Key News
Asian equities were mixed as Hong Kong and Taiwan outperformed.
Hong Kong investors were in a good mood following the four-day weekend as the market played catch up following the Mainland’s positive move and better-than-expected PMIs.
Xiaomi gained +8.97% after its successful foray into electric vehicles (EVs). Its competitors in the space were mixed overnight. Li Auto was up +1.98% and XPeng fell -5.61%. It is remarkable to think how the mobile phone and electronics company pivoted to EVs while Apple
AAPL
Brilliance China Auto gained +25.93% on strong financial results and an unexpectedly large dividend payout that forced shorts to cover. We continue to advocate for Hong Kong-listed companies to pay dividends in order to hurt short sellers and raise the cost of shorting. NetEase fell -6.88% after two new games missed expectations while the company reminded investors that minors will have limits on playing time during the upcoming holiday.
Mainland investors bought a net $472 million worth of Hong Kong-listed stocks and ETFs via Southbound Stock Connect. Following Xiaomi’s strong day, Hong Kong’s most heavily traded stocks by value were Tencent, which gained +1.78% as the company bought back another 3.23 million shares, Meituan, which gained +4.75%, Alibaba, which gained +1.07%, and CNOOC, which gained +5.74%.
After the Hong Kong close and before the US open, Alibaba filed with the Hong Kong Stock Exchange that, during Q1 2024, the company spent $4.8 billion buying back 65 million ADRs, representing 2.6% of shares outstanding! From Q1 2023 to Q1 2024 the company has bought 1.057 billion shares (5.1% of shares outstanding). Impressive!
Mainland China bounced around the room, as foreign selling weighed on morning trading as the market slipped and closed in negative territory. Defensive/value plays outpaced growth stocks as Middle East tensions lifted energy stocks. Meanwhile, lithium plays lifted materials and benefited from March EV sales. Mainland-listed real estate development was the worst-performing subsector, led lower by Vanke, which fell -5.35% on an analyst downgrade and a public spat with a local partner. However, redeeming a bond early is a good sign.
The National Development and Reform Commission (NDRC) held a meeting with several companies, including JD Group, Midea, Haier, and Gree, on “large-scale equipment updates and consumer goods replacement.” I was surprised their stocks did not see a more significant reaction.
CNY and the Asia Dollar Index were weaker versus the US dollar. Hog prices increased +2% month over month in March, which should lead to a CPI increase.
The Hang Seng and Hang Seng Tech indexes gained +2.36% and +1.89%, respectively, on volume that increased +22.96% from last Thursday, which is 148% of the 1-year average. 329 stocks advanced, while 158 declined. Main Board short turnover increased by +40.93% from last Thursday, which is 159% of the 1-year average, as 19% of turnover was short turnover (remember Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The value factor and large-cap stocks outperformed the growth factor and small-caps. The top sectors were energy and tech, +4.33%, and materials, +4.28%, while healthcare was off -0.04%. The top sub-sectors were energy, technical hardware, and materials, while food/staples and healthcare equipment. Southbound Stock Connect volumes were very high as Mainland investors bought $472 million of Hong Kong stocks and ETFs, with the Hong Kong Tracker ETF a moderate net buy, CNOOC and Li Auto small net buys, while Xiaomi was a large net sell, Sciclone Pharma and Xpeng small net sells.
Shanghai, Shenzhen, and the STAR Board fell -0.08%, -0.53%, and -0.87%, respectively, on volume that decreased -3.14% from yesterday, which is 111% of the 1-year average. 2,231 stocks advanced, while 2,663 fell. The value factor and large caps fell less than the growth factor and small caps. The top sectors were energy +1.34%, materials +0.79%, and utilities +0.28%, while real estate -2.9%, tech -1.86% and healthcare -1.27%. The top sub-sectors were shipping, fine chemicals, and oil/gas, while cultural media, computer hardware, and software were the worst. Northbound Stock Connect volumes were light/moderate as foreign investors sold -$223 million of Mainland stocks, with CATL a large net buy, Inovance, and Wuliangye small net buys, while Kweichow Moutai, Cits, and Sungrow Power were moderate/small net sells.
Last Night’s Performance
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Last Night’s Performance
- CNY per USD 7.23 versus 7.23 yesterday
- CNY per EUR 7.77 versus 7.79 yesterday
- Yield on 10-Year Government Bond 2.29% versus 2.31% yesterday
- Yield on 10-Year China Development Bank Bond 2.42% versus 2.43% yesterday
- Copper Price +0.38%
- Steel Price +1.70%