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China Stock Roundup: NetEase Beats, PetroChina Misses

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Markets moved higher during a week dominated by the U.S. presidential election. The benchmark index increased on Monday following strong gains for coal and metal producer stocks. The Shanghai Composite gained on Tuesday, surging to its highest level in almost a year.

The benchmark index declined on Wednesday even though it managed to recover partially from losses suffered earlier in the day. The Shanghai Composite surged to its highest level in 10 months on Thursday.

PetroChina Co. Ltd.’s (PTR - Free Report) third quarter earnings per ADR came in at 15 cents, failing to beat the Zacks Consensus estimate of 29 cents. NetEase, Inc. (NTES - Free Report) reported adjusted third-quarter 2016 earnings of $3.11 per share, which exceeded the Zacks Consensus Estimate of $3.09 cents.

Last Week’s Developments

Last Friday, the Shanghai Composite lost 0.1% following concerns over the results of a closely fought U.S. presidential election. The CSI 300 declined by 0.3%. However, indications that China’s economy was attaining a certain degree of stability helped stocks post weekly gains. The benchmark index advanced 0.7% while the CSI 300 increased 0.4% over last week, marking their fourth straight weekly gains.

Encouraging data on services and manufacturing released recently had led to fresh optimism about the economy. However, real estate and transportation stocks declined last Friday and substantial profit taking place in stocks which are the choice of speculators. This led to a considerable decline in the risk appetite of a market dominated by retail investors. The Hang Seng declined 0.2% on Friday and lost 1.4% over last week.  

Markets and the Economy This Week

The benchmark index increased 0.3% on Monday following strong gains for coal and metal producer stocks. These gains were partially negated by substantial profit taking among stocks primarily utilized for speculation. Adding further weight to the day’s bullish sentiment were comments from Premier Li Keqiang. The Chinese premier said that China is set to maintain stable growth will increase the pace of its economic transformation.

Gains for miners and metal producers came on the back of hopes that efforts to reduce overcapacity in these sectors were meeting with a sufficient degree of success. Stocks in Hong Kong rebounded after the FBI said that it was sticking to its initial position that no criminal charges should be levelled against Hillary Clinton.

However, property stocks declined following an increase in stamp duties on real estate, curbing the day’s gains. The Hang Seng added 0.7% while the Hang Seng China Enterprises index increased 1.2%.

The Shanghai Composite gained 0.5% on Tuesday, surging to its highest level in almost a year. Stocks in China rose after U.S. markets moved north following indications that Hillary Clinton was set to win the U.S. presidential election. Such sentiments negated concerns arising from the release of dismal trade data. Official data showed that exports declined by 7.3% in October after falling by 10% in September. The CSI 300 increased by 0.4%.

Stocks in Hong Kong moved higher following optimism over an increasingly likely victory for Hillary Clinton. The Hang Seng moved 0.5% higher while the Hang Seng China Enterprises Index added 0.5%.

The benchmark index declined 0.6% on Wednesday even though it managed to recover partially from losses suffered earlier in the day. This was because concerns that arose early in the session over Donald Trump winning the U.S. election had eased considerably. The CSI 300 lost 0.5%. Initially, markets across the world were betting on a win for Clinton. However, fresh exit polls showed that the race was too close to call.

Real estate and materials stocks gained following a rally in gold mining stocks as investors rushed to pick up safe haven assets. Stocks in Hong Kong declined to their lowest level in three months. The Hang Seng moved 2.2% lower while the Hang Seng China Enterprises Index declined by 2.9%.

The Shanghai Composite surged to its highest level in 10 months on Thursday, increasing by 1.4%. Markets across the world rebounded after falling in the wake of Donald Trump’s surprise victory in the U.S. presidential election. The CSI 300 gained 1.1%. Relatively risky assets staged an astounding comeback after market watchers reevaluated the impact of a Trump presidency. Several of them now believe that his term as President could result in a higher rate of growth. The Hang Seng added 1.9% while the Hang Seng China Enterprises Index advanced by 1.8%.   

Stocks in the News

PetroChina Co. Ltd. announced third quarter 2016 earnings of RMB 1.2 billion or RMB 0.01 per diluted share, compared with RMB 5.2 billion or RMB 0.03 per diluted share a year earlier.

Earnings per ADR came in at 15 cents, failing to beat the Zacks Consensus estimate of 29 cents. Moreover, China’s dominant oil and gas producer’s total revenue for the three months under consideration fell 4% from the comparable 2015 period to RMB 411.4 billion. The negative comparisons can be primarily attributable to continued collapse in oil prices, which pummeled its biggest unit – exploration and production – to a loss.

While crude oil output – accounting for 65% of the total – fell 3.6% from the year-ago period to 696.6 million barrels (MMBbl), marketable natural gas output was up 6.1% to 2,428.9 billion cubic feet (Bcf). As a result, Zacks Rank #3 (Hold) rated PetroChina’s total production of oil and natural gas remained essentially flat year over year at 1,101.5 million barrels of oil equivalent. But average realized crude oil price during the first nine months of 2016 was $35.79 per barrel, representing a 30% decrease from the year ago period.

The Beijing-based company’s ‘Refining & Chemicals’ business generated an operating income of RMB 34.3 billion. This is a significant increase from the year-earlier period earnings of RMB 3.1 billion.

Revenue from the Natural Gas & Pipelines business fell 15% to RMB 174.7 billion on a sharp drop in natural gas prices, which was partly offset by improved pipeline transportation profitability. In marketing operations, the group sold 118.727 million tons of gasoline, diesel and kerosene during Jan–Sep 2016, reflecting a marginal 0.5% year-over-year decrease. (Read: PetroChina (PTR - Free Report) Q3 Earnings Battered by Crude Plunge)

NetEase, Inc. reported adjusted third-quarter 2016 earnings of $3.11 per share, which exceeded the Zacks Consensus Estimate of $3.09 cents. This was also a significant improvement over earnings of $2.24 per share reported in the same period last year. However, this was lower than adjusted earnings of $3.40 reported in the second quarter of 2016.

NetEase reported revenues of $1,381 million, up 2.5% from the second quarter of 2016. More significantly, revenues registered a 31.5% year-over-year increase.

Revenues from online games came in at $984.9 million, registering a 26% year-over-year increase. Revenues from advertising services came in at $84.5 million, registering a 23.8% year-over-year increase. Revenues from email, ecommerce and other businesses amounted to $312.0 million, surging 107.2% year-over-year. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LightInTheBox Holding Co., Ltd. said that it is launching a cloud-based enterprise resource planning software for distribution companies. This Software-As-A-Service solution is targeted at companies operating in both the online and offline spheres. The new cloud based software has been built around the ERP system developed by LightInTheBox which has been used by the company over the last eight years and has evolved over several versions.

Earlier this week, Zacks Rank #1 rated LightInTheBox released the Chinese language version of the software which was deployed via Amazon (AMZN - Free Report) unit Amazon Web Services’ data center in China. The company is slated to launch the English language edition later in 2016, which is aimed at the international market.

ReneSola Ltd (SOL - Free Report) said that it has provided high efficiency polycrystalline PV modules which can produce 10.4 MW of power to a project in Japan. The modules have been supplied to Saferay Ltd for a ground mounted PV project which is located near Date city in the Hokkaido prefecture. Saferay Ltd is a Germany-based independent developer of large scale power stations. Zacks Rank #3 rated Renesola has completed delivery of the modules last month. The project is expected to achieve completion by Nov 2016.  

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.


Last 5 Day’s Performance

6-Month Performance































Next Week’s Outlook:

Donald Trump’s victory in the U.S. presidential election has come as a shock to several investors. However, markets have regained some of their optimism and markets now believe that Trump’s term may give a fillip to economic growth. Meanwhile, optimism over the economy continued to grow despite the release of disappointing trade data. Several crucial economic reports are scheduled for release next week. This includes data on industrial production, retail sales, fixed asset investment and new loans. If most of these are encouraging in nature, markets could continue to trend higher in the days ahead.  

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