Week in Review
- Asian equities were mostly mixed this week, led by measures of government support for the platform economy and U.S.-China diplomatic green shoots.
- Industrial production beat expectations, increasing +4.4% year over year versus the estimated 2.5% and May’s 3.5%, though retail sales were +3.1% versus expectations of 3.3% and May’s 12.7%.
- US semiconductor companies will meet with the White House to press their case limiting US export curbs.
- On Wednesday, Mainland investors bought $2.11 billion of Hong Kong-listed stocks in the 10th largest net buy day ever.
Friday’s Key News
Asian equities were largely higher as India underperformed on light volumes and little news.
Investors noticed the recent announcement outlining thirty-one measures supporting the private economy as Hong Kong’s most heavily traded were Tencent +0.06%, Alibaba HK +2.01%, and Meituan +1.18%. The National Development and Reform Commission announced “several measures to promote car consumption,” lifting Hong Kong-listed EV stocks. Solvency concerns hammered distressed real estate developer Country Garden’s stocks and bonds. Several Mainland Chinese cities may ease real estate investment curbs, which lifted Mainland-listed real estate stocks. The lifting of curbs could help lift real estate prices which have weighed on investor and consumer sentiment due to the large exposure of Chinese households.
We noted the very large inflows/outflows via Southbound Stock Connect that we speculated were related to buying and selling of Hong Kong-listed ETFs and not stocks. The Hong Kong Tracker Fund (2800 HK) had a one-day inflow of $793 million, which solves that mystery as Mainland investors buy the dip in Hong Kong stocks. Worth noting that liquor company Kweichow Moutai saw a very large net buy from foreign investors today. Hong Kong, Shanghai, and Shenzhen bounced around the room, with the former posting a small gain and the latter two small losses. Shanghai is just below the 3,200 level, Shenzhen just above the 2,000 level, and Hang Seng just above 19,000, as investors will watch these support levels.
The Hang Seng and Hang Seng Tech gained +0.78% and +1% on volume -26.93% from yesterday, which is 68% of the 1-year average. 297 stocks gained, while 172 declined. Main Board short turnover declined -12.43% from yesterday, which is 69% of the 1-year average, as 17% of turnover was short turnover. Growth and value factors were mixed as large caps outperformed small caps. The top sectors were healthcare +1.7%, discretionary +1.24%, and financials +0.6%, while real estate -0.87%, utilities -0.83%, and materials -0.62%. The top sub-sectors were pharma, retailing, and healthcare equipment, while semis, household products, and consumer durables were the worst. Southbound Stock Connect volumes were light as Mainland investors bought +$63 million of Hong Kong stocks, with Huaneng Power a small net sell, Tencent, Meituan, Kuiashou, and XPeng were small net buys.
Shanghai, Shenzhen, and STAR Board fell -0.06%, -0.19%, and -0.58% on volume -9.45% from yesterday, which is 79% of the 1-year average. 2,186 stocks advanced, while 2,408 stocks declined. Value and growth factors were mixed as small caps outperformed large caps. The top sectors were staples +2.02%, healthcare +1.15%, and real estate +0.24%, while tech -0.84%, energy -0.73%, and materials -0.46% were the worst. The top sub-sectors were liquor, biotech, and chemical industry, while computer hardware, education, and industrial machinery were the worst. Northbound Stock Connect volumes were light/moderate as foreign investors bought $811 million of Mainland stocks, with Kweichow Moutai a large net buy, Foxconn a small net buy, and Longi Green Tech a moderate/large net sell. CNY closed at 7.18 while the Asia dollar index fell 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 7.18 versus 7.16 yesterday
- CNY per EUR 7.98 versus 8.01 yesterday
- Yield on 10-Year Government Bond 2.60% versus 2.62% yesterday
- Yield on 10-Year China Development Bank Bond 2.73% versus 2.74% yesterday
- Copper Price +0.16% overnight
- Steel Price +0.24% overnight
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