New CSRC (SEC of China) Head Announced, Thursday for BABA & PMIs
Hope you had a great weekend.
The CSRC announced Yi Hui as the new ninth chairman of China’s market regulator. The former ICBC chairman, the second largest bank globally with a market cap of $286 billion behind JP Morgan and ahead of Bank of America, will have a three year term after replacing Liu Shiyu. The move takes place after December’s China Economic Work Conference that included several pro-market initiatives such as the new Shanghai technology board, mitigate systematic risks, and “promote more medium and long-term funds to enter the market.” My take on the new Chairman’s primary task: Get the Market to Go Up!
Hang Seng opened higher as investors cheered the new CSRC head and this week’s senior meetings of US China trade ministers though the December’s industrial profits weighed on sentiment as the index gained 7 points +0.03% on light volume/below the 1 year average and poor breadth with 18 gainers and 30 decliners. China Mobile gained +1.54%/23 index points on continued positive 5G headlines while China Construction Bank +0.88%/19 index points as Tencent declined _0.64%/-18 index points. Within the MSCI China All Shares’ HK stocks, materials gained +1.02% as gold stocks gained while utilities -2.33% and healthcare -1.95%. Soutbound Connect volumes were elevated with sellers outpacing buyers as mainland investors raised cash ahead of Chinese New Year’s. Tencent was the volume leader with sellers outpacing buyers almost 2 to 1.
Shanghai & Shenzhen gave up early gains to close -0.18% and -0.38% on light volumes and weak breadth. Within the MSCI China All Shares’ mainland stocks, energy stocks gained +0.93% as Sinopec’s trading loss didn’t impair earnings to the extent feared while the majority of sectors were positive while healthcare -1.26%. I did not see anything specific to healthcare’s fall though the sector was broadly lower. Northbound Connect volumes were strong as buyers outpaced sellers with MSCI Inclusion names Kweichow Moutai and Ping An insurance experienced 3 to 1 and 2 to 1 buying. A strong inflow from foreign investors into China’s mainland markets.
Markets are apt to be quiet ahead of Thursday as Alibaba reports earnings and National Bureau of Statistics releases the Manufacturing & Non-Manufacturing PMIs. Brokers noted that markets tend to be quiet ahead of Chinese New Year’s but Thursday will be a big day. Caixin PMIs will be released on Saturday though Chinese New Year’s will be in full swing. Hong Kong is open Monday 2/4 and Friday 2/8 though it will be very slow next week.
December Industrial Profits fell -1.9% following November’s -1.8%. One broker estimates that Q4 profit likely fell to 0.4% from Q3’s 10.2%. Remember that tariff front running compressed 12 months of activity into the first half of the year. Q3 to Q4 and year over year comparisons will not be good.
The PBOC is allowing S&P to rate Chinese bonds within the Interbank Bond Market, the world’s 3rd largest, without a joint venture partner for the first time.
Strategy Analytics reported that according to their analysis Apple’s iPhone shipments in China declined 22% though the company did move ahead of Xiaomi with 10% of market share in fourth place behind Huawei, Oppo and Vivo.
CDB bonds have widened versus Gov’t bonds over the last few weeks. I’ve not seen any research on this though interesting. Big drop
- Yield on 1 Day Chinese Gov’t Bond 1.74%
- Yield on 10 Year Chinese Gov’t Bond 3.13%
- Yield on 10 Year China Development Bank Bond 3.79%
Commodities were mixed on both the Dalian and Shanghai though Dr Copper was up 0.68%