Week in Review
- Asian equities were mixed for the week as Hong Kong outpaced Mainland China, which was lower, with a slight gain.
- May retail sales, reported Monday, increased by +3.7% year-over-year (YoY), versus April’s 2.3% increase YoY and an expected 3%.
- Alibaba and JD.com both reported double-digit growth in sales during this year’s 6.18 Sales Festival compared to last year’s 6.18.
- The STAR Board outpaced major Mainland indexes this week as recent policy is seen as directly benefitting the technology-focused exchange.
Key News
Asian equities were mostly lower overnight along with US tech weakness and US dollar strength.
Investors are gearing up for China’s “Third Plenum” to be held in Beijing by policymakers next month. The meeting is important as it will be the first time officials might discuss ideas for the next five year plan (the 15th, for the period 2026 to 2031). The meeting is not expected to herald any significant policy changes, but officials’ tone and the precise levels of new fiscal support will be important to watch.
The PBOC orchestrated its strongest CNY fixing since April, to keep the currency stable after it reached its lowest levels this year. The strong fixing is likely a good indicator. Rather than devaluing the currency to prop up exports, the central bank is holding its value steady to keep up the purchasing power of its consumers.
A large Japanese bank sold low-yielding USD and EUR bonds overnight, worsening its profit outlook. Japanese equities have been bolstered by easy monetary policy and a cratered exchange rate. Any slight reversal of this trend could see outflows.
Hong Kong’s IPO market is heating up, with 70 new applications this year. This represents a significant increase from last year’s application tally. The approval of bitcoin ETFs likely helped grow the number to the current level, though Mainland policies bolstering support for well-qualified firms to go public in Hong Kong have also contributed. Having been in Hong Kong just a few weeks ago, the energy improvement over last year was palpable among bankers and traders.
The Securities Daily, a Mainland financial media source, reported that new, lower mortgage rates have sparked a wave of early repayments from borrowers, a strong indicator of healthy balance sheets among Chinese homeowners.
Bilibili surged +16.82% in Hong Kong this week on strong results from its new games and an analyst upgrade.
The electric vehicle ecosystem was under pressure this week on potential Canadian tariff increases.
The Hang Seng and Hang Seng Tech indexes both closed lower by -1.67% and -1.76%, respectively, on volume that increased +26% from yesterday. Mainland investors bought a net $585 million worth of Hong Kong-listed stocks and ETFs overnight. The top-performing sectors were Materials, which fell -0.99%, Real Estate, which fell -1.26%, and Health Care, which fell -1.52%. Meanwhile, the worst-performing sectors were Industrials, which fell -2.18%, Consumer Discretionary, which fell -2.08%, and Energy, which fell -1.95%.
Shanghai, Shenzhen, and the STAR Board diverged to close -0.24%, -0.09%, and 0.43%, respectively, on volume that decreased -14% from yesterday. The top-performing sectors were Communication Services, which gained +0.62%, Information Technology, which gained +0.40%, and Real Estate, which gained +0.04%. Meanwhile, the worst-performing sectors were Consumer Staples, which fell -1.46%, Energy, which fell -0.81%, and Health Care, which fell -0.29%. CNY was flat versus the US dollar, government bond prices declined slightly, and copper and steel were lower.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.26 versus 7.26 yesterday
- CNY per EUR 7.76 versus 7.78 yesterday
- Yield on 1-Day Government Bond 1.40% versus 1.40% yesterday
- Yield on 10-Year Government Bond 2.26% versus 2.24% yesterday
- Yield on 10-Year China Development Bank Bond 2.36% versus 2.35% yesterday
- Copper Price -0.44%
- Steel Price -1.19%
