Hope all is well! 

Tencent (700 HK) released earnings after the Hong Kong close/this morning NYC time. Tencent’s top line numbers were strong, Q4 +28% Year over Year /2018 32% YoY, but the bottom line/operating profits was a disappointing miss versus analyst expectations. While a slowdown was anticipated due to Tencent’s inability to monetize Fortnite and PUBG in China due to a lack of regulatory approval, 2018 gaming revenue increased only 6% and declined -1% in Q4. Operating expenses increased which drove the disparity between revenue and operating profits. Tencent has only begun ramping up advertising revenue which reminds me of Facebook’s efforts years ago though the company blamed slowing ad growth on the tepid economic growth. Gaming still dominates the company though the revenue mix is shifting. Pre-market I would normally look at South Africa’s Naspers though the market is closed today. Tencent’s unsponsored ADR (TCEHY) is off pre-market at $45.28 versus yesterday’s close of $47. Approvals of online games has picked up this year though these results may push the regulators to step it up.

• Q4 Revenues increased +28% to 84.896B ($12.370B) YoY
• Operating profit decreased -33% to $2.5B YoY
• Operating margin decreased to 20% from 39% YoY
• Combined mobile and computer WeChat users 1.097 billion monthly users
• Profit RMB 14.229B versus 21.622 Q4 2017 and analyst expectations of 17.55B
• EPS -32% to RMB 1.50
• Adjusted EPS +13% RMB 2.08
• Revenue Breakdown: Social Networks/WeChat 23%, Online games 33%, Online Advertising 19%, Others (cloud computing) 25%

The Hang Seng gave up morning gains as the market rolled over in the afternoon to end -0.85% on strong volumes above the 1 year average and 10% higher day over day. There were 16 advancers and 33 decliners as HK weighed the positive of US rates staying low and President Trump keeping tariffs on. The latter is likely jawboning in advance of talks next week in Beijing. Today’s price action was driven by the micro and not the macro as China Mobile’s disappointing earning results led to the stock -4.76%/-73 index points, Tencent’s -1.89%/55 index points in advance of their earnings release and AIA off -1.61%/-44 index points. Auto maker Geely had a strong day +2.27% after reporting a 15% revenue increase and 18% profit increase. Within the MSCI China All Shares’ HK stocks -0.77%, materials had a strong day gaining +2.74% on miners strength following the Fed’s release followed by healthcare +1.4% as the sell side analysts have become more constructive on the sector. China Mobile and Tencent pulled Communications down -2.28% while real estate was off -1.62% on concerns of HK property affordability. Southbound Connect volumes were led by sellers though pork giant WH Group saw 4 to 1 buyers and Tencent had 2 to 1 buyers. 

Shanghai & Shenzhen grinded higher on the Fed news and dates of the US trade delegation released as March 28 & 29^th ending +0.35% and +0.77% on volumes 2X the 1 year average and 13% day over day and positive breadth. The Shanghai Comp closed above the 31,000 level while the Shenzhen closed just below 1,700 at 1,697. Within the MSCI China All Shares’ mainland stocks +0.28%, communication gained 1.71%, tech +1.17% following Micron’s positive earnings, materials +0.91%, healthcare +0.46% though staples lagged as food & beverage names lagged -0.57%. Growth/tech led small caps higher versus large caps. Northbound Connect volumes were high, I suppose this is the new normal, as foreign investors were net buyers in mixed trading. Ping An Insurance saw 2 to 1 buyers while Kweichow Moutai saw sellers slightly outpace buyers. 

CNY 6.69 

Front of the curve rose again. Interesting! 
Yield on 1 Day Chinese Gov’t Bond 2.18%
Yield on 10 Year Chinese Gov’t Bond 3.18%
Yield on 10 Year China Development Bank Bond 3.62%

Commodities had a strong day on both the Shanghai & Dalian Exchanges w/Dr. Copper +0.06%