US/China Trade Talks to Resume, CEWC Begins
Hang Seng managed a +0.2% gain after spending all day in a very tight range with very light volumes barely higher than Monday’s 52 week volume low as traders sat on their hands ahead of today’s Fed decision and China’s CEWC. Breadth was decent with 27 advancers and 19 decliners. AIA gained +1.74% worth 41 index points though energy heavyweights PetroChina and CNOOC weighed on the index. Within the MSCI China All Shares index’s HK stocks, real estate and communications gained +0.34% and +0.26% while energy and healthcare lost -2.72% and –2.66%. The former on crude’s continuous downward spiral while drug auctions a few weeks ago still weighs on pharma. Southbound Connect volumes were light with sellers outpacing buyers.
Shanghai & Shenzhen opened higher but eased lower to end -1.05% and -1.38% in very light volumes that were almost a 52 week low accompanied by weak breadth. Like HK, there were no notable catalysts ahead of the Fed and CEWC. Within the MSCI China All Shares’ mainland stocks, healthcare and energy were off -2.77% and -2.03% with only utilities gaining a mere +0.12%. Real estate names almost made into the green as speculation around housing curbs coming off has generated some buying from adventurous investors. The small city of Heze (population 9mm) announced easing property development curbs which some investors take as the start of a broader trend though time will tell. Northbound Connect volumes were light with sellers barely outpacing buyers.
Treasury Secretary Mnuchin confirmed US China trade talks would resume in January.
The Central Economic Working Conference begins today. The CEWC sets the 2019 economic goals which are then officially approved at the March Two Sessions conferences though the general guidelines are leaked prior. We should expect both fiscal and monetary support in light of the trade war and softness in the economy. Specifically VAT cuts and the increasing government deficit to 3% are a given at this juncture. Housing development is an area of potential focus. Housing development curbs have been in place though housing has so many downstream beneficiaries (cement, steel, copper etc). We’ll know soon enough!
Mainland & HK listed diesel engine manufacturer Weichai Power announced a buyback of 7.9mm shares split between 6mm mainland shares and 1.9mm HK shares costing RMB 62mm. Big buyback!
During the 40th anniversary, the BAT founders, Baidu’s Robin Li, Alibaba’s Jack Ma and Tencent’s Pony Ma, were among the nineteen business entrepreneurs recognized for their contributions. Another ten non-Chinese recognized for their contributions including Hank Greenberg.
- CNY 6.89D
Yields have risen slightly over the last week. Too early to get excited about an asset allocation shift from fixed income to equities but bears watching.
- Yield on 1 Day Chinese Gov’t Bond 1.77%
- Yield on 10 Year Chinese Gov’t Bond 3.37%
- Yield on 10 Year China Development Bank Bond 3.83%
Commodities were mixed/lower on the Shanghai and Dalian with Dr. Copper -1.22%