Daily Posts

Good Ending to a Good Week

Good morning and TGIF on a cold windy day. I have an overseas business trip next week with a significant time zone change so China Overnight will be taking a week long hiatus. Yes next week is Thanksgiving though when a client says they want to see you, you head to the airport! Have a great Thanksgiving and looking forward to reconnecting the week after next.

Hang Seng overcame early weakness to gain +0.31% on light volumes that declined 9% day over day in mixed breadth with 24 advancers and 23 decliners. For the week the Hang Seng gained +2.27% as trade war tensions thawed in advance of the G-20 summit in Argentina. Tencent continued its post earnings rebound gaining +0.83% worth 20 of the indice’s 80 point gain. Within the MSCI China All Shares’ HK companies, staples and communications gained +0.69% and +0.68% in a broad rally though materials was off -1.83% with several infrastructure names weaker on higher steel and cement production numbers. Southbound Connect volumes were light in mixed trading. Tencent saw more buying than selling again from mainland investors.

Shanghai & Shenzhen gained +0.41% and +0.84% on strong volumes that increased 17% day over day and well above the 52 week average. In addition to trade news, investors cheered news that several companies’ stock collateral pledges would be not have a margin call due to financial support from a local government. For the week the SH & SZ gained +3.09% and +6.17% (in US $). This week’s rally has been accompanied by strong volumes. Within the MSCI China All Shares’ mainland stocks, recent leading sectors tech and real estate led the way again gaining +1.55% and +1.38%. Healthcare was off -1.31% as investor continue to digest new regulations on bulk drug buying. Northbound Stock Volumes were moderate with foreign buyers outpacing sellers though volume leader Ping An saw sellers outpace buyers by a small margin. 

It was relatively light news days though new regulations on for profit kindergartens and pre-schools had a significant effect on education stocks with revenue exposure to that space. Investors had a quick trigger finger as many names in the space fell further than revenue exposure. 

Foreign Direct Investment grew 7.2% in October from Sept’s 8%. The FDI release shows that global multi-national companies continue to have confidence investing in and building their presence in China. Regardless of a trade war China’s population offers a strong market opportunity. 

London Shanghai Stock Connect appears to be making progress. Separately sovereign wealth fund CIC will partner with HSBC and PE firm Charterhouse Capital Partners to invest in UK companies according to the FT.

CNY 6.95

Back end of the curve rallies again as the curve flattens further
  • Yield on 1 Day Chinese Gov’t Bond 1.88%
  • Yield on 10 Year Chinese Gov’t Bond 3.40%
  • Yield on 10 Year China Development Bank Bond 3.95%

 


Commodities were firmer on both the Shanghai & Dalian commodity exchanges