Markets Malaise, Tim Cook in China (don’t tell anyone), Autos: Telsa Land Purchase and BMW JV Buyout, FX
Hang Seng fell -3.54% on very high volumes with zero advancers and 50 decliners in what one of our local brokers called market action a “toxic brew” of Trump/Fed comments, US/China trade worries, higher US interest rates/bond yields, US tech sell off and disappointing Q3 US earnings. Tencent’s -6.77% fall accounted for 150 of the indice’s 926 point fall though it was fairly uniform sell off. Within the HK names of the MSCI China All Shares, four sectors were off more than 5% (industrials, communications, real estate and tech). Southbound Connect volumes were elevated in mixed trading. Interesting to see mainland investors are dipping their toes in HK stocks. Of particular note was Tencent saw more buying than selling! Overnight one of our brokers noted his desk was seeing some Tencent buying.
Shanghai & Shenzhen fell -5.22% and -6.45% on very high volumes and extraordinarily poor breadth. Amazingly/depressing only 21 stocks were up and 1,438 stocks down on the Shanghai. Tech & Communications were off -7.23% and -6.64% as US export exposed sectors continue to lead lower. Northbound Connect volumes were very high with sellers outpacing buyers but not by large margin.
Tim Cook is in China during a low profile/out of the spotlight visit. There has been a limited breach of Apple user id thefts leading to e-commerce purchases.
Tesla is rumored to be paying $145mm for land near Shanghai to build a factory. A local factory would alleviate the increasing tit for tat tariff on imported autos. Chinese EV maker NIO has jumped the last two days after asset manager Ballie Gifford reported a 85mm share/11% stake. Ballie Gifford is the second largest holder of Tesla. Match maker? Could be interesting.
Treasury Secretary Mnuchin in a Financial Times interview said the renminbi had fallen significantly. October 15th is the date the US releases its list of currency manipulators. There is a clear detachment from perception and reality when it comes to China’s renminbi. YTD the spot return of renminbi is -5.78% versus the dollar. The Total return of the renminbi is -2.38%.
- BMW took control of their China joint venture after buying 25% from Brilliance China for $4.2B.
- Yield on 10 Year Chinese Gov’t Bond Yield 3.59%; big rally in bonds on risk off sentiment
- Commodities were lower on both the Shanghai & Dalian