China last night
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Important news
Asian equities were mostly lower as Hong Kong underperformed on higher volume overnight.
US CPI print suggested inflation has eased slightly since December, but not nearly enough to allow the Fed to pause on rate hikes. The still high pressure was expected but still weighed on risky assets globally, including in Mainland China and Hong Kong.
The market is pricing in two more rate hikes from the US Federal Reserve. This could explain the absence of an overnight cut in China’s medium-term credit facility (MLF).
The International Energy Agency (IEA) has raised its global oil demand forecast for 2023 by 500,000 barrels per day in light of China’s reopening.
According to the National Security Council, the three unidentified objects shot down since last Friday were said to have been for commercial purposes.
Hong Kong was one of the worst performers in Asia overnight as most of the increase in volume came from selling. Internet names outperformed, with Baidu and Xiaomi leading the way. Meanwhile, consumer discretionary and real estate saw more profit-taking and declines from equity issuance, respectively.
iFlyTek Co. rose 7.20%, beating the announcement of a chat GPT-like AI search feature. This is the latest in a slew of Chinese names riding the AI wave.
Carrefour has closed stores in China in what appears to be a downsizing of its retail operations in the country. Many say e-commerce is to blame, but China’s consumerism is also to blame. Carrefour, which has been operating in China for over a decade, did not reckon with Chinese consumers’ loyalty to their local street markets for fresh foods such as fruits and vegetables. China is a difficult market to break into, but extremely rewarding for global corporations.
Speaking of hard-to-break markets, Pinduoduo entered the US market with a splash through its numerous Super Bowl ads last Sunday. Apparently, the company is heavily subsidizing its US entry, offering rock-bottom prices with the slogan “Shop like a billionaire.” They’re making a big bet on US consumers, a key global market.
Internet earnings season begins next week with reports from Baidu, Alibaba and NetEase. Q4 is likely to be mixed as many in China have contracted COVID or scaled back spending and activities for fear of contagion. We should see positive reopening results in Q1 releases. Beware of bearish fourth quarter releases.
Many have wondered if the reopening will lessen the need for online shopping in China. This is far from the truth, as reopening means consumer confidence will rebound, while the entrenchment of e-commerce (30% of all retail sales) means e-commerce businesses will benefit.
The Hang Seng and Hang Seng Tech indices ended down -1.43% and -0.97% respectively after volume rose +15% from yesterday. Mainland investors bought a net $753 million in Hong Kong stocks overnight as they weakened. Among the best performing sectors were internet and technology. Meanwhile, among the worst performing sectors were real estate and healthcare.
Shanghai, Shenzhen and the STAR Board were mixed, finishing -0.39%, -0.06% and 0.15% respectively on volume up +3% from yesterday. Overnight, foreign investors sold a net $272 million worth of mainland stocks. On the mainland, the best performing sectors overnight included Communications and Consumer Staples. Meanwhile, healthcare, consumer discretionary and financials were among the weaker performers.
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performance last night
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stock performance
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Hong Kong Top 10
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China’s top 10
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Exchange rates, prices and yields last night CNY per USD 6.84 vs 6.83 yesterday CNY per EUR 7.33 vs 7.33 yesterday 1-day government bond yield 1.60% vs 1.65% yesterday yield on 10 -Year Treasury Bonds 2.89% vs 2.89% yesterday China Development Bank 10-year bond yield 3.06% vs 3.05% yesterday Copper Price +0.48% overnight Follow me on Twitter or LinkedIn. Check out my website.
I am the Chief Investment Officer of KraneShares, a China-focused provider of Exchange Traded Funds (ETFs). As a pioneer in the ETF industry, I’ve witnessed the surge in popularity of ETFs firsthand and helped an industry-leading global ETF provider grow from a few million to over $1.5 trillion in assets under management. With my experience working in the capital markets, my insatiable appetite for global financial news and a dash of humor, I aim to provide readers with an informative daily summary of the most important headlines and data from China’s financial markets. In addition to my Forbes contributions, I am frequently interviewed and quoted on topics related to the Chinese markets on Bloomberg, CNBC and The Wall Street Journal.
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