Key News
Asian equities were mixed on light volumes as China and Hong Kong were off.
Henry Kissinger’s remarkable meeting with President Xi was front-page news in China and Asia. Amazing to see the one-hundred-year-old doing his part to mend relations between the US and China. President Xi commented China is ready to “…explore with the United States the right way for the two countries to get along and take their relations steadily forward, which will be good for both sides and deliver benefits to the world”. Interesting!
More positive comments overnight from government officials on supporting the private economy though investors are asking, “Where’s the beef?!” i.e., action not talk as Hong Kong and China slumped in afternoon trading. We will likely need to wait for the end-of-month Politburo meeting for specific measures to be released.
The PBOC said “No Mas!” to the renminbi’s weakness versus the US dollar as CNY gained +0.79% versus the US dollar closing at 7.16 versus yesterday’s 7.21. As expected, the 1 and 5-year loan prime rates were left unchanged though a fair amount of chatter about housing curbs being dialed back.
Real estate was the top performer in China +1.31% and HK +2.21%. The EV ecosystem was mixed with Tesla’s financial results weighing on the space though EVs’ purchase tax exemption was extended for four years. Smartphone camera maker and Apple supplier Sunny Optical (2382 HK) fell -13.65% after releasing earnings guidance for the first half of the year -65% to -70%. The fall weighed on tech as growth stocks/sectors were weak in both Hong Kong and China.
Taiwan Semis’ financial results came out after the close though its no-nonsense Chairman Mark Liu continues to earn my respect with his candor. The weak outlook should be a cold blanket on US tech AI mania and valuations. Time will tell!
Hong Kong internet stocks failed to match the strong performance of their US ADRs on no news. Southbound Stock Connect saw a very large net sell of -$1.77B though the culprit appears to be large sell in a Hong Kong-listed ETF as most stocks were net buys. Shanghai closed just below the 3,200, Shenzhen above 2,000, and Hang Seng just below 19,000.
Government social media personality and recent stock buyer Hu Xijin noted he took a loss today, though he commented on the government talk on supporting the economy. His buying of stock for the first time and in a very public way has been called “Hu Xi’s bottom,” though today’s market action took Shanghai and Shenzhen below his initial entry point. He acknowledged investors want to see such talk implemented. I couldn’t agree more!
The Hang Seng and Hang Seng Tech fell -0.13% and -1.25% on volume -57.93% from yesterday, 93% of the 1-year average. 197 stocks advanced, while 290 declined. Main Board short turnover fell -57.94% from yesterday, which is 79% of the 1-year average, as 14% of turnover was short turnover. Value factors outperformed growth factors as small caps outperformed large caps. Top sectors were real estate +2.22%, materials +0.74% band healthcare +0.27% while tech -2.92%, utilities -0.9% and energy -0.63%. The top sub-sectors were real estate, banks, and materials, while technical hardware, media, and semis were the worst. Southbound Stock Connect volumes were moderate as Mainland investors sold a healthy -$1.77B of Mainland stocks, with Tencent a small/moderate buy, China Mobile, Meituan, XPeng, and Kuiashou small net buys.
Shanghai, Shenzhen, and STAR Board fell -0.92%, -1.05%, and -1.43% on volume +12.13% from yesterday, 87% of the 1-year average. 1,164 stocks advanced, while 3,507 declined. Value factors outperformed growth factors, while large caps outpaced small caps. The top sectors were real estate +1.35%, materials +0.99%, and staples +0.75%, while tech -1.82%, communication -1.73% and discretionary -0.46%. The top subsectors were fertilizer, education, and chemical industry, while computer hardware, communication equipment, and electronic component equipment were the worst. Northbound Stock Connect volumes were moderate/light as foreign investors bought +$48mm of Mainland stocks, with Kweichow Moutai a small net buy, Foxconn a moderate net buy, and Longi Green Tech a small/moderate net sell. CNY and the Asia dollar index gained +0.79% and +0.44% versus the US dollar. Treasury bonds rallied while copper and steel gained.
Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.16 versus 7.21 yesterday
- CNY per EUR 8.01 versus 8.10 yesterday
- Yield on 10-Year Government Bond 2.62% versus 2.62% yesterday
- Yield on 10-Year China Development Bank Bond 2.74% versus 2.75% yesterday
- Copper Price +0.07% overnight
- Steel Price +0.99% overnight
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