Key News
Asian equities were largely higher as Japan outperformed, while Indonesia and Malaysia were closed for the Islamic New Year.
Hong Kong stocks were off slightly, but not nearly as much as US-listed China ADRs due to strong buying from Mainland investors via Southbound Stock Connect in afternoon trading which curtailed losses. Mainland investors bought $2.11 billion of Hong Kong-listed stocks today in the 10th largest net buy day ever. Main Board short turnover increased +140% from yesterday as 32% of turnover was short turnover. Short turnover was very high in Hong Kong-listed ETFs, indicating the Mainland may have hedged their long positions. The only culprit in yesterday’s US-China ADR fall that I could see was the US dollar’s strength, especially versus China’s renminbi which fell -0.46% overnight to 7.21.
US-China diplomatic green shoots continue with John Kerry and Henry Kissinger in China. Related to Kerry’s visit, President Xi made positive statements on China’s climate commitment though the comments were released after the close. Also, after the close, the State Council released a statement “…promoting the development and growth of the private economy.” Investors will be very interested in economic stimulus measures coming from the month-end Politburo meeting. The 1 and 5-year loan prime rate will be released tonight though expectations for a preemptive cut are low from current rates of 3.55% and 4.20%. You never know, though, especially with markets sitting near support levels.
The National Development and Reform Commission press conference was titled “Quickly formulate policies to restore and expand consumption.” Areas of focus include auto, electronic products, and rural consumption, as the NDRC will focus on weighing on consumption. The Ministry of Commerce also released meeting notes focused on the economy with EVs front and center. Mainland-listed electronic appliance makers were up, as Midea gained +2.45% and Gree gained +0.73%. Foreign investors were sellers of Mainland stocks as Shanghai closed just below 3,200 while Shenzhen sits above the 2,000 level.
Mainland earnings season is kicking off with its pre-announcement period. Tencent -1.01% was the most heavily traded stock by value as Prosus’ statement on selling shares weighed on sentiment, with Mainland investors selling again overnight. Alibaba HK gained +0.72% despite the US ADR falling -2.37% yesterday. In addition to the month-end Politburo meeting, US-China ADRs will report in August, and in early September, Alibaba’s six business units commencing independent operations. Stay tuned, as we would like to see the talk backed with action!
The Hang Seng and Hang Seng Tech fell -0.33% and -0.35% on volume +17.53% from yesterday, which is 99% of the 1-year average. 204 stocks advanced, while 275 stocks declined. Main Board short turnover increased +141% from yesterday, which is 188% of the 1-year average, as 32% of volume was short turnover. Value factors outperformed growth factors as large caps edged out small caps. The top sectors were real estate +1.34%, energy +0.92%, and materials +0.4%, while healthcare -1.26%, communication -0.78%, and financials -0.37%. The top sub-sectors were telecom, energy, and media, while semis, pharma, and healthcare equipment were the worst. Southbound Stock Connect volumes were moderate/high as Mainland investors bought a very healthy $2.11 billion of Hong Kong stocks as Tencent was a moderate/large net sell, and Meituan, China Mobile, and XPeng were small net buys.
Shanghai, Shenzhen, and STAR Board closed mixed +0.03%, -0.26%, and -0.5% on volume -9.85% from yesterday, which is 78% of the 1-year average. 2,139 stocks advanced, while 2,481 stocks advanced. Value factors outperformed growth factors as large caps outperformed small caps. Real estate was the only positive sector gaining +0.65%, while tech -1.39%, industrials -1.25%, and healthcare -1.03% were the worst. The top sub-sectors were household products, precious metals, and leisure products, while computer hardware, electronic power grid, and airport were the worst. Northbound Stock Connect volumes were light as foreign investors sold -$683 million of Mainland stocks, with Kingsoft Office Software a small net sell, Kweichow Moutai and Yili Industrial Group were moderate net sells. CNY fell -0.46% versus the US dollar, along with the Asia dollar index -0.38%. Treasury bonds rallied while copper and steel gained.
Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.21 versus 7.17 yesterday
- CNY per EUR 8.10 versus 8.07 yesterday
- Yield on 10-Year Government Bond 2.62% versus 2.62% yesterday
- Yield on 10-Year China Development Bank Bond 2.75% versus 2.75% yesterday
- Copper Price +0.06% overnight
- Steel Price +0.30% overnight
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