Good morning and greetings from beautiful south Florida! I am attending Inside ETFs this week though I will work to get China Overnight out regardless.

Hang Seng gained +0.71%/197 index points on moderate volume and strong breadth with 38 advancers and 9 decliners. The US trade team’s visit to Beijing was the main news item as junior members meet in advance of Mnuchin and Lightizer joining Thursday and Friday. There is speculation that a Trump Xi meeting could occur in March in Florida. The question will be does the US delay implementation in further tariffs on March 1^st with markets baking in the likelihood that the deadline will be extended. Tencent had a strong day gaining +1.85%/54 index points followed by Ping An Insurance’s +1.24%/16 index points and CK Hutchison’s +2.22%/14 index points. Apple suppliers Sunny Optical +7.6% and AAC +5.06% following Lagran, a Taiwenese handset maker for Huawei, announced surprisingly strong January sales. Interesting that there were other reports saying Apple’s China market share is likely falling further which is why Apple is cutting the prices of their phones in China. Food delivery giant Meituan Dianping jumped +7.77% and Xiaomi +4.29% on speculation that MSCI’s review of dual share class companies will be revised allowing for a potential index inclusion. MSCI’s announcement will be today though I’ll report on it tomorrow.  Within the MSCI China All Shares’ Hong Kong stocks, technology was the leading sector gaining +2.9% led by the Apple suppliers. Utilities had a strong day +1.65% while Tencent powered the Communications sector +1.45%. Industrials and real estate eased -0.88% and -0.31%. Southbound Connect volumes were high with sellers outpacing buyers though Tencent, the volume leader, had almost 2 to 1 buyers to sellers.

Shanghai & Shenzhen reopened post Chinese New Year’s gaining +1.36% and +2.9% on moderate volumes and strong breadth. Remarkably only 90 stocks declined while 3,539 stocks advanced. Investors came back from vacation in a positive mood! Within the MSCI China All Shares’ mainland stocks, staples gained +3.39% led higher by liquor stocks while technology gained +3.8% and discretionary +1.7%. Energy and financials lagged -0.4% and -0.24%. Investors favored small caps, Shenzhen listed stocks and private companies as increased bank lending to small medium enterprises is a major policy focus as banks lagged as such lending may crimp their lending revenue. Northbound Connect volume was very strong with buyers outpacing sellers by a thin margin though volume leader Kweichow Moutai saw 3 to 1 buyers to sellers.

Retail and catering sales eclipsed RMB 1 trillion/$150b gaining 8.5% year over year while tourism revenue +8.2% to 513 billion during Chinese New Year’s according to CCTV.

A broker noted that foreign investors bought over RMB 52 billion/$7.8 billion in the strongest month ever for Connect inflows. Over the last year $14B has flowed into mainland stocks according to a Bloomberg article.

January FX Reserves was $3.087 trillion versus estimates of $3.080 trillion and December’s $3.072 trillion. Funny how FX reserves no longer receive any media attention since they have largely gained!

Tencent (700 HK) announced 823 million digital red envelopes were delivered this past Chinese New Year’s which was up 7.1% year over year.

Baidu (BIDU) will announce Q4 earnings on February 21^st.

CNY 6.78; backs up 0.65% post Golden Week holiday

Curve flattens as the highly volatile short term rate gains while long term bonds rallied

• Yield on 1 Day Chinese Gov’t Bond 1.82%
• Yield on 10 Year Chinese Gov’t Bond 3.11%
• Yield on 10 Year China Development Bank Bond 3.69%

Commodities were generally higher with Dr. Copper making a slight gain on the Shanghai & Dalian commodity exchanges