Premier Li, NDRC, PBOC & MOF Statements, White Horse Stocks Stampede, New Loan Activity
Apologies as for the late delivery as I had a meeting this morning.
Key Takeaway Overnight: The cavalry came out to verbalize policy makers’ support of the economy and highlight policies to assist.
- Ministry of Finance’s Xu Hongcai said there will be “large scale” tax cuts in addition to fee cuts and support for small medium enterprises
- PBOC’s Deputy Governor Zhu Hexin said it would “adopt a more flexible monetary policy” due to China’s stable but “complicated” economic situation.
- Premier Li spoke at a State Council meeting that China faced a challenging environment but policy makers are ready to support the economy.
- The National Development & Reform Commission’s Vice Chairman Lian Weiliang stated that government infrastructure policies will focus around “stabilizing employment” will an emphasis on 5G, AI, construction and infrastructure and addressing environmental needs.
Hang Seng gained +2.02% as volumes jumped 20% day over day and strong breadth with 49 advancers and zero decliners as investors cheered the above verbal support. The one caveat is volumes failed to reach the 1 year average. AIA’s +3.73%/95 point gain with support from Tencent’s +2.55%/69 point gain helped fuel the Hang Seng’s 531 point gain. Within the MSCI China All Shares’ HK stocks, tech was the leading sector gaining +2.87% as gaming company Kingsoft jumped +7%. Real Estate and energy both jumped 2.68% followed by discretionary at +2.65%, staples +2.64%, and communications +2.52%. Time will tell if January 4th’s rally was the bottom or not but a strong move from that level over the last two weeks. Southbound Connect volumes were moderate as sellers outpaced buyers though Tencent experienced 2 to 1 buyers. Surprising to see mainland investors still in net redemption mode.
Shanghai & Shenzhen gained +1.36% and +1.49% on volumes 13% higher day over day though unfortunately below the 1 year average. Breadth was quite strong with 2,897 advancers and only 584 decliners. Like the Hang Seng, the mainland market has made a nice move since January 4th. White Horse stocks stampeded led by staples’ +4.92% with food/liquor and home appliance stocks. Autos had a nice move as well. Healthcare rebounded +2.99% while tech +2.43% and discretionary +2.07%. All sectors were in the green today. Worth noting that brokerage stocks have picked up in anticipation of Shanghai’s new tech oriented board. Foreign investors were in a festive mood with buyers outpacing sellers by a large margin.
- December Aggregate Financing RMB 1,589B versus estimate 1,300B and Nov’s 1,519B
- December M2 YoY 8.1% versus estimate 8.1% and Nov’s 8%
Takeaway: A strong number highlighting that policies to support the economy are making their way through the economy was released after the close. One research firm pointed out that bond sales, which increased in December, are included in the aggregate financing number.
Reuters reported three oil tankers left Galveston Texas for China with a delivery of US oil. China had shut the spigot of US oil in a retaliation move following US tariffs.
Publicly traded Shanghai International Port Group, China’s port group, announced 2018 port activity increased 4.4% year over year to 42mm containers and 561 million tons of cargo. Factual data such as this doesn’t fit with the US media narrative does it?
Curve steepened a bit
- Yield on 1 Day Chinese Gov’t Bond 1.80%
- Yield on 10 Year Chinese Gov’t Bond 3.15%
- Yield on 10 Year China Development Bank Bond 3.71%
Commodities were largely lower on the Dalian & Shanghai futures exchanges