Week in Review
- Asian equities had a mixed week. A “light” US inflation print and the US Fed holding rates steady boosted sentiment, but chatter that the Biden Administration might further curtail Chinese companies’ access to AI chips weighed on sentiment.
- On Wednesday, Wuxi Biologics gained +14.21% in Hong Kong, and WuXi AppTec gained +8.45% in Hong Kong, as the Biosecure Act did not include provisions to restrict the use of the companies’ services.
- May Aggregate Financing increased to RMB 14.8 trillion from April’s RMB 12.73 trillion, though it missed expectations of RMB 15.08 trillion.
- May New Loans increased to RMB 11.14 trillion from April’s RMB 10.18 trillion, though it slightly missed expectations of RMB 11.13 trillion.
Key News
Asian equities were mixed overnight on light news and volumes as the US 10-year Treasury Yield rallied along with the US dollar.
The biggest news out of China overnight was coverage of Tesla’s shareholder meeting. Hong Kong had a choppy session on light volumes, ultimately succumbing to gravity into the close, with the Hang Seng closing just below 18,000. EU tariffs on Chinese electric vehicles (EVs) weighed on sentiment and auto stocks despite the tariffs being “preliminary,” and Vice Premier Ding Xuexiang is headed to Brussels to negotiate.
The China Association of Automobile Manufacturers reported that May auto sales increased by +1.5% year over year (YoY) to 2.417 million, as new energy vehicles (NEVs), which include both EVs and hybrids, increased by +33.33% YoY to 955,000 vehicles. 39.5% of total auto sales were NEVs. With all the talk of China’s “overcapacity,” new auto and NEV production was still LESS than sales. At “only” 40% of sales, NEVs have a significant market share to take from internal combustion engine or gas powered vehicles.
There was some chatter about the US Treasury looking at Chinese banks’ Russian transactions, which didn’t help sentiment, but nothing tangible thus far. The Hong Kong market lacks a strong catalyst, though the 6.18 E-commerce sales event could provide some fuel in advance of July’s Third Plenum. Alibaba’s 6.18 results have been good so far, with first-day average sales up +30% year-over-year. President Xi stated that the economic reforms would be focused on “planning and implementing a series of significant measures to comprehensively deepen reform.” Policies supporting domestic consumption and “high development” are expected.
Hong Kong’s growth stocks were off. Hong Kong’s most heavily traded stocks by value were Tencent, which closed flat/0%; Meituan, down -1.71%; Alibaba, down -2.28%; AIA, down -1.94%; and BYD, down -1.46%. US-China ADRs performed okay yesterday, though Hong Kong couldn’t replicate the positive day today, as Bilibili HK was up only +0.26% versus its ADR gaining +7.71% yesterday on the success of a new game. Mainland investors bought the Hong Kong dip with a healthy $743 million of net buying today, bringing the holiday-shortened weekly total to $3.451 billion. Real estate was the top sector in Hong Kong as it gained +1.14% and also gained +1.86% in Mainland China, with reports that Shanghai real estate transactions have picked up following house purchase restriction rules being relaxed back on May 28. Shanghai and Shenzhen both managed small gains.
After the close, May new loans increased to RMB 11.14 trillion from April’s RMB 10.18 trillion, though a slight miss versus expectations of RMB 11.13 trillion. May Aggregate financing increased to RMB 14.8 trillion from April’s RMB 12.73 trillion, though it also missed expectations of RMB 15.080 trillion. A nice month-over-month gain! A fair amount of attention was given to Monday’s May industrial production, retail sales, and fixed asset investment. Enjoy the weekend!
The Hang Seng and Hang Seng Tech fell -0.94% and -0.84%, respectively, on volume +8.29% from yesterday, which is 113% of the 1-year average. 230 stocks advanced, while 243 declined. Main Board short turnover increased +3.3% from yesterday, which is 100% of the 1-year average, as 15% of turnover was short turnover. The value factor managed a positive return while growth underperformed the market. The top sectors were real estate, up +1.14%, materials, up +0.50%, and financials, up +0.22%, while consumer discretionary was down -1.55%, energy was down -0.88%, and healthcare was down -0.57%. The top sub-sectors were food/staples, healthcare equipment, and media, while retailing, pharmaceuticals/biotech, and semiconductors were the worst. Southbound Stock Connect volumes were moderate/light as Mainland investors bought a healthy $743 million worth of Hong Kong-listed stocks and ETFs.
Shanghai, Shenzhen, and the STAR Board diverged to close +0.12%, +0.37%, and -0.62%, respectively, on volume that increased +13.1% from yesterday, which is 100% of the 1-year average. 2,323 stocks advanced, while 2,524 declined. Value and large caps outpaced growth and small caps. The top sectors were real estate, up +1.86%, information technology, up +1.41%, and financials, up +1.35%, while utilities fell -2.26%, energy fell -0.92%, and healthcare fell -0.57%. The top sub-sectors were communication equipment, securities, and electronic components, while soft drinks, power, and biotech were the worst. Northbound Stock Connect volumes were light, with foreign investors net sellers of Mainland stocks, with CATL a large/moderate net buy, Zhongji Innolight, and Mindray moderate net buys, while Cypc, WuxiAppTec, and Bank of Communications were large net sells.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.25 versus 7.25 yesterday
- CNY per EUR 7.76 versus 7.82 yesterday
- Yield on 10-Year Government Bond 2.25% versus 2.27% yesterday
- Yield on 10-Year China Development Bank Bond 2.37% versus 2.38% yesterday
- Copper Price -0.44%
- Steel Price +0.80%
