Key News
Asian equities were mixed overnight as South Korea outperformed while Hong Kong and India underperformed.
Hong Kong’s 10-day win streak was snapped on a bout of good old-fashioned profit-taking with the growth/internet names that have been outperforming hit the hardest. Bulls should note today’s move was on light volume compared to the volumes on the way up. Despite the pullback, breadth/advancers vs decliners wasn’t bad. The bears should note Mainland investors bought the dip via Southbound Stock Connect with $273mm of net buying today.
After moving from January’s 31st low of 15,485 to today’s 18,479, a breather was more than overdue. Q1 earnings season kicks off next week, with Alibaba and Tencent reporting next Tuesday morning. Further out will be the Third Plenum, the major economic meetings in July, though the amplification of policy support is increasing.
Overnight, there was continued chatter of home appliance upgrades/purchases. Hong Kong’s most heavily traded by value were Tencent -1.19%, Meituan -3.99%, Alibaba -1.82%, Kuaishou -4.76% and AIA -2%. Despite growth/internet names being the focus of profit-taking, the market held up well otherwise. Real estate was the top performer following Shenzhen loosening the housing purchase restrictions yesterday, rising +2.47% in Hong Kong and +1.4% in Mainland China. Energy also had a strong day, gaining +0.53% in Hong Kong and +0.99% in Mainland China. Mainland markets bounced the room in a choppy session with the Shanghai +0.22% and the Shenzhen +0.24%. Foreign investors were net sellers of Mainland stocks via Northbound Stock Connect, though Kweichow Moutai saw a strong net buy. President Xi’s visit to President Macron in France included a call to “fend off a new Cold War.” The US dollar was a touch stronger overnight, sending CNY and the Asia dollar index lower.
It’s funny to me to hear an investor say, “I’m not going to invest in China,” and then you look at their portfolio/13Fs, which is full of US companies with significant revenue exposure in China.
The Hang Seng and Hang Seng Tech fell -0.53% and -2.13% on volume -21.5% from yesterday, which is 114% of the 1-year average. 238 stocks advanced, while 230 declined. Main Board short turnover fell -32.82% from yesterday, which is 97% of the 1-year average, as 15% of turnover was short turnover (the renminbi is quoted USD/CNH, which confusingly means a lower price is renminbi appreciation versus the US dollar). The value factor “outperformed”/fell less than the growth factor. The top sectors were real estate +1.41%, energy +1.01%, utilities +0.74%, communication -1.82%, discretionary -1.76%, and healthcare -1.33%. The top sub-sectors were business/professional services, energy, and materials, while retailing, software, and media were the worst. Southbound Stock Connect volumes were moderate/high as mainland investors bought $273mm of Hong Kong stocks and ETFs, with Bank of China a moderate net buy and Li Auto a small net buy, while Meituan and Kuaishou were net sells.
Shanghai, Shenzhen, and STAR Board diverged +0.22%, +0.24%, and -1.01% on volume -12.21% from yesterday, which is 114% of the 1-year average. 2,795 stocks advanced, while 2,036 declined. The value factor and small caps outpaced the growth factor and large caps. The top sectors were real estate +2.47%, energy +0.53%, and staples +0.4%, while utilities -1.08%, discretionary -0.81%, and tech -0.61%. The top sub-sectors were aerospace/military, motorcycle, and fertilizer, while computer hardware, education, and land transportation were the worst. Northbound Stock Connect volumes were moderate as foreign investors sold -$296mm of Mainland stocks, with Kweichow Moutai a large net buy, Haier and Inovance small net buys while Foxconn, BYD, and Gree small net buys. CNY and the Asia dollar index were off versus the US dollar. Treasury bonds rallied. Copper and steel gained.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.21 versus 7.20 yesterday
- CNY per EUR 7.76 versus 7.77 yesterday
- Yield on 10-Year Government Bond 2.29% versus 2.31% yesterday
- Yield on 10-Year China Development Bank Bond 2.38% versus 2.40% yesterday
- Copper Price +0.21%
- Steel Price +0.46%
