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China Stock Roundup: JD.com Inks Deal with Wal-Mart; Qunar, Ctrip Results Disappoint

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Markets suffered another week marked by significant volatility as Brexit loomed large over investors. The benchmark index inched up on Monday even as other Asian markets gained substantially. The Shanghai Composite declined on Tuesday following concerns about the state of China’s economy which dampened investor sentiment. The benchmark index surged on Wednesday, gaining the most in a week as investors focused on chances of Britain voting to remain within the EU. The Shanghai Composite Index declined on Thursday as most investors stayed away from the bourses ahead of Britain’s crucial referendum. The benchmark index and the CSI 300 both moved lower on Friday after Britain voted in favor of leaving the EU, which rattled global financial markets.

JD.com (JD - Free Report) has recently inked a deal with Wal-Mart Stores Inc. (WMT - Free Report) . Qunar Cayman Islands Limited reported adjusted first-quarter 2016 loss of $1.14 per share, wider than the Zacks Consensus Estimate of a loss of 29 cents. Ctrip.com International, Ltd. reported adjusted first-quarter 2016 loss of 54 cents per share, lower than the Zacks Consensus Estimate of a loss of 67 cents.

Last Week’s Developments

Last Friday, the Shanghai Composite Index increased 0.4%, with consumer stocks notching up the highest gains. The day’s gains were primarily a result of bookmakers reducing the odds of a Brexit as the referendum on Jun 23 approached. The day’s gains helped cut weekly losses to 1.4%. The CSI 300 added 0.5%.

Meanwhile, the Hang Seng advanced 0.7% while the Hang Seng China Enterprises Index advanced 0.9%. This increase helped to reduce its weekly loss to 3.9%. Banks and insurance companies led gains on the Hong Kong exchange. Asian stocks were boosted after campaigning on the Brexit vote was suspended after the murder of a British M.P. The yuan moved up 0.1% on Friday, but lost 0.4% over the week.

Markets and the Economy This Week

The benchmark index inched up by 0.1% on Monday even as other Asian markets gained substantially. Markets were subdued following fears that the yuan would fall even lower. Additionally, concerns about fresh move to curb speculator trading were doing the round. The CSI 300 also added only 0.1%.

In contrast, the Hang Seng moved up 1.7%, with oil and real estate companies leading gains. This was its highest increase in nearly a month, following speculation that the “Remain” side held the advantage ahead of the referendum in Britain. The Hang Seng China Enterprises Index added 1.8%.

The Shanghai Composite declined 0.4% on Tuesday following concerns about the state of China’s economy which dampened investor sentiment. The CSI 300 lost 0.2%. Both indexes had gained in early trading following speculation that Britain will vote to remain within the EU during the referendum on Thursday.

Stocks of material producers declined after China’s exports increased to their highest level since 2012. The Hang Seng added 0.8%, following fresh polls which indicated that a “Bremain” vote was likely. The Hang Seng China Enterprises Index moved up 0.8%. A key index of volatility fell to its lowest level since Jan 2015.

The benchmark index surged 0.9% on Wednesday, gaining the most in a week as investors focused on chances of Britain voting to remain within the EU. Energy companies were the highest gainers for the day while tech and small cap stocks also notched up gains. The ChiNext index moved up to its highest point in two weeks.

Stocks in Hong Kong gained for the fourth successive day with the Hang Seng moving up 0.6%. The Hang Seng china Enterprises Index added 1.7%. Hong Kong’s exchange also experienced higher turnover as trading volumes exceeded the 30-day average by 13%. The Shenzhen Composite Index gained 1.7%.

The Shanghai Composite Index declined 0.5% on Thursday as most investors stayed away from the bourses ahead of Britain’s crucial referendum. The CSI 300 also lost 0.5%. An index of materials stocks lost 0.5%, the most among all the industry groups. This was the most grievous loss for the benchmark in a week even as polls showed that the “Remain” and “Leave” camps were extremely close to each other ahead of the vote.

Investors were also concerned about the fate of the yuan following the vote. However, the Hang Seng added 0.4%, cutting its yearly losses to 4.8%. Its five consecutive days of increases were the longest since May. In contrast, the benchmark took its decline for 2016 to 18%, the most among all major global indexes.    

The benchmark index and the CSI 300 each lost 1.3% on Friday after Britain voted in favor of leaving the EU, which rattled global financial markets. China’s capital controls managed to reduce steep losses, even as other Asian markets suffered severe declines. Each of these indexes declined 1.1% over the week.

The ChiNext had lost more than 3% at one point but closed the session nearly flat. However, markets in Hong Kong were significantly impacted by the outcome of the EU referendum. The Hang Seng nosedived, losing 2.9% which is its steepest lost since Feb 11. The Hang Seng China Enterprises Index also moved 2.9% lower.

Stocks in the News

JD.com has recently inked a deal with Wal-Mart Stores Inc. Per the terms of the deal, JD.com will buy Wal-Mart Stores’ Chinese e-commerce business Yihaodian in exchange for a 5% equity stake in JD.com. JD.com will issue about 145 million new class A shares to Wal-Mart, worth about $1.5 billion at JD.com's current valuation.

Wal-Mart's Sam's Club China will open a flagship section on JD.com, and both companies will leverage their supply chains and broaden the range of imported goods. Wal-Mart will continue to operate the Yihaodian direct sales business and will be a seller on the Yihaodian marketplace.

Qunar Cayman Islands Limited reported adjusted first-quarter 2016 loss of $1.14 per share, wider than the Zacks Consensus Estimate of a loss of 29 cents. However, this was significantly lower than the loss of $5.66 per share posted in the previous quarter, but higher than year ago loss of 52 cents. 

Qunar reported revenues of $154 million, a year-over-year jump of 48%, which came in below the Zacks Consensus Estimate of $161 million. Mobile revenues accounted for 75.8% of Qunar’s total first-quarter revenue as against 59.4% in the year-ago quarter.

Ctrip.com International, Ltd. reported adjusted first-quarter 2016 loss of 54 cents per share, lower than the Zacks Consensus Estimate of a loss of 67 cents. This was substantially higher than a loss of 8 cents reported in the same period last year. Additionally, this is particularly unfavorable when compared to adjusted earnings of $3 per share reported in the fourth quarter of 2015.

Ctrip.com reported revenues of $648 million, higher than the Zacks Consensus Estimate of $633 million.  This was also 80% higher than the figure posted in the year-ago quarter. It was also substantially higher than fourth quarter 2015 figure of $444 million.

China National Offshore Oil Corp. (CEO - Free Report) , or CNOOC, recently announced that its Chairman Yang Hua has assumed the role of CEO also. Yang Hua as CEO replaced Li Fanrong who has resigned from his position as CEO, President and Executive Director.

Yuan Guangyu has been appointed as the new President and Executive Director. The aforementioned changes took effect from Jun 15, 2016. The changes come at an opportune time because the oil space is currently at the crossroads with opinion divided between oil stability and slide.

JA Solar Holdings Co., Ltd.  has supplied 11 megawatts (“MW”) of high-efficiency photovoltaic (“PV”) modules for the largest PV-diesel hybrid power project in North Africa.

Located in the Red Sea region of Egypt, the project was developed to meet the power requirements of the tourism industry in the area. It has been constructed by Masdar using funds provided by the government of Abu Dhabi.

The project will integrate the new PV modules with the existing diesel generators. It is designed to save costs associated with the purchase and transportation of diesel oil while reducing CO2 emissions significantly. After completion, the project is expected to generate adequate power for 25,800 homes in the area and reduce CO2 emissions by 42,700 tons a year.

The project comprises four power plants – Marsa Alam, Shalateen, Abu Ramad and Halayeb. In total, these plants have a capacity of 14 MW.

Performance of Most Actively Traded US-listed Chinese Stocks

The table given below shows the price movements of 10 Chinese companies with the highest three-month average trading volume on U.S. exchanges. Price movements over the last five days and during the last six months have been included.

Ticker

Last 5 Day’s Performance

6-Month Performance

JD

+1.5%

-35.3%

BABA

-2.9%

-7.1%

VIPS

-2.3%

-31.1%

CTRP

+2.2%

-17.4%

BIDU

-4.2%

-17.5%

SFUN

-3%

-31%

QIHU

+3%

+3.5%

TSL

+0.1%

-33.3%

WB

-2.4%

+35.7%

VNET

-0.1%

-47.7%

Next Week’s Outlook:

Market proceedings are likely to be dominated by the fallout of Britain’s decision to leave the EU. Asian markets are already feeling the heat of such a move and it is likely that China’s stocks will be impacted at least to some extent.

It remains to be seen whether authorities will step in and take actions to prop up markets, if needed. Meanwhile, private and government data on manufacturing and services is scheduled to be released on Thursday. If these reports are positive in nature, stocks will receive a much needed impetus in the days ahead.

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