Daily Posts

China Economic Data Review, Latest Round of Game Approvals Lack Tencent/Netease (again), PDD Lock Up Expires

It isn’t often that you can square yesterday’s temperature and today’s temperature is still under 20 degrees!

Takeaway: China economic data was inline/exceeded estimates on Sunday night NYC/Monday morning China time though the media had a field day on the quarter’s GDP growth rate. Following yesterday’s rise, markets were weaker driven by the IMF’s downgrade of global growth, coming US’ extradition of Huawei’s CFO Meng Wanzhou from Canada, intellectual property a potential sticking point in trade talks and President Xi called on senior officials to watch for “serious dangers”.

Hang Seng declined -0.7%/-191 index points on light volume and poor breadth with only 9 advancers and 39 decliners. Tencent was off -1.24%/-34 index points as the latest round of online game approvals did not include the company again. PetroChina’s profits doubled though the stock declined -3.31%/-10.5 index points on a $1.5 billion write off following trading losses. Within the MSCI China All Shares’ HK listings, utilities was the only positive sector while healthcare declined -2.27% after Premier Li’s comments from two weeks ago on reforming drug pricing become public yesterday. Tech -2.17% was off as trade war worries rose while energy -1.95% was driven lower by PetroChina. Southbound Connect volumes were moderate in mixed trading. The top three volume leaders, ICBC, CCB and Tencent, all experienced buying activity.

Shanghai & Shenzhen were down -1.18% and -1.17% on light volumes and poor breadth as profit taking prevailed following yesterday’s gains in the worst day in five weeks. Healthcare reversed -2.21% after recent gains as tech was weaker -2.03% followed by staples -1.92% led by liquor names on profit taking. Fairly uniform down day. Northbound Connect saw net selling on moderate volumes as MSCI heavyweights Kweichow and Ping An experienced selling.

An institutional broker mentioned the coming technology board on the Shanghai Stock Exchange could have 150 IPOs in the first half of 2019. Great news for Chinese private equity firms! The firm mentioned foreign listed Chinese companies could list on the board though they didn’t mention CDRs (Chinese ADRs). I’ve reached out to the firm for more details.

PDD’s IPO lock up expires today.

SOE profits rose 12.9% to CNY 3.39 trillion according to the Ministry of Finance.

China Economic Data from Sunday Night NYC/Monday Morning China

  • Q4 GDP YoY                                        6.4% versus estimate 6.4% and Q4 2017 6.5%
  • Q4 GDP YTD                                        6.6% versus estimate 6.6% and 2017 6.7%
  • Q4 GDP Quarter over Quarter     1.5% versus estimate 1.5% and Q3’s 1.6%
  • Dec Retail Sales                                 8.2% versus estimate 8.1% and Nov’s 8.1%
  • Dec Retail Sales YTD                        9% versus estimate 9% and 2017’s 9.1%
  • Dec Industrial Production YoY                     5.7% versus estimate 5.3% and 5.4%
  • Dec Industrial Production YTD YoY            6.2% versus estimate 6.2% and 6.3%
  • Fixed Asset Investment YTD YoY                 5.9% versus estimate 6% and 2017’s 5.9%
  • Dec Property Investment YoY                     9.5% versus Nov’s 9.7%
  • Jobless Rate                       4.9% and Nov’s 4.8%

 


Takeaway: Yes overall GDP percentage growth was less than in years past as virtually every headline has reminded us. An alternative headline would be China’s GDP exceeds CNY 90 trillion for the first time. The majority of the data released exceeded expectations. We are apt to see tariff front loading rolling off which will lead to declining economic releases over the coming months. Year over year comparisons will become more difficult as it takes time for China’s monetary and fiscal stimulus to work their way through the system. Markets are forward looking though. Potential descalation of the trade war would assist dramatically. Within the press release from the National Bureau of Statistics there were several interesting data points worth sharing.

  • Online retail sales increased 23.9% to RMB 9 trillion accounting for 18.4% of all retail sales
  • Births 15mm/Deaths 9.93mm
  • Within the 1.395 billion population, 713mm males and 681mm females
  • Within the working age population between the ages of 16 to 59, 897mm/64% of the population


CNY 6.80; eases versus the US $ though DXY higher

The movement into stocks from bonds didn’t last!

 

  • Yield on 1 Day Chinese Gov’t Bond 1.80%
  • Yield on 10 Year Chinese Gov’t Bond 3.12%
  • Yield on 10 Year China Development Bank Bond 3.71%

 


Commodities were down on both the Dalian and Shanghai