Daily Posts

Mnuchin/Liu Trade Talks, Loan/Financing Data

Hope all is well despite the rain here! I failed to follow up on my eldest son’s state championship tournament: they tied! Great game but no penalty kicks.

Hang Seng gapped down -2.11% at the open but clawed back +0.62% on higher volumes day over day +24% with 39 advancers and 8 decliners. AIA gained +1.73% worth 41 of the indice’s 159 point followed by Tencent’s +1.4%/31 index points. Tech and Apple suppliers did surprisingly well considering Apple’s fall in the US yesterday as Sunny Optical +2.85% and AAC +0.19% as iPhone Singles Day sales appeared to be strong. Online gamer Kingsoft gained +2.56% with strong Q3 revenue growth though the company continues to lose money. Kingsoft’s better than expected results buoyed Tencent ahead of earnings tomorrow post HK/pre-US open. Within the MSCI China All Shares’ HK listings, staples gained +2.37%, discretionary +1.52%, healthcare +1.51%, communications +1.45%, and tech +1.01% as energy followed crude lower -1.52%. Southbound Connect volumes were moderate with buyers outpacing sellers as volume leader Tencent saw 3 to 1 buyers.

Shanghai & Shenzhen gained +0.93% and +1.63% on strong volumes up 34% day over day and well above the average volume over the last year. Breadth was strong as well as investors are taking policy makers private sector support as a positive sign. Staples were led higher by food and beverage stocks +2.71%, communications +1.57% healthcare +1.38% and tech +1.21%. Flows were barbelled as mega caps and small (micro) caps were bid up while large and mid saw selling pressure. Northbound Connect volumes were moderate with buyers outpacing sellers with Kweichow Moutai the volume leader seeing buyers.

Markets were higher on reports that Vice Premier Liu He will travel to Washington to meet with Treasury Secretary Steve Mnuchin to pave the way for Trump Xi meeting at the G-20 in Bueno Aires. This raises the possibility of a trade deal getting done which the market has not built in as.

New Loans:
RMB 697B versus estimate 904 and Sept’s 1,380B

RMB 728B versus estimate 1,300B and Sept’s 2,205B

M2 YoY:
8% versus estimate 8.4% and Sept’s 8.3%

Takeaway: The data supports policy makers recent goal of helping the private sector access credit. The goal is to lower SOEs’ access to loans while expanding access to the private sector. Banks historically would only lend to SOEs which have an implicit gov’t backing. Why take credit risk by lending to the private sector? This is going to change.

China’s recent tax cut will free us US $190 billion according to a mainland media source. It notes that a further reduction in the VAT would assist consumers.

American Express has been approved by the PBOC as the first foreign credit card company to be given a license to operate in China.

Citigroup is reportedly breaking its joint venture Citi Orient Securities after it failed to negotiate a majority stake. Citi will launch a new JV taking a controlling 51% stake.

6.95 CNY; one broker had chatter on intervention below 7. The PBOC eliminated language on the market determining price recently.

  • Curve flattened as long end rallied; interesting to see bonds rally along with stocks
  • Yield on 1 Day Chinese Gov’t Bond 2%
  • Yield on 10 Year Chinese Gov’t Bond 3.46%
  • Yield on 10 Year China Development Bank Bond 4.12%

Commodities were mainly lower though copper was up