Markets declined again over the week as concerns about the economy continued to weigh on investor sentiment. The benchmark index gained on Monday with telecom, consumer staples and tech stocks leading gains. The index declined for the first time in three days on Tuesday, with commodity stocks emerging as the biggest losers.

The Shanghai Composite Index moved lower on Wednesday after fears arose regarding a flight of capital from the economy even as the U.S. prepares to raise rates. The benchmark index increased on Thursday, rebounding after two consecutive days of declines. The Shanghai Composite Index declined on Friday to register is sixth consecutive weekly decline.

Trina Solar Ltd. (TSL Quick QuoteTSL - Free Report) reported earnings of 29 cents per American Depositary Shares (ADS) in the first quarter of 2016. JA Solar Holdings Co. Ltd. posted first-quarter 2016 adjusted earnings of 36 cents per diluted American Depositary Share (ADS), beating the Zacks Consensus Estimate of 22 cents by a wide margin of 63.6%.

Last Week’s Developments

Last Friday, the Shanghai Composite Index moved up 0.7%, but declined 0.1% for the week. This was its fifth consecutive week of losses. Investors remained concerned about the state of the economy and the imminent Fed rate hike. The CSI 300 gained 0.5%, posting a 0.1% increase for the week. In contrast, the Hang Seng China Enterprises Index gained 0.7%.

Markets and the Economy This Week

The benchmark index gained 0.6% on Monday with telecom, consumer staples and tech stocks leading gains. Volatility slumped to its lowest level in 15 months even as investors favored companies with minimum exposure to manufacturing which is undergoing a slowdown.

The CSI 300 advanced 0.3%. Sub indexes of telecom, tech and consumer staples companies gained a minimum of 0.8%. The Hang Seng declined 0.2% while the Hang Seng China Enterprises Index moved up 0.1%. The small cap ChiNext added 1.6%.

The benchmark index declined for the first time in three days on Tuesday, losing 0.8%. Commodity stocks were the largest decliners after speculation arose that prices of raw materials will drop further. This would be the outcome of an economic slowdown which is reducing demand.

The Hang Seng China Enterprises Index ended flat for the day. The Hang Seng advanced 0.1%. Sub-indexes of telecom and material stocks within the CSI 300 declined by a minimum of 1%.

The Shanghai Composite Index declined again on Wednesday, losing 0.2%. Fears arose regarding a flight of capital from the economy even as the U.S. prepares to raise rates. The CSI 300 moved 0.1% lower as nearly all sector closed in the red with transportation emerging as the largest decliner. The Hang Seng jumped 2.7%, increasing by the largest extent in six weeks. The Hang Seng China Enterprises Index advanced 2.8%.   

The benchmark index increased 0.3% on Thursday, rebounding after two consecutive days of declines. Commodity stocks emerged as the highest gainers for the day, boosting the Shanghai Composite above the crucial level of 2,800. The CSI 300 advanced 0.2%. The Hang Seng moved 0.1% higher. However, the Hang Seng China Enterprises Index lost 0.1%.

The Shanghai Composite Index declined 0.1% on Friday to register is sixth consecutive weekly decline. Consumer staples, industrials and pharma stocks were the worst performers for the week. Additionally, fresh data revealed that profit growth of industrial companies had declined to 4.2% for April.

The benchmark lost 0.2% over the week and has lost 4% over the month as of now. The CSI 300 moved 0.1% lower, taking the week’s decline to 0.5%. The Hang Seng gained 0.9%, adding 3.7% over the week. The Hang Seng China Enteprises Index increased 0.8%, advancing 3.5% over the week.

Stocks in the News

Trina Solar reported earnings of 29 cents per American Depositary Shares (ADS) in the first quarter of 2016. The bottom line beat the Zacks Consensus Estimate of 23 cents by 26.1% and also surged 81.3% from 16 cents earned in the year-ago quarter.

Trina Solar posted revenues of $816.9 million in the first quarter, up 46.4% year over year but down 15.1% sequentially. The year-over-year increase in revenues was primarily driven by higher shipment volumes in key markets in China, the U.S., and India. However, lower demand in Japan and Europe partially limited the upside. The sequential decrease was mainly due to seasonality. The quarterly figure surpassed the Zacks Consensus Estimate of $803 million by 1.7%.

Solar module shipments in the reported quarter totaled 1,423.3 megawatts (“MW”) compared with 1,026.2 MW in the year-ago quarter and 1,776.3 MW in the previous quarter. This was attributable to increasing demand from prime geographical regions, like China, the U.S. and India.

Trina Solar expects second-quarter 2016 module shipment in the range of 1.50 gigawatts (GW) to 1.60 GW. For the full year, the company reaffirmed its guidance for total PV module shipments to the range of 6.30 GW to 6.55 GW.

JA Solar posted first-quarter 2016 adjusted earnings of 36 cents per diluted American Depositary Share (ADS), beating the Zacks Consensus Estimate of 22 cents by a wide margin of 63.6%. Earnings also surged from the year-ago figure of 13 cents by 176.9%.

JA Solar’s revenues in the reported quarter were $538.1 million, beating both the Zacks Consensus Estimate of $431 million by 24.8% and the year-ago figure by 44.4%. The improvement in revenues was driven by strong shipments to key markets, primarily to its domestic market China.

Total shipments in the first quarter 2016 were 1,128.3 megawatts (“MW”). External shipments were 1,038.3 MW, up 52.4% year over year. The year-over-year improvement in external shipments was attributable to a 57.4% upside in module shipment as well as a 22.1% rise in cells and cell tolling.

The increase in shipments came on the back of strong demand from China, which constituted 59.6% of the quarter’s total shipment. Shipments to America jumped to 4.5% of the total from 1.0% in the year-ago quarter.

Europe, however, witnessed a considerable drop, having contributed 5.6% to total shipments, compared with 22.6% a year ago. Asia-Pacific (excluding China) markets also witnessed a slowdown with shipments constituting 26.7% of the total, a considerable drop from 53.9% a year ago.

JA Solar expects to ship 1.4–1.5 gigawatts (“GW”) of cells and modules in the second quarter of 2016. The company anticipates module shipment of about 100 MW to its downstream projects.

ReneSola Ltd. (SOL Quick QuoteSOL - Free Report) reported earnings of 6 cents per American Depositary Share (“ADS”) in the first quarter of 2016. The Zacks Consensus Estimate was a loss of 4 cents.

The company has made significant progress in transforming itself from a solar product manufacturer to a multi-faceted participant across the green energy value chain. Moreover, it has reduced its debt level.

ReneSola’s first-quarter net revenue of $260.7 million was almost in line with the Zacks Consensus Estimate of $260 million. Reported revenues, however, tanked 25.3% year over year and 12% sequentially.

The company attributes the decline to lower module shipments to external customers, and reduced module average selling prices (ASP) as it has strategically directed more shipments toward downstream projects.

In the quarter under review, total module shipments were 350.7 megawatts (MW), down 6% sequentially. Wafer shipments totaled 351.0 MW, up 79.9% year over year and 29.8% sequentially.

JinkoSolar Holding Co., Ltd. (JKS Quick QuoteJKS - Free Report) announced that it has supplied 122 megawatts (MW) of photovoltaic (PV) modules to Pattern Energy Group LP (Pattern Development), for the Conejo solar project in Chile. U.S.-based independent power producer, Pattern Development, is a joint owner of the project. The project is expected to be complete in the second half of 2016.

 Conejo is one of the largest PV projects in Chile. The project has already secured a 22-year power purchase agreement from Minera Los Pelambres, an affiliate of Antofagasta Minerals. Under this agreement, upon completion, the project will fulfill 65% of the electricity requirement of the Los Pelambres.

Situated in the Antofagasta region in Chile, the project will be connected to the Sistema Interconectado Central transmission 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:

The Chinese rebound seems to be faltering even as investors continue to lose their confidence in the country’s economic fundamentals. Data on industrial profits has been discouraging and markets look toward an upcoming Fed rate hike with trepidation.

Fresh indicators about the economy will become available on next Tuesday and Thursday as private and government data on manufacturing and services are scheduled for release. The nature of these reports is likely to have a significant impact on the direction of markets in the week ahead. 

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