TGIF! This Sunday China will release March PMIs. I am headed overseas Saturday night but will do my best getting the daily note out. There will be no note Thursday due to a flight conflict. Apologies in advance.  

Key News

• A local HK media source noted yesterday that the Chinese trade team hadn’t brought a translated version of the trade agreement to yesterday’s working dinner. I didn’t mention it as I couldn’t find the story substantiated elsewhere. This morning the media is widely reporting the trade teams are reviewing and ensuring the English and Chinese versions of the agreement match. Isn’t the story that there is an agreement? I’m shocked that there hasn’t been more emphasis on the fact that there is an agreement.
• Northbound Connect volumes were VERY high last night as foreign investors invested $1.65 billion in mainland stocks. A broker noted this was the highest inflow day since December 3, 2018 and the fourth largest ever. Today’s flows could be partially window dressing by active managers who will need to show their holdings at quarter end. 30 of the 33 top performing EM stocks were Chinese stocks in Q1 according to Bloomberg.
• Strong earnings and talk of another bank reserve requirement ratio as interest rate sensitive sectors rose in HK and particularly in the mainland.
• The CSRC approved JP Morgan and Nomura for a mainland securities business license.
  
  
  

Hang Seng gained +0.96%/+276 index points closing at 29,051 as volumes surged 32% day over day with 32 advancers and 12 decliners. AIA continued its winning streak +2.29%/+65 index points while Tencent gained +1.98%/+57 index points and Pin An Insurance +2.51%/+37 index points. Within the MSCI China All Shares’ HK stocks +1.22%, real estate +3.21% on chatter of a bank RRR cut, staples +2.81% as investor favorites liquor/food & beverage names , healthcare +2.53% after strong earnings from Luye Parma ripped +14%, interest rate sensitive utilities +1.61%, discretionary +1.41% and communications led higher by Tencent +1.31%. Southbound Connect volumes were elevated as buyers outpaced sellers by a 3 to 2 margin. Real estate company Sunac was the volume leader nearly to 2 to 1 while Tencent saw sellers slightly outpace buyers. 

Shanghai & Shenzhen gained +3.2% and +3.38% on volumes 26% day over day and 2X the 1 year average. Breadth was very strong as only 300 stocks declined and 3,311 stocks advanced. Kweichow Moutai strong earnings and strong forecast led the stock +5.85% (Rumors of the death of the Chinese consumer have been greatly exaggerated). Within the MSCI China All Shares’ mainland stocks +4.03%, real estate +5.92% as rates appear to be low for longer, staples +5.44% on KM’s earnings led food & beverage names higher, financials +4.78% led higher by brokers, discretionary +3.74%,  industrials +3.42%, tech +3.28% communications +3.19%, materials +2.86%, healthcare +2.72%, energy +2.3% and utilities +1.45%. Northbound Connect volumes surged with buyers outpacing sellers 3 to 2. Despite the huge inflows of $1.65B only 14% of Connect daily quota was used. Kweichow Moutai had almost 2 to 1 while Ping An buyers outpaced sellers by a small margin. 

CNY 6.71 

• Yield on 1 Day Chinese Gov’t Bond 2.02%
• Yield on 10 Year Chinese Gov’t Bond 3.149%
• Yield on 10 Year China Development Bank Bond 3.58%  

Commodities were mainly higher on the Shanghai & Dalian Exchanges w/Dr. Copper +0.6%