Hope all is well!

• Industrial Production      5.3% versus estimate 5.6% and Jan’s 6.2%
• Retail Sales                         8.2% versus estimate 8.2% and Jan’s 9%
• Fixed Asset Investment 6.1% versus estimate 6.1% and Jan’s 5.9%

Takeaway: IP came in slightly light while Sales and FAI inline with analyst expectations. The release had little impact on markets overnight as Chinese New Year’s distorts the data. Year over year comparisons will be an ongoing issue in the first half of 2019 as tariff front running compressed 12 months of activity into a 6 to 9 month time period. China’s policy maker turned on the stimulus spigot over the last year which is making its way into the economy. Remember that markets are forward looking while newspaper headlines are backward looking!

The Hang Seng gained +0.15%/43 index points in choppy trading on the lowest volumes in three weeks that were slightly below the 1 year average. Breadth was mixed with advancers and decliners at 24 each. It was a fairly quiet day with Trump’s comments on walking away from trade deal weighed slightly on sentiment. Multiple brokers referenced the Hang Seng completing a Golden Cross, the 50 day moving average crossing above the 200 day moving average, as a positive technical signal. In keeping their technical analyst hats on, the index has tracked the 10 day moving average as we consolidate with punching above 29,000 would give the index room to run. Energy giant CNOOC jumped +3.77%/27 index points on crude’s rise while investors continue to cheer Ping An’s great earnings/buyback announcement +1.61%/23 index points while China Mobile +1.3%/20 index points following China Unicom jumped +3.32%/6 index points following strong earning results lifted what we used to call Telecom stocks. Within the MSCI China All Shares’ Hong Kong stocks, value plays led the way higher energy gained 1.72% while utilities +0.87% and staples +0.79% while tech lagged -1.93% with Apple suppliers dove on no news as Sunny Optical -3.28% and AAC -3.21%. Real estate and healthcare declined -1.59% and -1.33%. Southbound Connect volumes were light with mainland investors turned slight sellers of HK listed stocks though Ping An saw nearly 6 to 1 buying.

Shanghai & Shenzhen declined -1.2% and -2.31% on volumes 2.5X the 1 year average off -22% day over day in poor breadth. The CSRC is reaching out to brokerage firms to ensure illegal margin trading isn’t fueling the market’s rally as memories of 2015 margin induced market fall linger. The CSRC would love an orderly bull market though the tidal wave of retail investors returning to stocks is difficult to control. The CSRC’s jawboning hit small cap/growth companies the hardest while mega cap Shanghai stocks rose yesterday. Within the MSCI China All Shares’ mainland stocks, staples gained +0.81% as investors returned to food/beverage and liquor stocks as they short term infatuation with growth names fades. Communications and tech unsurprisingly dropped -4.18% and -2.7% as the trade sensitive sector weighed on the news of a delayed Trump Xi meeting. The one positive news overnight was foreign investors were net buyers of mainland stocks via the Northbound Connect program with MSCI Inclusion stocks Ping An and Kweichow Moutai both seeing net buying.

Pinduoduo (PDD) cratered -17% after yesterday’s morning Q4 earnings and a private placement well below the previous close. While the company’s losses widened dramatically, the top line was very strong. I suspect you’ll see buyers as these levels.

The NPC concluded today following yesterday’s closing session of the CPPCC. The most important outcome is the foreign investor protection law clearly aimed at placating US trade demands.

CNY 6.72

• Yield on 1 Day Chinese Gov’t Bond 1.94%
• Yield on 10 Year Chinese Gov’t Bond 3.21%
• Yield on 10 Year China Development Bank Bond 3.63%

Commodities were lower on the Shanghai & Dalian Exchanges