China Market Sentiment Near ‘Freezing Point’

Market sentiment has reached what's described in Chinese media as "freezing point" on a combination of concerns about neverending initial public offerings, an upcoming over-the-counter market, and disappointing corporate scorecards.

Grant Faith | The Image Bank | Getty Images

The benchmark Shanghai Composite Index fell 1.74 percent to close at 2147.96 on Monday.

Market Factors:

The Chinese cabinet is expected to hold its midyear economic conference as early as this Wednesday that will set the tone of fiscal and monetary policies for the second half of the year. Analysts expect pro-growth measures to be announced after the conference.

State-owned enterprise profits fell 11.6 percent in the first half to 1.02 trillion yuan ($160 billion). But June profits grew 20.6 percent on a month-over-month basis. Tobacco and auto industries saw the most profit increases, while transport, resources, and construction materials company profits declined by the largest amount.

Stocks to Watch:

Gree Appliances - The appliance maker posted preliminary earnings that showed a 30 percent rise in first half net profit.

China Railways Erju - The railway engineering company expects first-half earnings to plunge 70 percent to 120 million yuan ($19 million) as China's investment in railways slowed sharply.

CSSC Jiangnan Heavy - The shipbuilder sees first-half net profit diving 80 percent because of shrinking orders and declining prices.

China Merchants Energy Shipping - The oil shipping firm says first-half net profit shrank 58 percent to 82 million yuan ($13 million), even as revenue rose 15.7 percent.

Pingdingshan Tianan Coal Mining - The listed unit of China's fifth largest coal miner said its profit in the first six months fell 27 percent to 830 million yuan ($131 million) due to restructuring costs, higher safety costs, and increased power tariffs.

Coming Up This Week:

TUESDAY: Japanese Monetary Policy Meeting Minutes
WEDNESDAY: Australian NAB Quarterly Business Confidence
THURSDAY: Japanese All Industries Activity Index, Hong Kong Unemployment Rate, New Zealand Import Price Index, New Zealand Credit Card Spending
FRIDAY: Indian Foreign-Exchange Reserves