Markets swung between substantial gains and grievous losses over a week marked by considerable volatility. The benchmark index advanced on Monday, after experiencing wild swings for most of the trading session. The Shanghai Composite Index gained more than 1% on Tuesday, its first major movement over the last two weeks. The benchmark index plunged on Wednesday following reports that new restrictions may be imposed on wealth management products. The Shanghai Composite moved higher on Thursday following speculation that the selloff which sent the benchmark to a six-week low was excessive in nature.

New Oriental Education and Technology Group Inc. (EDU Quick QuoteEDU - Free Report) reported fiscal fourth quarter 2016 earnings of 27 cents per share, lower than earnings of 31 cents reported in the last quarter. TAL Education Group reported fiscal first quarter 2017 earnings of 16 cents per share, lower than the Zacks Consensus Estimate of 29 cents.

Last Week’s Developments

Last Friday, the Shanghai Composite lost 0.9%, marking its first weekly decline for July. The benchmark index declined 1.4% over the week, following losses from consumer and energy stocks. Further, an index of 30 day price volatility declined to its lowest level in more than two years. This indicated that markets may be taking a break, following gains for stocks over the last three weeks.

The CSI 300 lost 0.8%. The Hang Seng declined 0.2%, though it still managed to gain for the second successive week. The Hang Seng China Enterprises Index moved 0.3% lower. Indexes of utility, energy and consumer staples stocks declined by a minimum of 1%. Meanwhile, margin traders pushed up the amount of shares acquired using borrowed money for the fourth successive day, taking margin debt to record levels.

Markets and the Economy This Week

The benchmark index advanced 0.1% on Monday, after experiencing wild swings for most of the trading session. Ultimately, gains made by consumer companies managed to outweigh losses made by energy stocks. The Shanghai Composite ended the day in the green after losing nearly 0.3% at one point in the day.

Both the Hang Seng and the Hang Seng China Enterprises Index managed to overcome losses by the end of the session, gaining 0.1% and ending the day nearly unchanged, respectively. An index of healthcare companies on the mainland index advanced 0.8%. Stocks of consumer staples producers increased 0.5%.

The Shanghai Composite Index gained 1.1% on Tuesday, its first major movement over the last two weeks. This was also its highest gains over the same period with consumer stocks increasing the most amongst hopes that the economy was firming up. Meanwhile, casino shares led a rally for stocks on the Hong Kong exchange.

Investors focused on encouraging economic signals, specifically data on retail sales, GDP and industrial production. The Hang Seng China Enterprises Index added 0.3%. Meanwhile, the Hang Seng advanced 0.6%, ending at its highest point since Dec 24 last year. Analysts were of the opinion that investors were reallocating their funds from debt to equities as bond yields continued to remain low.

The benchmark index plunged, falling by 1.9% on Wednesday following reports that new restrictions may be imposed on wealth management products. Such speculation heightened concerns that such regulatory steps, aimed at reducing risk will curb fund inflows for stocks. The decline for the Shanghai Composite was its largest in six weeks.

The small cap heavy Chi-Next index plummeted, losing 5.5%, the highest loss since Jun 13. The Shenzhen Composite Index moved 4.5% lower. In contrast, the Hang Seng gained 0.4%. Meanwhile, the Hang Seng China Enterprises Index increased 0.6% after losing nearly 0.8% earlier in the day. The H-share index ended at its highest level in three months.

The Shanghai Composite moved 0.1% higher on Thursday after losing more than 0.8% earlier in the session. Stocks rebounded during the afternoon trading session following speculation that the selloff which sent the benchmark to a six-week low was excessive in nature. Gains were led by utility and automobile stocks.

The small cap heavy ChiNext index lost 0.7%, falling to its lowest level in a month. Earlier, during the session, the index had declined by 2.1%. The Hang Seng China Enterprises Index moved 0.4% lower while the Hang Seng declined by 0.2%.

Stocks in the News

TAL Education Group reported fiscal first quarter 2017 earnings of 16 cents per share, lower than the Zacks Consensus Estimate of 29 cents. This is marginally lower than the 13 cents reported in the last quarter. However, this is significantly lower than earnings of 23 cents reported in the year-ago period.

TAL Education Group reported revenues of $ 195.1 million, representing a 50.8% increase over the figure of $129.4 million reported in the same period last year. Revenues also increased from the $175 million reported in the last quarter.

Additionally, student enrollments experienced a year-over-year jump of 56.8%. The physical network of the tutoring company increased from 363 centers across 25 cities to 395 centers covering 25 cities.

New Oriental Education and Technology Group Inc. reported fiscal fourth quarter 2016 earnings of 27 cents per share, lower than earnings of 31 cents reported in the last quarter. However, the figure compares favorably with earnings of 23 cents posted during the same period last year.

Revenues increased 20.1% year over year to $394.9 million. Educational programs and services reported net revenues of $322.2 million, an improvement of 20.4% compared to the same period last year.

A rise in the number of student enrollments for New Oriental’s K-12 after-school tutoring courses was the primary growth driver. Enrollments for tutoring and test preparation courses jumped 32.5% compared to the same period last year.

Earnings per share for fiscal 2016 came in at $1.54 per share. Revenues moved up 18.6% to $1,478.3 million. During the year, enrollments for tutoring and test preparation courses increased 25.8%.

Baidu, Inc. (BIDU Quick QuoteBIDU - Free Report) has reportedly rolled out its first search interest based indexes tracking the movement of some economic indicators of China. According to Bloomberg, the indexes tracked down unemployment rate and forecast Apple’s (AAPL) second quarter 2016 sales (a demonstration of accuracy).

Baidu’s search technology is taking into account user positions, location requests and Wi-Fi hotspot logins to track down consumer behavior and extract economic trends.

The company stated that it will release consumer and employment indexes from this month. More granular level data will be rolled out from next month including industry and company specific data, useful mainly to hedge funds, managers and investors. Charges will be per the volume of data requested.

JD.com (JD Quick QuoteJD - Free Report) has expanded the scope of its relationship with Lenovo in order to meet rising business and consumer demand in China for products from the PC and smart devices manufacturer. As per a recent announcement, JD.com’s CEO Richard Liu and Lenovo’s Chairman announced that key Lenovo products will be launched on JD.com.

Such a move will provide exclusivity to JD.com’s customers during crucial product launches. On its part, the ecommerce giant will provide customers across the country an easier and faster way to purchase original Lenovo products. Delivery will take place through the site’s own logistics system. 

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:

Investors have traversed a particularly troublesome week, climbing to spectacular heights on one day and plummeting to a six-week low the very next. Gains came on renewed optimism over the economy. In contrast, losses arose from speculation that new restrictions would be imposed on wealth management products, a step which would reduce investor risk significantly.

The focus could shift back to the economy if upcoming economic data is positive in nature. Several economic reports are scheduled for release over the next few days. This includes data, both official and private, on services and manufacturing. If most of these reports are positive in nature, markets could gain a much needed stability over next week.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>