March 20, 2010 (Chinavestor) Earnings, strong dollar, and Chinese fiscal tightening combined with a stimulus exit drove China stocks prices for the week. Most extreme movers were City Telecom (H.K.) (NASDAQ:CTEL) to the upside and Fuqi International (NASDAQ:FUQI) to the downside.
The earnings calendar was full of action for the week. KongZhong Corp. (NASDAQ:KONG) is one of the best performing China stock of the week thanks to strong earnings. But most small cap China stocks reported disappointing financials, crashing share prices for HQ Sustainable Maritime (AMEX:HQS), AirMedia Group (NASDAQ:AMCN), China TechFaith Wireless (NASDAQ:CNTF), and China SkyOne Medical (NASDAQ:SKI) among others.
The dollar strengthened on the woes of the euro, softening oil and commodity prices. Chinese solar stocks underperformed as a result, with Trina Solar (NYSE:TSL) losing -12.99% for the week. Part of the fall is attributed to a secondary offering of 7.9 million ADRs, diluting EPS and other valuation measures.
Inflation has gained momentum in China raising chances of an interest rate increase. Bank of India just did so on Friday, sending equity markets lower world wide. Odds are increasing that China will start exiting stimulus measures soon as the economy has been recovering steadily. The exit will hurt the auto industry, one of the major beneficiaries of the stimulus program. Shares of China Automotive Systems (NASDAQ:CAAS) and Tongxin International (NASDAQ:TXIC) felt the pinch for the week, giving up -12.8% and -13.7% of their share price, respectively.
Looking ahead, earnings and economic news are going to dominate stock price movements for the week. On the corporate front China Telecom (NYSE:CHA) and China Unicom (NYSE:CHU) are going to report 2009 full-year (FY) results. China Telecom (NYSE:CHA) is expected to report a blockbuster year compared to 2008, part of it attributed to a record loss in 2008 due to impairment charges. Chinese oil majors are going to start reporting as well. The largest Chinese oil producer, Petrochina (NYSE:PTR) is schedule to report between March 22-24 followed by CNOOC Ltd. (NYSE:CEO), China's offshore oil specialist. Asia's largest refiner by volume, Sinopec (NYSE:SNP), is due on Monday, March 29, the following week. Bank of China (HKG:3988) and China Construction Bank (HKG:0939) are going to report the week before March 29. China stock earnings calendar, March 22-26.
Economic data-points for the upcoming week include Japanese CPI on Friday. Consumer price index fell -1.3% in January but is expected to improve for February. On the domestic front, housing and durable goods order numbers will dominate. Number of existing home sales will come to light on Tuesday, followed by number of new home sales on Wednesday. Durable goods order report is schedule for Wednesday. The health care reform is going to have impact on the insurance industry, Sunday's vote is expected to create some waves on the market on Monday.
No company specific data propelled the best performing China stock of the week higher. Shares of City Telecom (NASDAQ:CTEL) advanced +20%, driven by technicals. The company has been strong for over 52 weeks and the sudden drop in its share price a week earlier was detected by the oversold monitor. We issued a bullish statement on Tuesday "On the oversold end City Telecom (NASDAQ:CTEL) and WuXi Pharmatech (NYSE:WX) became oversold and are ready to bounce back up", suggesting a rally is imminent, though the magnitude of it was a surprise. Oversold CTEL rocks the house.
Not earnings but presumed financial wrongdoing punished Fuqi International (NASDAQ:FUQI) this week. The company submitted a form to the SEC asking for a delay releasing Q4 earnings and had to restate earnings for the last three quarter. While the change of earnings is relatively minor, allegations into wrongdoings send the stock tumbling -44% for the week. While many investors have lost their shirts so far, the time has come to take advantage of the crushed stock price. We think a strong bounce back is likely for the upcoming week. Don't panic FUQI investor!
On the corporate front earnings of China Mobile (NYSE:CHL) were highly watched. The company is the largest mobile carrier in the world measured by number of subscribers, boosting 522 million of them! The company has plenty of cash despite 3G network building related costs, and it just took a 20% stake in Shanghai Pudong Development Banks (SHA:600000). Both the acquisition and earnings reaffirmed our assumption that CHL is an excellent value play. China Mobile 2009 FY beats expectations.
Additional earnings coverage of the week:
- China Housing & Land back in the red (NASDAQ:CHLN)
- AOB down on earnings, outlook (NYSE:AOB)
- Risk increases for CFSG as earnings disappoint but outlook sweetens (NASDAQ:CFSG)
- CSKI falls on earnings - but wait a minute! (NASDAQ:CSKI)
- JRJC advanced on 2009 Q4. Will it last? (NASDAQ:JRJC)
- Focus Media rattles nerves with 2009 Q4 numbers. (NASDAQ:FMCN)
- KongZhong up 17%. Will it last? (NASDAQ:KONG)
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