Markets showed a downward trend over the week following fresh concerns about China's economy. The benchmark index declined on Monday following the release of discouraging trade data.

The Shanghai Composite Index closed nearly flat on Tuesday as the impact of a report in a leading Communist Party publication continued to weigh on investor sentiment. The benchmark index increased on Wednesday with consumer and healthcare stocks leading the gainers. The Shanghai Composite Index declined marginally on Thursday with consumer staples and industrials leading the declining stocks.

Alibaba Group Holding Ltd. (BABA - Analyst Report) reported fourth-quarter fiscal 2016 (ended Mar 31, 2016) earnings of 20 cents per share, missing the Zacks Consensus Estimate of 38 cents. Yingli Green Energy Holding Company Ltd. (YGE- Snapshot Report), or Yingli Solar, reported an operating loss of 72 cents per American Depositary Share (“ADS”) in fourth-quarter 2015, narrower than the Zacks Consensus Estimate of a loss of $2.60.

Last Week’s Developments

Last Friday, the Shanghai Composite Index lost 2.8% following a decline in commodity stocks and fears that the recent uptick in economic data may be petering out. A decline in commodity stocks sent producers of commodity stocks tumbling, which led to losses for the day and the benchmark ending the stocks nearly flat. The Hang Seng China Enterprises index declined for the fifth successive day, marking its longest losing stretch for the year.

The H-share index lost 1.8% while the benchmark index closed below the 3,000 mark. The Hang Seng declined 1.7% leading to a weekly loss of 4.5%, the highest since Feb 12. All of the CSI 300’s 10 industry groups suffered losses, with consumer staples stocks falling significantly. A gauge of developers on the Shanghai exchange declined 2.1% after gaining for three successive days. The small-cap heavy ChiNext index slumped by 4.3%.  

Markets and the Economy This Week

The benchmark index declined again on Monday following the release of discouraging trade data. Additionally, a leading publication issued a warning about the country’s debt situation. The Shanghai Composite declined by 2.8% once again while an index of raw materials stocks fell to its lowest in two months.

Data released over the weekend revealed that China’s exports suffered a 1.8% decline in April in dollar terms. Additionally, imports fell for the 18th successive month, by 10.9%. Meanwhile, an important Communist Party publication said that the country needs to prioritize dealing with its debt situation over the pursuit of short term growth targets.

The Shanghai Composite closed at its lowest point since Mar 11. The CSI 300 lost 2.1%, even as sub-indexes of commodity and industrials declined in excess of 3%. The Hang Seng advanced 0.2%. However, the Hang Seng China Enterprises Index moved 0.3% lower, declining for the sixth successive day.

The Shanghai Composite Index closed nearly flat on Tuesday as the impact of a report in a leading Communist Party publication continued to weigh on investor sentiment. The CSI 300 increased 0.1% after losses made by materials stocks were outweighed by gains from consumer and industrial stocks. The market continued to experience intermittent gains and losses over the trading day.

The decline in factory gate deflation exceeded expectations. Meanwhile, CPI increased for the third successive month while the PPI lost 3.4%. A rise in inflation may reduce the chances of further monetary stimulus. Meanwhile stocks of automobile companies were the highest gainers for the consumer sector. The Hang Seng China Enterprises Index and the Hang Seng both gained 0.4%.  

The benchmark index increased 0.2% on Wednesday with consumer and healthcare stocks leading the gainers. This was the Shanghai Composite’s largest gain for the week. The CSI 300 gained 0.5% with sub-indexes of consumer staples and healthcare stocks gained by a minimum of 2.4%.  

However, stocks in Hong Kong suffered losses following a decline in financial stocks. Fears that the government will avoid introducing fresh stimulus measures despite indications of an economic slowdown were responsible for this downward trend. The Hang Seng China Enterprises Index lost 0.5%, its seventh decline in eight sessions. The Hang Seng moved 0.9% lower.

The Shanghai Composite Index lost less than 0.1% on Thursday with consumer staples and industrials leading the declining stocks. For every share that gained on the benchmark index, two shares of more declined. An index of industrial stocks declined the most among its industry groups. However, stocks of power producers increased, curbing losses for the day.

A sub-index of industrial stocks declined by 0.6%, the highest among the CSI 300’s industry groups. Meanwhile, sub-indexes of healthcare and consumer staples stocks both lost 0.4%. The Hang Seng moved 0.7% lower. Meanwhile, the Hang Seng China Enterprises Index declined by 0.4%.

Stocks in the News

Alibaba Group Holding Limited reported fourth-quarter fiscal 2016 (ended Mar 31, 2016) earnings of 20 cents per share, missing the Zacks Consensus Estimate of 38 cents. The adjusted figure excludes one-time items but includes stock-based compensation expense.

Alibaba reported revenues of RMB24.18 billion (US$3.8 billion), up 38.8% sequentially and 19.5% year over year, driven by strong mobile revenues. Also, revenues surpassed the Zacks Consensus Estimate of $3.58 billion.

Revenues from total China commerce business were RMB19.4 billion. The retail business recorded RMB18.3 billion (US$2.8 billion) in revenues, up 41% year over year driven by growth in online marketing services revenues and commission revenues. Wholesale business revenues came in at RMB1.08 million (US$168 million), up 28% year over year, supported by an increase in paying members and average revenues from them.

Alibaba’s adjusted operating expenses of RMB7.68 billion increased 4.6% from the year-ago period. Alibaba generated adjusted net profit of RMB3.08 billion compared with RMB3.11 billion in fourth-quarter fiscal 2015.

Yingli Green Energy Holding Company Ltd., or Yingli Solar, reported an operating loss of 72 cents per American Depositary Share (“ADS”) in fourth-quarter 2015, narrower than the Zacks Consensus Estimate of a loss of $2.60. The reported loss was also narrower than the year-ago loss of $4.90 per ADS.

Also, the company reported a loss of $1.97 per share in 2015, wider than a loss of $1.17 per share in 2014.

Total revenue was $325.7 million, down 41.4% from the fourth quarter of 2014. Revenues also missed the Zacks Consensus Estimate of $440 million. In 2015, the company reported revenues of $1,538.5 million, down 88.1% year over year.

Total PV module shipments were 504.5 megawatts (“MW”) in the fourth quarter of 2015, compared with 939.2 MW in the fourth quarter of 2014. For the first quarter of 2016, Yingli Green expects PV module shipments in the range of 480–510 MW. For the full year, the company expects PV shipment to be approximately 2.6–3.0 gigawatts.

JD.com, Inc.(JD - Snapshot Report) reported adjusted first-quarter 2016 loss of 7 cents per share, lower than the Zacks Consensus Estimate of a loss of 8 cents. JD.com reported revenues of $8,370 million, lower than the Zacks Consensus Estimate of $8378 million. However, revenues were 47.3% higher than the figure posted in the year-ago period.

Revenues from services and others, registered a 91% year-over-year increase. Gross merchandise value (GMV) rose 55% to $20 billion from core GMV registered in the same period last year. Annual active customer accounts increased to 169.1 million for the 12 months ended on Mar 31, 2016, 73% higher than the year ago figure.

SINA Corporation (SINA - Analyst Report) reported adjusted first-quarter 2016 loss of 27 cents per share, higher than the Zacks Consensus Estimate of 12 cents. SINA reported revenues of $199 million, lower than the Zacks Consensus Estimate of $204 million. However, revenues were 8% higher than the figure posted in the year-ago period. Advertising revenues increased 8% from the year-ago period to $163 million.

NetEase, Inc. (NTES - Snapshot Report) reported adjusted first-quarter 2016 earnings of $2.88 per share, higher than the Zacks Consensus Estimate of $2.31. NetEase reported revenues of $1228 million, 116.3% higher than the figure posted in the year-ago period. Revenues from online games increased 104.5% from the year-ago period to $932.9 million.

Phoenix New Media Ltd. reported adjusted first-quarter 2016 earnings of 2 cents per share and revenues of $50 million. Revenues declined 11.6% from the figure posted in the year-ago period. Advertising revenues increased 1.1% from the year-ago period to $42.1 million.

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:

Concerns over the health of China’s economy have once again taken center stage. Dismal trade data and observations about the country’s worrying non performing loans situation have rekindled fears of a slowdown. Meanwhile, market watchers have reason to believe that no fresh monetary stimulus may be in the offing.

This is why the economic reports scheduled for release over the next few days assume special significance. This includes data on loans, money supply, industrial production, retail sales and housing prices. The nature of economic data is likely to have a significant impact on the direction of markets in the week ahead.