China Stock Roundup: Baidu Invests in Israel, Yingli Solar to Install Solar Farms in Thailand

Markets experienced an extremely volatile week with stocks making gains and taking losses on alternate trading days of the week. The Shanghai Composite Index moved above the 3,000-mark for the first time in three years on Monday. However, Chinese stocks experienced their steepest decline in nearly four years on Tuesday following a volatile session.

The benchmark index rebounded on Wednesday on speculations that the government will take further steps to boost the economy. Stocks moved lower today after China’s largest oil companies took losses and brokerages slumped following fears that gains made recently were excessive.

Baidu Inc. (BIDU) is making its first direct investment in Israel's thriving start-up sector through video capture firm Pixellot. Meanwhile, Yingli Green Energy Holding Company Limited’s (YGE) unit, Yingli Green Energy Singapore Company Pte. Limited, plans to install solar farms in Thailand in partnership with Huawei Technologies Co., Ltd., Kasikornbank Public Plc. and Solventia Solar Energy Co., Ltd.

Last Week’s Developments

Last Friday, the Shanghai Composite Index gained 1.3% at the end of the trading session following a volatile session. The benchmark index experienced its largest fluctuations in four years, increasing by a maximum of 2.7% and losing 3%. Financial shares rallied even as China’s securities regulator warned investors about the high degree of risks in equities.

The Shanghai Composite Index swung by 165 points within the first hour and half of trading, the largest such variation since Nov 2010. The benchmark’s recent phenomenal gains, possibly the highest among the entire world’s indexes, have encouraged investors to open trading accounts at the sharpest pace in three years.

The CSI 300 gained 0.7%, advancing 11% over last week. The Hang Seng China Enterprises added 1%, while the Hang Seng advanced 0.7%. The Shanghai Composite Index gained 9.5% over last week, the highest such increase since Feb 2009. Speculation that the People’s Bank of China (:PBOC) would reduce reserve requirement ratios following a cut in interest rates has led to these gains.

The rate cut was an attempt to shore up the nation’s economy. Manufacturing and export growth data have indicated that a slowdown is in the offing. Some analysts were of the view that the current market rally was not based on economic fundamentals and would end if the PBOC did not ease monetary conditions further.

Markets and the Economy This Week

The Shanghai Composite Index moved above the 3,000-mark for the first time in three years on Monday, gaining 2.8%. Meanwhile, the CSI increased by 4.1%, advancing 28% over 12 successive days of gains. The country’s securities regulator has warned investors about the high risk of investing in equities.

However, analysts were of the view that valuations were low and there were indications that the government would ease monetary policy further to boost the economy. This would provide stocks with the necessary impetus to make further gains. They opined that given the enthusiasm among retail investors, there was reason to believe the benchmark would continue to gain over the remainder of the year.

However, export data was dismal with exports increasing only 4.7% in November, behind most estimates. Meanwhile imports declined 6.7%, raising the trade surplus to $54.47 billion. Markets remained undeterred by the report. Sub-indexes of financial and industrial stocks within the CSI 300 gained by a minimum of 5.1%. The Hang Seng increased 0.2%. Meanwhile, the Hang Seng China Enterprises Index advanced 2.4% to touch its highest point since Feb 2013.

Chinese stocks experienced their steepest decline in nearly four years on Tuesday following a volatile session. The Shanghai Composite Index plunged 5.4%, its steepest decline since Aug 2009. China’s four largest lenders lost more than 9% while PetroChina Co. Ltd. (PTR), the country’s largest listed company, declined 8%. Bonds with low ratings took losses and the yuan fell to its lowest level in four months following an official decision that they could no longer be used as collateral for certain short-term loans.

The CSI 300’s 12-day long rally came to a close, with the index losing 4.5%, even after gaining 4.2% at one point. A sub-index of financial shares plummeted, losing 6.3% and reducing gains to 42% during a month-long series of gains. The Hang Seng China Enterprises Index experienced its largest loss in three years, slumping 4.6%. The Hang Seng declined 2.3%. Analysts were of the view that speculators were increasing activity and triggering volatility. Meanwhile profit taking was taking place, with an emphasis on oil stocks.

The Shanghai Composite Index rebounded on Wednesday, gaining 2.9% following speculation that the government will take further steps to boost the economy. These views were reinforced by data that showed inflation was falling. Consumer prices increased 1.4% in November compared with a rise of 1.6% in October. Producer prices also declined providing the conditions necessary for further monetary stimulus.

Meanwhile, analysts opined that stocks had gained following speculation that the PBOC has introduced almost 400 billion yuan ($65 billion) into the interbank market using the development bank. Sub-indexes of utility, consumer discretionary and industrial stocks all gained in excess of 5%. The CSI 300 also rebounded from Tuesday’s losses, advancing 3.7%. The Hang Seng added 0.2% while the Hang Seng China Enterprises Index added 0.4%.

Stocks moved lower today after China’s largest oil companies took losses and brokerages slumped following fears that gains made recently were excessive. Both PetroChina and China Petroleum & Chemical Corp. (SNP) or Sinopec declined by a minimum of 2%. The Shanghai Composite Index declined 0.5% following gains of nearly 0.9% and losses of 1.6% earlier during the day.

The 10-day volatility of the benchmark index increased to its highest level since 2009 as investors doubted whether the current market rally would continue. Analysts were of the view that the benchmark was fluctuating near the 3,000-mark. However, they opined that the bull run was not over and stocks would continue to rise in the long term.

On the basis of points, Sinopec and PetroChina attributed for nearly half the losses. The CSI 300 declined 1.2% while the Hang Seng lost 0.9%. The Hang Seng China Enterprises Index moved down by 1%. A sub-index of financial stocks within the CSI 300 lost 3.2%, the highest among the 10 industry groups. All the 10 largest losers of this sub-index were brokerage firms which have rallied on new trading account openings and higher leverage activity being used to purchase stocks.

Stocks in the News

Baidu Inc. is making its first direct investment in Israel's thriving start-up sector through video capture firm Pixellot. The investment is worth $3 million. Pixellot plans to utilize the funds to increase its research and development and to advance worldwide marketing and business development.

Baidu’s senior director of corporate development, Peter Fang, is of the opinion that Israeli technology will change video content production for Internet users in China.

Established in 2013 by Miky Tamir and CTO Gal Oz, Pixellot is known for developing a system of unmanned cameras capable of covering the entire field or court at a sporting event and mechanizing video production for professional broadcasters as well as amateur fans.

Yingli Green Energy Holding Company Ltd. unit Yingli Green Energy Singapore Company Pte. Limited, plans to install solar farms in Thailand in partnership with Huawei Technologies Co., Ltd., Kasikornbank Public Plc. and Solventia Solar Energy Co., Ltd. The companies have already inked a Memorandum of Understanding (MoU) related to the latest venture.

Per the MoU, the companies will offer turnkey solar power solutions for the power plants and distributed generation projects across the nation.

JA Solar Holdings Co., Ltd. (JASO) announced that it has completed shipping solar modules of 100 megawatts (“MW”) capacity to the first large-scale solar farm in Pakistan.

The solar farm, spread across 500 acres, is located within the Quaid-e-Azam Solar Park in Bahawalpur, Pakistan. With very high solar radiance, the region receives roughly 3,000 hours of sunlight every year making it ideal for PV power generation.

Pakistan’s energy demand has risen by roughly 8% annually resulting in an energy production deficit of 6 gigawatts (“GW”). The project is an important step toward consolidating the China-Pakistan Economic Corridor, a program formulated by the governments of both these countries for development of energy and infrastructure projects.

Trina Solar Ltd. (TSL) entered into an agreement under which the company will buy a minority stake in Shuntai Leasing. The transaction is aimed at boosting its downstream and manufacturing growth plans. The company expects the deal to close by the end of this year.

Per the agreement, Trina Solar will acquire a 28% stake in Shuntai Leasing (Changzhou) Company Limited, which is one of the financing institutions under Changzhou Hi-Tech group.

Trina Solar has also signed a cooperation agreement with Shuntai to finance its downstream and solar manufacturing businesses. It will help Trina Solar to cut its near-term cash requirement for project development and capital investment.

China Mobile Ltd. (CHL) plans to build 10,000 4G base stations in Shanghai by the end of the year. These include those located in the Pilot Free Trade Zone. The announcement came after the mobile operator garnered 2 million 4G users in Shanghai.

The company has now increased its numbers of users in Shanghai to 2 million, twice the number it had two months ago. Speaking at a press conference, China Mobile’s deputy general manager Huang Gang said 4G data exceeded the amount used by 3G users for the first time in October to touch 600 million gigabytes.

China Mobile aims to provide a VoLTE service through its 4G network by mid-2015.

Bona Film Group Ltd. (BONA) has partnered with Singapore entrepreneur Calvin Cheng and Tembutsu Partners, a Singapore private equity fund to create a $100 million fund focusing on China’s entertainment and media industry.

This will be the first non-Reminbi-denominated fund which will target the country’s media sector. It plans to take advantage of Singapore’s legal framework, co production treaties and the fact that the city is a financial hub to draw investors from outside.

The closed-end fund has a five-year term period and will be formalized on March 31, 2015, following which fundraising will begin. Thailand’s Chia Tai Group and Bona Film Group will be among its anchor investors.

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
BABA	-6.9%	+10.6%
JD	+5.2%	-12.7%
VIPS	-9.7%	+10.8%
NQ	-18.4%	-38%
SFUN	-12.1%	-26.3%
CTRP	-20.2%	-26.8%
TSL	-10.1%	-19.6%
QIHU	-20.6%	-30.8%
BIDU	-8.2%	+27.8%
JASO	=0.8%	-9%

Next Week’s Outlook:

Stocks have experienced one of the most volatile weeks in recent times with gains coming in following speculation that the PBOC will ease monetary policy further. Meanwhile, losses have occurred due to profit taking and fears that recent gains have been excessive in nature.

Economic data has been mixed with trade data coming in below expectations. On the other hand, lower inflation has provided the climate essential for further monetary easing.

However, analysts have taken the view that valuations remain low and there are indications that further monetary easing will occur. This increases the possibility of gains for the market over the longer term. Meanwhile, oil stocks are playing a crucial role as far as losses are concerned and they may continue to guide markets.

Several key economic reports are lined up for release over the next few days. This includes crucial data on retail sales, industrial productions, loans and housing prices. Positive indications on this front could reduce volatility and sustain a market rally.

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