Volumes Surge on Tax Cuts, Barron’s BAT Review, Tim Cook Goes on the Record
Hang Seng gained +2.32% on above average volume which was 14% higher than Friday on strong breadth with 48 advancers and 2 decliners. Policy makers continue to verbally support the market as a proposed tax cut and assisting companies with stock collateral pledges. AIA gained +3.77% worth 89 of the indice’s 591 point gain with Tencent’s +3.26% worth 78 index points. Within the MSCI China All Shares’ HK stocks, Healthcare was the leading sector gaining 5.58% with consumer discretionary and staples gaining 5.4% and 4.85%. Defensive utilities was a laggard gaining 1.66%. Southbound Connect volumes were high with buyers outpacing sellers 2 to 1. Tencent was the volume leader with buyers outpacing sellers 2 to 1.
Shanghai & Shenzhen gained +4.09% and +4.9% on volumes 47% higher than Friday and incredibly strong breadth. Would you believe only 14 stocks declined on both the SH & SZ? Tech and healthcare led the way higher gaining 5.36% and 5%. President Xi spoke on supporting private companies over the weekend and the PBOC committing to supporting private company access to credit. The proposed tax cut and alleviating stock pledges were cheered by institutional investors in China. Insurance and mutual fund families were positive in their comments about the policy and support. In examining today and Friday’s trade size data, we noticed that mega and large cap stocks saw inflows while small caps and mid caps saw net selling. One can extrapolate that institutional investors are buying while retail investors continue to sell. That is bullish in my opinion as once the masses come back it could provide a further leg up. Northbound Connect volumes were very strong in balanced trading. Foreign investors were slightly sellers.
This weekend’s Barron’s included an interview of four EM PMs on current opportunities within EM. The article was a worthwhile based on the divergent opinions expressed by the PMs. It also included a positive review of Baidu, Alibaba and Tencent in a carve out segment. I was a little surprised that those interviewed didn’t address the regulatory overhang on Tencent nor the recent weakness in FANG on BAT. Regardless it was a positive endorsement on the three companies.
Apple CEO Tim Cook vehemently denied the Bloomberg Newsweek article on China imbedding spyware in a Buzzfeed interview. Mr. Cook stated that the article should be retracted. A Reuters article on interview noted that Apple may take legal action against Bloomberg Newsweek.
Tiger Global raised $3.75B for a new TMT fund focused on the US, China and India. Tiger has been very active in Chinese internet companies via public and private investments.
- CNY 6.94
- Yield on 1 Day Chinese Gov’t Bond 1.83%
- Yield on 10 Year Chinese Gov’t Bond 3.59%; yields off on risk on
- Yield on 10 Year China Development Bank Bond 4.24%
Commodities were mixed on the Shanghai & Dalian w/Dr. Copper higher