Daily Posts

Tencent Earnings Rejoiced, Mainland Markets Rally

Good morning on a brisk NYC morning!

Hang Seng gained +1.75% on volumes +9% day over day though below the 52 week average with breadth was strong with 44 gainers and 5 decliners. Local investors rejoiced Tencent’s strong earnings driving the stock +5.8% worth 138 of the index’s 448 index points. Also contributing to the today’s very broad rally was positive news that the US and China are talking in advance of Mnuchin Liu He meeting which is in advance Xi Trump meeting in Argentina. Within the MSCI China All Shares’ HK stocks, communications gained 4.68% led by Tencent, tech +2.15%, real estate 1.87%, industrials +1.51% etc. Healthcare was the only down sector as the gov’t announced tightened drug trial requirements. Southbound Connect volumes were moderate with sellers outpacing buyers though Tencent, the volume leader, experienced buying (HK $811mm buys versus HK$ 540mm selling).

Shanghai & Shenzhen gained +1.36% & +1.45% on volumes that were down -1.7% day over day but above the 52 week averages on strong breadth. In addition to the positive trade war news, the Shanghai Stock Exchange held a meeting to discuss launching a new board geared to tech companies. The mainland market shook off tepid new home prices in the month of October. Premier Li announced a free trade deal is almost secured Regional Comprehensive Economic Partnership. The RCEP is comprised of Southeast Asian countries. China’s Commerce minister Zhong Shan released a public statement supporting the private sector. Mega caps and small caps again experienced inflows while large and mid caps saw outflows. Within the MSCI China All Shares Indice’s mainland stocks, communications and tech gained 2.61% and 2.03% though it was a broad rally with all sectors ending in the positive/green (in mainland China red denotes a stock going up and green down). Natural gas names had a strong day. Could a US China trade deal include a LNG deal? Northbound Connect volumes were moderate with buyers outpacing sellers 2 to 1 with MSCI Inclusion names Kweichow and Ping An experiencing 4 to 1 buying.

A HK broker noted that UBS raised Chinese equities to an Overweight for 2019. I’ve not seen the report so unsure from which team or unit the recommendation came from.

There had been chatter China would cut the tax on new car purchases though the National Development and Reform Commission denied that such a tax cut was coming overnight. 

VIPS, NTES and WUBA reported after yesterday’s close/this morning. In a nutshell all three companies revenue and EPS beat expectations.
  • CNY 6.93
  • CBD 10 year had a BIG day though front end eases a tad
  • Yield on 1 Day Chinese Gov’t Bond 1.87%
  • Yield on 10 Year Chinese Gov’t Bond 3.42%
  • Yield on 10 Year China Development Bank Bond 4.00%

Commodities were firmer on both exchanges