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Market Malaise, PBOC/State Council Private Company Support

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Good morning! I got to the airport to write a quick/concise China Overnight. Apologies for the brevity.

Hang Seng reversed yesterday’s 591 point/+2.32% gain for a 806 point/-3.08% on volumes 15% lower than yesterday with only 1 gainer and 49 decliners. Asia followed the S&P lower though as US futures sold off it seemed to accelerate the market sell off. Markets face several headwinds Italy, Brexit, trade war, Saudi etc though higher US interest rates are the elephant in the room. Tencent’s 4.6% loss and AIA -4.64% loss contributed -106 and -105 index points. Within the MSCI China All Shares’ HK listings, Real estate, materials, tech and communications all declined more than 4%. Financials “outperformed” with a -2% loss. China Mobile was weaker -3.87% following revenues flat year over year. Macau casino names were weaker on an analyst price target cut. Southbound Connect volumes were moderate with sellers outpacing buying 3 to 2.

Shanghai & Shenzhen declined -2.26% & -1.92% as volumes declined 15% day over day. Consumer staples declined -5.97% on liquor and beverage names declined on proposed policies to limit excess drinking. Tech was unsurprisingly weaker at -3.18% due to US revenue exposure. Healthcare was off inline with the market as new regulations on vaccines were announced following the spring’s scandal involving fake vaccines. Northbound Connect volumes were higher than average with buyers slightly outpacing sellers.

The major news overnight were announcements from the State Council and PBOC to support private companies ability to access credit and bond issuance. While overall sentiment was poor, we can continue to policy makers implement policies to support the economy.

  • CNY 6.93 though off 6.95 high
  • Yield on 1 Day Chinese Gov’t Bond 1.80%
  • Yield on 10 Year Chinese Gov’t Bond 3.58%; yields rally on risk off
  • Yield on 10 Year China Development Bank Bond 4.23%

Commodities were mixed on both the Shanghai & Dalian exchanges