Week in Review
- Asian equities had a decent performance week as China’s Politburo meetings, which were moved up to this past Monday and attended by President Xi, appear to be leading up to stronger-than-expected economic support measures.
- The electric vehicle ecosystem was a performance leader this week, alongside the internet sector, as China-based EV maker Xpeng received a $700 million investment from Volkswagen.
- Ant Group was in the news this week with an upcoming ownership restructure, which could lead to a revival of its Hong Kong IPO.
- China Internet stocks have been on a tare over the past two weeks on an unexpected “180” from regulators, who have become increasingly supportive of the “platform economy” in their latest signaling.
Friday’s Key News
Asian equities were mostly higher overnight as Hong Kong outperformed.
China’s CSRC, the securities regulator, has been speaking with securities firms in search of possible measures to shore up investor confidence in China’s stock market. This could include cutting certain transaction costs. This is a great sign and follows directly from the messaging from the Politburo earlier this week.
Real estate developers were significantly higher overnight, with some analysts saying that they have reached “bull market” levels, another positive turnaround for China’s capital markets. Investors appear to have become more certain that down payments will be lowered and other support measures will come through for real estate.
Evergrande New Energy Vehicles plans to raise nearly $500 million to satisfy capital requirements for vehicle production. The automaker, associated with embattled property developer Evergrande, could promise a new future for the group.
Although CNY came down slightly overnight, CNH, China’s currency that trades during US hours, has rallied to the highest point since mid-June. This is related to sentiment that the Fed is closing in on peak rates, which is positive for emerging market currencies. The PBOC has also set its Yuan fixing at a stronger-than-expected level in its latest update.
In diplomatic news, France’s Macron has expressed his desire to work with China on international standards for cosmetics. Meanwhile, Xi Jinping met with Indonesian leader Joko Widodo, expressing hopes to strengthen ties between both nations in tourism, new energy vehicles, and food security.
The Hang Seng and Hang Seng TECH indexes closed higher by +1.41% and +2.89%, respectively, on volume that increased +21% from yesterday. Mainland investors bought a net $937 million worth of Hong Kong stocks via Southbound Stock Connect overnight.
Shanghai, Shenzhen, and the STAR Board all closed higher by +1.84%, 1,23%, and 1.09%, respectively, on volume that increased +22% from yesterday. Foreign investors bought a net 2.3 billion worth of Mainland stocks via Northbound Stock Connect overnight. Autos, brokerages, and real estate were the top performers on the Mainland overnight.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.16 versus 7.15 yesterday
- CNY per EUR 7.88 versus 7.96 yesterday
- Yield on 10-Year Government Bond 2.65% versus 2.64% yesterday
- Yield on 10-Year China Development Bank Bond 2.76% versus 2.75% yesterday
- Copper Price -0.46% overnight
- Steel Price -0.57% overnight
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