The Zacks Analyst Blog Highlights: China Telecom, Trina Solar, China Mobile, China Unicom (Hong Kong) and Shanda Games

CHICAGO, Sept. 12, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the China Telecom Corp. Ltd. (NYSE:CHA-Free Report), Trina Solar Ltd. (NYSE:TSL-Free Report), China Mobile Limited (NYSE:CHL-Free Report), China Unicom (Hong Kong) Limited (NYSE:CHU-Free Report) and Shanda Games Limited (Nasdaq:GAME-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Thursday's Analyst Blog:

China Stock Roundup

Markets had a dismal week following a series of disappointing economic reports. After being closed for a national holiday on Monday, stocks suffered losses on Tuesday following a decline in imports. Stocks declined once again on Wednesday following Indications from the Chinese Premier that money supply growth had slowed down.

Concerns that gains made by stocks recently were too high relative to the country's economic situation led to losses for the markets today. China Telecom Corp. Ltd. (NYSE:CHA-Free Report) gained 1.45 million 3G subscribers during the month of July. Meanwhile, Trina Solar Ltd. (NYSE:TSL-Free Report) will provide 70MW high efficiency solar modules to a power project in Chile.  

Last Week's Developments

Stocks gained for the sixth successive day last Friday, leading to the highest weekly gain for the benchmark index in 19 months. Speculation that the government is stepping up measures to boost the economy and end the four-year weakness in stocks lifted markets. The Shanghai Composite Index increased 0.9% while the CSI 300 added 1%. The sub-index for industrial stocks within the CSI 300 gained 2.4%, the highest among the 10 industry groups. The Bloomberg China-US Equity Index declined 0.3%.

Analysts took the view that recent measures such as the reduction of margin requirements on index-futures contracts and financial assistance to real estate companies had led investors to believe that further measures were in the offing. The Hang Seng China Enterprises Index lost 0.2%.

For the week, the benchmark index gained 4.9%, the largest weekly increase since Feb 2013. The CSI 300 gained 4.8% over the week. An increase in services sector indices and a number of articles released by the Xinhua News Agency which encouraged investors to buy stocks are the primary reasons for these gains. Analysts are of the view that such articles are part of the government's efforts to boost markets.

Markets and the Economy This Week

China's financial markets were closed due to a national holiday on Monday. The Hang Seng lost 0.2% after Chinese imports shrank 2.4% in August compared to year-ago levels. This gave rise to concerns among investors that industrials may not be strong enough to support growth in the economy during the second half of the year. On the other hand, exports gained 9.4% and the trade surplus touched $49.8 billion. However, the Hang Seng China Enterprises Index moved up 0.4%.

The Shanghai Composite Index ended Tuesday flat but the CSI 300 lost 0.2%. This ended a six day rally for the index, during which it gained 6%. The CSI 300 is made up of the largest stocks on the Shanghai and Shenzhen exchanges. Financial and tech stocks suffered the highest losses. A decline in imports was the primary reason for the downward movement of stocks.

Markets in Hong Kong were closed due to a holiday. Analysts were of the view that the decline in imports highlighted the underlying weaknesses in the economy. This made the case for additional government stimulus even stronger. Some market watchers were of the view that the rally would soon come to an end. This is because it was being powered by government stimulus and the planned linking up of the Hong Kong and Shanghai exchanges, rather than an improvement in the economic outlook.

Stocks declined once again on Wednesday after Chinese Premier Li Keqiang said the broadest measure of money supply, M2, increased 12.8% in August. This is lower than the 13.5% growth reported in July. However, the People's Bank of China has yet to release official data. The decline in money supply growth follows July's record decline in new credit and the dip in imports. Investors also believe that gains made by markets recently have been excessive.

The Shanghai Composite Index declined 0.4% while the CSI 300 moved down 0.5%. The gauge for property stocks within the benchmark index declined 0.8%, emerging as the largest loser among the five industry groups. The H-shares gauge or the Hang Seng China Enterprises Index moved down 2.6%, its heaviest loss in seven months.

The benchmark index lost 0.3% today and fell to its lowest level in a week. Fears that a rally which raised valuations to their highest level in a year was unsustainable led to losses. Data on inflation released today followed recent reports which have highlighted underlying economic weaknesses. This includes a fall in imports and a decline in growth of money supply. These reports have given rise to concerns that the rally is excessive given the dismal economic outlook.

The CPI gained 2% on a year-over-year basis while the PPI declined 1.2%. Both the increase and the decline came in below expectations. The CSI 300 fell 0.4% while a sub-index of consumer staples within the index lost 1.2%. This was the highest decline among the 10 industry groups. The Hang Seng China Enterprises Index declined 0.8%, following Wednesday's record losses.

Stocks in the News

China Telecom Corp. Ltd. added 1.45 million 3G subscribers during the month of July. This is its fifth consecutive month of 3G user additions. Though the current trend reflects a consistent improvement in performance, there is still a significant gap between the company and its rivals. China Mobile Limited (NYSE:CHL-Free Report) and China Unicom (Hong Kong) Limited (NYSE:CHU-Free Report) added 9 million and 2.5 million 3G and 4G subscribers, respectively, during the same period.

Additionally, the company has recently received a trial license from the Chinese government to set up a 4G network. This network will utilize both TD-LTE and FDD-LTE technology standards. According to a media report, China Telecom will probably receive the official hybrid LTE network license during early 2015.

The company has recently said that it has received government approval to increase the coverage of its 4G network trial to 24 more cities. The trial will cover a total of 40 cities across China, including Beijing and Guangzhou. China Telecom's chairman had said earlier that the company is likely to invest $13 billion on capital expenditure during the current year, around 50% of which will be spent on launching its 4G network.

Trina Solar Limited will supply 70MW high efficiency solar modules to a power project in Chile. According to the terms of the agreement, the company has agreed to deliver TSM-PC14 solar modules which provide output of 300-310 MW per panel. The shipment of the modules will begin in Sep 2014.

President of the company's module business unit, Zhiguo Zhu, said: "We are pleased to have secured Trina Solar's second agreement this year to supply modules to large utility scale projects in Chile. We pride ourselves on our ability to establish long-term relationships with our customers, especially in emerging markets such as Chile, where there is currently large demand and we see significant future potential for solar energy."

Shanda Games Limited's (Nasdaq:GAME-Free Report) controlling shareholders have been attempting to buy out the company for some time now. These efforts received a major setback after a consortium of private-equity companies, which includes The Carlyle Group LP (CG), backed out of a $1.9 billion buyout offer to take the company private.

Additionally, FountainVest Partners and China-based investment company Primavera Capital also moved out of the group. Probably, the most significant player to move away from Shanda Games is Perfect World Co., Ltd. (PWRD), which relinquished its stake in the company.

Some companies have joined the group attempting to take the company private. This includes affiliate companies of Orient Securities Co and Haitong Securities Co. These companies are both brokerage firms and the latter is the second largest player in this domain in terms of assets. Ningxia Zhongyincashmere International Group Co has also joined the consortium.

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