All Quiet on the Western Front, Auto & Appliance Stimulus?
Hope all is well!
Hang Seng managed a +0.15% gain on light volumes and decent breadth with 34 advancers and 14 decliners. Quiet day overall as short term profit taking and a lack of catalysts made for listless trading. Insurance giant AIA gained +1.11% worth 26 of the indice’s 39 point gain. Geely Auto followed yesterday’s -3% with a -11% on their poor 2019 outlook that took the index off -19 points. Tencent eased -0.63% worth -16.5 index points. Several HK real estate names had a good days as chatter of HK easing first time home buyer mortgages. Within the MSCI China All Shares’ HK stocks, Healthcare stocks had a strong day +1.56% and tech +1.05% while real estate was off -1.02% driven by mainland property developers while HK property names were up. Southbound Connect volumes were light with sellers outpacing buyers. Geely was sold 3 to 1 while Tencent was bought nearly 3 to 1.
Shanghai & Shenzhen was off -0.26% & -0.12% as volumes were off -14% day over day on poor breadth as short term profit taking kept the market in check. Within the MSCI China All Shares’ mainland stocks, utilities gained and energy gained +0.94% and +0.54% while real estate and financials were off -0.59% and -0.48%. Northbound Connect volumes were surprising good considering the light tone of the market as buyers outpaced sellers. Interesting to see foreign buyers continue to come into the market.
Wilbur Ross stated on CNBC that there is a “very good chance that we will get a reasonable settlement that China can live with, that we can live with and that addresses all of the key issues”. A HK broker noted that a Chinese entity has begun buying US soybeans again.
GM’s 2018 China auto sales fell 10% YoY to 3.64mm. Remember that China had a sales tax on car purchases in 2016 and 2017 that led to elevated car buying. In 2018 car sales have fallen off. There are reports according to a sharp eyed broker that mainland media is reporting a step up China auto and home appliances sales as a goal in 2019. Ning Jizhen, the National Development and Reform Commission’s deputy director, was quoted on China’s news CCTV. Electric vehicles and small medium enterprise loans were also mentioned as areas of emphasis following December’s Central Economic Work Conference.
The New York Times had an interesting opinion piece from a HK based on private equity fund CEO Weijan Shan. Mr. Shan provides an overview on Apple’s revenue cut which Tim Cook blamed on China’s slowing economy. Mr. Shan outlined the following points though the piece titled “American Companies Need Chinese Consumers” is a worthwhile read:
- US companies with large China revenues: Apple $52B, Qualcomm $15B/65% of total sales, Intel 24% of sales, Micron Technology 51%, and Texas Instruments 44%.
- “Exports have dropped from 36 percent of China’s gross domestic product in 2006 to 20 percent in 2018.”
- “In 2018, GDP in China grew by 6.5 percent, and household consumption accounted for about four fifths of that growth.”
- “China is now the fastest-growing consumer market in the world, with private consumption amounting to about $5 trillion, more than 10 percent of the world’s total.”
China’s gold reserves increased by 1,853 metric tons to 59.56 million tons according to the PBOC. This was the first reported increase in two years. Conspiracy theorists should conspire on what that means!
Golden Globe winner “Green Book” was funded in part by Alibaba Pictures.
January 20th is the next big data day for China’s economy as we’ll have Retail Sales, Industrial Production, FAI and GDP reported.
Bonds rally as yields fall.
- Yield on 1 Day Chinese Gov’t Bond 1.40%
- Yield on 10 Year Chinese Gov’t Bond 3.13%
- Yield on 10 Year China Development Bank Bond 3.61%
Commodities were mixed on both exchanges