Hope all is well!  

Overnight Catalysts

• Very quiet night as profit taking followed yesterday’s strong move.
• Shanghai & Shenzhen appear to be consolidating around resistance levels of 31,000 and 1,700 while the Hang Seng has punched above 29,000.
• Healthcare and nuclear energy plays were standouts while mega and large caps lagged.

The Hang Seng managed to gain +0.19% in sideways trading in volumes above the 1 year average but off -15% day over day. Breadth was positive with 34 gainers and 16 decliners as AIA -0.95%/-27 index points while pork giant WH Group jumped +5.47%/12 index points on news China imports of pork from the US would increase due to China’s swine flu while HSBC +0.38%/11 index points. Education names were off following China New Education’s postponement of their board meeting. Within the MSCI China All Shares’ HK stocks (+0.14%), healthcare was the leading sector gaining +2.05% following strong earnings from Wuxi Biologics +2.9% and CSPC Pharma +3.3%. The Hang Seng only has 1 healthcare name and 50 stocks in total which is why I prefer to look at the China All Shares which has 17 healthcare stocks and 204 HK stocks. Real estate gained +0.56% though utilities was off -2.01% as Huaneng Renewables was off -6.88% following poor results. Southbound Connect volumes were moderate as sellers slightly outpaced buyers with WH Group seeing 4 to 1 buying while CCB was the inverse. Tencent was 2 to 1 buying as reports of cutting poor performing managers was reported by Bloomberg. 

Shanghai & Shenzhen were flatlined all day to end -0.18% & +0.18% on volumes 2X the 1 year average but off -7% day over day as decliners outpaced advancers but a slim margin. Communications had a strong day +1.43% while utilities gained +1.09% on reports China will build four nuclear power plants. Food & beverage took a breather following yesterday’s strong move as profit taking ruled the day leading to staples -1.39%. Mainland healthcare was off -1.07% in an interesting divergence from the HK. Brokers experienced profit taking as well as financials were off -0.52%. One broker noted that mainland investor sentiment was still positive as evidenced by a slight uptick in margin balances overnight.  Another broker noted that earnings season is apt to drive single names over the coming weeks. Northbound Connect volumes elevated as buyers very slightly outpaced sellers. Ping An was the volume leader with 3 to 1 buyers to sellers though Kweichow Moutai experienced slight selling pressure. 

Hong Kong’s defense of its currency peg to the US dollar is beginning to garner media attention. 

CNY 6.71

• Yield on 1 Day Chinese Gov’t Bond 2.06%
• Yield on 10 Year Chinese Gov’t Bond 3.19%
• Yield on 10 Year China Development Bank Bond 3.64%

Commodities were firmer on the Shanghai & Dalian Exchanges w/Dr. Copper +0.14%