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Premier Li’s Boao Forum Speech, Yunji Files for IPO

Hope all is well! 

Key News

  • Premier Li spoke at the Boao Forum mid-morning China time. While China will not release the “shock & awe” stimulus witnessed after the financial crisis, there will be targeted stimulus as the country will run a 3% deficit in 2019. The market’s reaction was muted as Premier Li didn’t reveal any new developments.
  • US trade team had a working dinner with its Chinese counterparts after arriving in Beijing.

The Hang Seng overcame early losses to gain +0.16%/46 index points on volumes below the 1-year average and down slightly day over day with thirty advancers and eighteen decliners. Link REIT gained +3.22%/18 index points while CCB declined post earnings -0.58%/  -13 index points and China Mengniu Dairy gained +5.47%/12 index points after strong earnings. ZhongAn Online insurance jumped +7.84% after gaining approval for a banking license in HK.  Within the MSCI China All Shares’ HK stocks -0.09%, as staples +1.83% led higher by Mengniu Dairy while materials and industrials gained +0.63% and +0.52%. Consumer discretionary lost -1.16% as Haier Electronics slumped -8.44% after disappointing earnings. Southbound Connect volumes were light as sellers outpaced buyers by a slight margin. 

Shanghai & Shenzhen slumped -0.92% and -0.9% on lower volumes as global stock weakness weighed on the markets. Breadth was poor as decliners led advancers by nearly 3 to 1. Within the MSCI China All Shares’ mainland stocks -0.68%, staples were led higher by food and beverage names +1.33% though real estate fell -1.86% on news Vanke would issue shares to raise cash, communications –1.28%, materials -1.27% and energy -1.16%. ZTE earnings forecast exceeded expectations as the company jumped limit up 10%. Northbound Connect volumes were light as sellers outpaced buyers by a small margin. Volume leader Kweichow Moutai experienced buying ahead of its earnings which were just released. It appears the company has beat analyst expectations though I’ll dive in further. 

Hangzhou e-commerce startup Yunji has filed an F-1 with the SEC in order to list on the Nasdaq exchange under ticker YJ. In reading the filing, it states the company looks to raise $200mm led by Morgan Stanly, Credit Suisse, JP Morgan and CICC. The company generated RMB 13B ($1.89B) in revenues in 2018 up from RMB 1.284B in 2016. The company is not quite profitable as it lost RMB 56MM ($8.2MM) in 2018. The company is like Pinduoduo (PDD) as they leverage Tencent’s WeChat social media platform though differs from PDD which makes money from advertising. Yunji signs up members who receive discounts as they buy goods which the company charges for. On China’s e-commerce market, the filing states: China’s online retail industry has experienced tremendous growth, with the overall market size growing from RMB3.8 trillion in 2015 to RMB7.2 trillion (US$1.0 trillion) in 2017, representing a CAGR of 37.0%, and is expected to grow to RMB15.0 trillion (US$2.2 trillion) in 2022, representing a CAGR of 15.8%. The online penetration rate of retail market increased from 10.3% in 2015 to 17.0% in 2017 and is expected to further increase to 24.4% in 2022, according to China Internet Network Information Center and CIC. 

CNY 6.73 

  • Yield on 1 Day Chinese Gov’t Bond 1.57%
  • Yield on 10 Year Chinese Gov’t Bond 3.14%
  • Yield on 10 Year China Development Bank Bond 3.57% 

Commodities were lower on the Shanghai & Dalian Exchanges w/Dr. Copper -0.06%