White Horses Stampede
Hope you had a great weekend!
- The Shanghai Stock Exchange will begin taking IPO applications for the new Science Technology Board.
- Premier Li’s Friday announcement that the VAT cut would be implemented April 1st is sooner than anticipated.
- Cement names were weaker on reports of an investigation from the NDRC on cement prices which have been rising.
- New home prices were higher across over 70 cities with the four tier 1 cities, Beijing, Shanghai, Shenzhen and Guangzhou, were +0.3% month over month while 31 second tier cities rose +0.7% and +0.4% in 35 third tier cities.
The Hang Seng gained +1.37%/+396 index points to close at 29,409 as it nears resistance at 30,000. Volumes were above the 1 year average though off -4% day over day on very strong breadth of 47 advancers and only 3 decliners. Tencent gained +2.73%/80 index points in advance of their Thursday earnings while China Resources led a strong day for real estate companies +9.13%/26 index points followed by China Overseas Land & Investments +7.03%/+24 index points. Investors shrugged off news that the Xi Trump Summit may not occur to April while focusing on the positive catalysts listed above. Within the MSCI China All Shares’ HK stocks +1.98%, real estate gained +6.17% while food & beverage/liquor pulled staples +3.86%, discretionary +2.87%, communications +2.33%, healthcare care rebounded +2.03% while materials was off -0.99% as cement names were weaker. Southbound Connect volumes were elevated with sellers outpacing buyers with volume leader CCB sold nearly 10 to 1. Tencent experienced 2 t o1 buyers which accounted for nearly 25% of the Hang Seng’s move though it was a very broad rally today.
Shanghai & Shenzhen gained +2.47% and +2.71% as retail investors continue their return to equities on strong volumes nearly 2X the 1 year average accompanied by strong breadth. Shanghai will test resistance at the 3,100 level closing at 3,096. Within the MSCI China All Shares’ mainland stocks +2.95%, staples were led higher the white horse stocks, popular companies within the food & beverage/liquor stocks and home appliance stocks, healthcare rebounded +4.36%, real estate +4.3%, industrials +2.91%, mainland investors shrugged off cement news +2.83% while financials lagged gaining only +1.9%. Northbound Connect names surged in very strong buying as evidenced by volume leader Ping An Insurance 4 to 1 buying.
One weekend sell side report was positive on the healthcare sector which has faced generic drug pricing pressure as a national pricing system is implemented.
Earnings over the next several weeks will drive individual stocks. The question has been to what extent have analysts dialed back expectations versus stimulus making its way to the balance sheet of companies.
China’s holdings of US Treasuries rose to $1.23 trillion in January from December’s $1.12 trillion according to Bloomberg.
Tencent will release earnings this Thursday morning post HK close and pre US market open. Drum roll! Fairly light weak week for economic releases.
President Xi is headed to Europe Thursday for a week of meetings.
- Yield on 1 Day Chinese Gov’t Bond 1.99%
- Yield on 10 Year Chinese Gov’t Bond 3.20%
- Yield on 10 Year China Development Bank Bond 3.64%
Commodities were mixed on the Shanghai & Dalian Exchanges w/Dr. Copper +0.45%