Asian equities were higher overnight as Hong Kong and South Korea outperformed while Mainland China underperformed.
Hong Kong internet stocks largely shrugged off yesterday’s ADR decline, with Hong Kong’s top-traded Tencent +1.49%, Meituan +1.64%, Alibaba HK +1.19% and JD.com HK +5.25%. The Hang Seng and Hang Seng Tech ended up +0.84% just below the 21K level and up +1.83%, although they were in late afternoon trading from the daily highs of +2.38% and +4.32 % have been sold. Shanghai and Shenzhen also gave up intraday gains of +0.86% and +0.58% and sold aggressively on profit-taking to close -0.96% and -1.7%, pushing the indices back to support levels. What triggered the afternoon sell-off? Hard to say.
There was a lot of good news as President Xi’s December speech was re-released from the CEWC business meetings, emphasizing consumption and political support. This should lead to further policy at the two government meetings that will take place on March 4th and 5th. The PBOC injected cash into the finances as taxes come due in China, with some rumors of another cut in the bank reserve requirement ratio or the benchmark lending rate. The Foshan Health Commission announced extended maternity and paternity leave as the government focuses on boosting China’s birth rate. The Shenzhen Health Commission has proposed giving parents a RMB 19,000 subsidy for the birth of a third child. Both Ji’nan and Harbin have proposed similar policies. More to come on this topic! We had some ChatGPT/AI mania in Mainland China which seemed to trigger a sell off that spread widely to stocks as only 474 stocks rose.
Overseas investors bought $991 million worth of mainland stocks through Northbound Stock Connect. Meeting with a Hong Kong visitor, they felt that the Northbound Connect inflows were from brokerages/market makers/high frequency traders. I would suspect that the bursting of the AI bubble, leading to a sell-off rush, was the culprit for the Mainland’s demise. However, the sell-off coincided with Iranian President Ebrahim Raisi’s visit to Beijing, which included an offer for President Xi to visit Iran, which he accepted. There have been rumors that a US-China meeting in Europe may be more difficult to hold after the balloon incident.
After the shutdown, Raytheon and Lockheed Martin were banned from doing business in China over arms sales to Taiwan, which is irrelevant, although Boeing avoided a similar fate. One idea for an activist investor would be to get Boeing to split its military and commercial efforts between two companies. The rebellion escalation is unfortunate and only enforces why the two sides should get on a plane and meet. Hong Kong internet stocks held up as investors check their calendars and appear to see Baidu reporting next Wednesday, Alibaba and NetEase on Thursday.
This morning, online auto retailer Autohome (ATHM US) reported fourth-quarter results, with sales and adjusted net income beating estimates while adjusted earnings per share fell short. The company has increased its dividend and buyback program in favor of investors.
It’s worth noting that Alibaba shareholders include Big Short’s Charlie Munger and now Michael Burry, who also owns JD.com. The number of domestic trips is increasing rapidly, while international and international trips are increasing! Munger had some kind words about BYD from his Daily Journal conference yesterday.
Hang Seng and Hang Seng Tech were up +0.84% and +1.83% from yesterday on volume of +9.43%, up 97.6% of the 1-year moving average. 249 stocks rose while 227 stocks fell. Motherboard short sales rose +11.57% from yesterday, 92% from the 1-year moving average, as 16% of sales were short sales. Growth factors outperformed value factors as large caps outperformed small caps. The top sectors were Real Estate +1.68%, Consumer Goods +1.64% and Communications +1.38%, while Healthcare -1.63%, Materials -1.49% and Utilities -0.45%. The leading sub-sectors were food/staples, healthcare equipment and telecom services, while semi-finished goods, materials and pharma/biotech were among the worst performers. Southbound Stock Connect volumes were light as mainland investors sold -$110M worth of Hong Kong stocks, with Tencent making a small net sell and Meituan and Kuaishou both being small net buys.
Shanghai, Shenzhen and STAR Board fell -0.96%, -1.7% and -1.86% respectively on volume +27.35% from yesterday, down 132% from the 1-year moving average. Only 474 shares rose while 4,286 shares rose. Value factors outperformed growth factors, while large caps outperformed small caps. Communications and Staples were the only positive sectors, +1% and +0.15%, respectively, while Materials -2.06%, Technology -1.93% and Industrials -1.46%. The leading subsectors were telecoms, catering and spirits, while computer hardware, education and packaging were among the worst performers. Northbound Stock Connect volumes were moderate as mainland investors bought a whopping +$991m in mainland stocks. The CNY was flat against the US dollar. Treasury bonds rallied while copper fell and steel rose.
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Exchange Rates, Prices And Yields Last Night CNY per USD 6.81 vs 6.82 yesterday CNY per EUR 7.33 vs 7.30 yesterday 10-year government bond yield 2.89% vs 2.89% yesterday 10-year yield China Development Bank 1-Year Bonds 3.05% vs. 3.06% Yesterday Copper Price +0.54% overnight Steel Price -0.62% 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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