Daily Posts

Tencent Music Prices $1.2B IPO @ $13 per share, Huawei CFO Bail Set at $7.5mm, MSCI Consultation Update, Supermicro Refutes

Hope all is well! My last flight of the year is today as I return home later today.

Hong Kong stocks rose +1.61% on light volumes and strong breadth with 39 gainers and 8 decliners. Insurance giant AIA was the leading gainer +2.57% worth 60 of the indice’s 415 point gain though Tencent gained +1.8%/47 points and CCB +2.19%/47 points. Within the China All Shares’ HK stocks, real estate was the leading sector +3.22% followed by utilities +2.56%, industrials +1.9%, communications +1.88%, financials +1.64% and tech +1.47%. Healthcare and materials were both off -0.19%. Market sentiment was better on the Huawei CFO bail and positive signs of a trade war descalation. The coming CEWC is apt to provide pro-growth policies which the market maybe speculating will include relaxation on property development. Macau gaming stocks were weaker on a sell side analyst downgrade. Southbound Connect volumes were light with sellers outpacing buyers.

Shanghai & Shenzhen were +0.31% and +0.16% in low volumes that one local broker called “uninteresting” and mixed breadth. Auto part makers were stronger as China submits work on lowering the car import tax from 40% to 15%. Within the MSCI China All Shares’ mainland stocks, utilities were up +1.27% followed by real estate +1.21% and discretionary +1.15%. Discretionary were led higher by food and beverage names. Healthcare was off though the rate of fall appears to be slowing. Northbound Connect volumes were light/moderate with buyers outpacing sellers as foreign buyers are back at it with MSCI Inclusion stocks Ping An and Kweichow Moutai volume leaders.

Tencent Music Entertainment Group (NYSE ticker TME)  is pricing their NYSE IPO at the low point of the range at $13 selling 82mm shares which will raise $1.1 billion valuing the company at $21.3 billion. By pricing at the low end of the range TME is apt to see a pop once trading begins. 

It is reported that Huawei CFO Meng Wanzhou will be granted bail posting $7.5mm in Canada. Her next trial date is in early February.

MSCI released an update on their consultation of Chinese A Shares on their website last night. There is an emphasis on suspensions and the actions taken by the CSRC to limit suspensions which has had a meaningful impact on reducing suspensions dramatically. MSCI included 5% of 235 Chinese A shares’ market cap in 2018. They are proposing a 15% more market cap to be added in 2019. The results of the consultation will be released in February and implemented on June 1 and Sept 1 2019.

Super Micro Inc was accused by Bloomberg Businessweek of allowing Chinese manufactured motherboards to have a spyware planted on them. The company took a vigorous denial as clients cut across a wide number of US technology providers including Apple. Apple went so far as to write a letter to the US government denying the spyware allegation. Yesterday the company’s CEO issued a press release that an unnamed third party verified that no such spyware existed. I was very dubious of the allegation and continue to be as such an allegation would have far impacting repercussions for technology companies that manufacture in China. It would never be worth the risk as finding such spyware would likely be easy. It appears the company believes the same.
  • CNY 6.88

China’s bond bull market continues unabated.

  • Yield on 1 Day Chinese Gov’t Bond 1.71%
  • Yield on 10 Year Chinese Gov’t Bond 3.28%
  • Yield on 10 Year China Development Bank Bond 3.76%

Metals were universally up on the Shanghai and Dalian future exchanges.