Markets enjoyed another week of gains, buoyed by speculation that the central bank could soon announce further monetary stimulus measures. The benchmark index surged to a two-month high on Monday following speculation that additional stimulus measures would be provided to boost growth. The Shanghai Composite Index increased again on Tuesday, moving above the 3,000 mark for the first time in excess of two months. The benchmark index gained once again on Wednesday, following continuing expectations of fresh stimulus from China’s central bank. The Shanghai Composite’s four-day rally came to a close on Thursday, with the benchmark index closing nearly flat.

Alibaba Group Holding Limited (BABA Quick QuoteBABA - Free Report) unveiled its new online system to track and remove fake products from its websites at an intellectual property (IP) conference in Hangzou on Jul 1. ReneSola Limited (SOL Quick QuoteSOL - Free Report) announced the sale of its four operational, photovoltaic utility-scale projects in England to a market leading investor and fund manager, Equitix Fund IV.

Last Week’s Developments

Last Friday, the Shanghai Composite Index advanced 0.1% and gained 2.7% over the week. Encouraging data on manufacturing and services were the primary reason for the uptrend. The official manufacturing purchasing index came in at 50 for June, which indicates that the sector is expanding. Meanwhile, the official services PMI increased from 53.1 in May to 53.7 in June. The CSI closed nearly flat on Friday.

Materials stocks were the largest gainers while a gauge of healthcare stocks declined. Markets were closed in Hong Kong for a holiday. However, Asian stocks as a whole had their best week since April after investors speculated that central banks will act to contain the effects of Brexit. The Shanghai Composite gained 0.5% during June, the first monthly increase since March. This increase has provided a much needed relief to China’s investors. 

Markets and the Economy This Week

The benchmark index surged to a two-month high on Monday, gaining 1.9% following speculation that additional stimulus measures would be provided to boost growth. An index of materials producers notched up their highest gains since May. The Shenzhen Composite advanced 1.6% after losing nearly 0.8% at one point.

However, the yuan continued to move lower even though the dollar declined on prospects of a soft interest rate regime over the rest of the year. The Hang Seng added 1.3% while the Hang Seng China Enterprises Index increased by 1%. The day’s gains helped the Hang Seng notch up more gains, amounting to 0.9% at that point, since Britain’s surprise referendum results.

The Shanghai Composite Index increased by 0.6% on Tuesday, moving above the 3,000 mark for the first time in excess of two months. Speculation that the central banks will provide additional stimulus to energize the economy was the primary reason for the index notching up gains. Consumer staples and industrials stocks led the gains for the day. The benchmark took its gains since Brexit to nearly 4%.

The Shenzhen Composite Index also gained, ending 0.2% higher for the day. However, the Hang Seng China Enterprises Index declined by 1.8%. This index suffered its most grievous decline in a week after major shares moved southward. The Hang Seng also declined by 1.5%.

The benchmark index gained 0.4% on Wednesday, following continuing expectations of fresh stimulus from China’s central bank. A state controlled newspaper indicated that further monetary easing might be on the anvil. The Shanghai Composite’s 14-day relative strength index (RSI) surged to 68.3, to its highest level since November.

The day’s gains helped the benchmark index remain above the 3,000-mark for the second consecutive day. The Hang Seng declined by 1.2%. Stocks in Hong Kong fell to their lowest level in a week following concerns that Brexit will impact global economic growth. The Hang Seng China Enterprises Index dropped 1.6%.

The Shanghai Composite’s four-day rally came to a close on Thursday, with the benchmark index closing nearly flat. The rally came to a close after the index’s 14-day RSI approached 70, a level which usually indicates that a losing streak could begin.

Meanwhile, the Hang Seng China Enterprises Index advanced 1.2%. The Hang Seng also added 1% on speculation of additional monetary stimulus measures. Fresh data indicated a surprise increase in forex reserves, exceeding most analyst estimates.

Stocks in the News

Alibaba Group Holding Limited unveiled its new online system to track and remove fake products from its websites at an intellectual property (IP) conference in Hangzou on Jul 1. The company requested brands to help its anti-piracy campaign rather than rebuke the issue.

Jessie Zheng, Alibaba’s chief platform governance officer, said that “In the face of such a complex problem we can’t be complaining about each other, or criticizing each other, instead we have to have everybody involved and work together to do it.”

The company said that this new online platform has been designed to streamline IP-related communications between brands and Alibaba. This new effort is an expansion of the existing “good faith takedown” scheme which was started last year. This will further simplify the removal of listings of suspected counterfeits, making Alibaba’s marketplace more transparent and trustworthy.

ReneSola Limited announced the sale of its four operational, photovoltaic utility-scale projects in England to a market leading investor and fund manager, Equitix Fund IV.

The four assets are located in Derbyshire, Devon, Northamptonshire and Notthinghamshire, and have a total capacity of about 20 megawatts (“MW”). These projects are equipped with the ReneSola Virtus II modules. The projects were approved under the 1.3 Renewable Obligations Certificate (ROC) program and were connected to the grid this March.

ReneSola entered into a hedging transaction as it intended to protect the value of the four projects in U.S. dollars, given that the sale consideration was in GBP.

According to ReneSola's Chief Executive Officer, Xianshou Li, the latest sale continues to maintain its track record of “rapidly developing and monetizing projects in attractive developed markets.” He added that amid a fluctuating global economy, the company has had to adopt measures to safeguard the value of its assets.

Trina Solar Limited (TSL Quick QuoteTSL - Free Report) said on Jul 5 that it has managed to achieve an average efficiency rate of 21.1% for its P-type monocrystalline cells. These industrially produced cells utilize Passivated Emitter and Rear Cell (PERC) technology. Modules utilizing these cells have managed to produce output of 300W.

These results mark an important breakthrough for the PERC cell. It is yet another achievement for Trina Solar, known for turning technology developed in a laboratory into a product ready for mass production.

Baidu Inc. (BIDU Quick QuoteBIDU - Free Report) has made invested in Circle Internet Financial, a blockchain company based in the U.S. An integral part of the bitcoin ecosystem, a blockchain ledge, is utilized to maintain a record of all transactions made using this virtual currency. This is its’s first foray into fintech, a domain where technology is utilized to increase the efficiency of financial services. 

Circle Internet Financial said that it has managed to raise $60 million in funds from a group of investors led by U.S. based media and venture capital company IDG. Other investors include General Catalyst Partners, Breyer Capital and Baidu.

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.

Next Week’s Outlook

Markets have gained over the week primarily on speculation that the central bank will introduce additional monetary stimulus measures. This is primarily due to the soft economic data released recently. Data on forex reserves has been better than anticipated but market watchers still believe the upcoming report on exports may not be encouraging.

A flurry of economic reports is set to be released over the next few days. This includes data on inflation, money supply, loans, balance of trade, ultimately culminating in the GDP release next Thursday. The tone of these reports is likely to determine the direction of markets in the days ahead.  

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