Daily Posts

IMF Raises China GDP Target, Property Sales Firm

Apologies for the late arrival as I had a computer technical problem this morning while traveling.

Key News Overnight

  • The IMF raised their China GDP target to 6.3% for 2019 from their January estimate of 6.2%.
  • Home appliance giant Gree Electric Appliances (000651 CH) went up limit up 10% again after yesterday’s announcement its parent would sell a 15% stake in the company. Caixin reported private equity firm Hopu Investments, founded in 2007 by former Goldman Sachs investment banker Fang Fenglei, wants to buy the stake for RMB 41 billion ($6.1B).
  • Premier Li Keqiang met with European officials reiterating China would open and level the playing field for foreign companies

The Hang Seng followed US markets lower at the open -0.35% falling as low as -0.88% but staged a come back/grinded higher to close -0.13%/-37 index points to close at 30,119. Volumes were off just over 1% day over day but still above the 1 year average though on poor breadth with only 14 gainers and 34 decliners. The index would have been lower if not for Tencent which gained 1.36%/+42 index points on news the company had a game approved by local regulators. China Construction Bank was off -1%/-22 index points though insurance giant AIA +0.69%/+20 index points. The HK stocks within the MSCI China All Shares gained +0.06% with tech the leading sector +1.34% led by Lenovo +6.89% following positive management comments at a local conference. Discretionary had a strong day +1.32% led by autos as yesterday’s news March auto sales were off but not as bad as expected. Tencent pulled communications +0.97% though real estate firms were off -0.83% despite news that March sales were strong. Financials were off -0.78% on further profit taking. Southbound Connect trading were moderate with buyers outpacing sellers though volume leader Geely Auto saw nearly 2 to 1 selling, CCB nearly 4 to 1 selling and Tencent 3 to 1 buying. Broker chatter was that market might take a breather/consolidate at this level.

Shanghai & Shenzhen also opened lower but grinded higher to end +0.07% (James Bond) and -0.21% on volumes higher 7% day over day and 2X the 1 year average. Breadth was weak with decliners outpacing gainers as small caps underperformed large/mega cap names. The mainland stocks in the MSCI China All Shares gained +0.12% led higher by staples +2.02% led by liquor stocks, healthcare gained +1.53% though I didn’t see any news, and discretionary +1.52% led by Gree and autos. Real estate was off -1.64% followed by energy off -0.95%. Northbound Connect trading was high in mixed trading as volume leader Kweichow Moutai saw slight selling.

The WSJ had an article highlighting the recent outflows from Ant Financial’s money market fund Yu’e Bao. Investors have moved to higher yielding competitors after the fund’s size in March 2018 reached RMB 1.69 trillion/$251 billion with 588 million investors drew regulators’ oversight. The fund now has RMB 1.13 trillion. I met with Tianhong Asset Management in Beijing a few years ago and came away very impressed. Imagine if Amazon had the largest mutual fund America. Pretty cool!

CNY 6.71

  • Yield on 1 Day Chinese Gov’t Bond 1.97%
  • Yield on 10 Year Chinese Gov’t Bond 3.31%
  • Yield on 10 Year China Development Bank Bond 3.76%

Commodities were lower on the Shanghai & Dalian Exchanges with Dr. Copper off +0.08%