Trade & Credit Data Released, MoF statement on CDRs
Trade Balance in US $ Year over Year
- Trade Balance: $32.6B versus estimate $5.7B and March’s $4.1B
- Exports: 14.2% versus estimate 6.5% and March’s -20.7%
- Imports: -7.6% versus estimate 0.2% and March’s -5.2%
Trade Balance in CNY Year over Year
- Trade Balance: 221.2B versus estimate 76B and March’s 34.3B
- Exports: 21.3% versus estimate 6.3% and March’s -16.6%
- Imports: -1.8% versus estimate 2.6% and March’s -0.3%
Takeaway: After giving analysts kudos yesterday for nailing the CPI/PPI, they missed the trade data by country mile. The data was released twenty minutes before the mainland close (closes at 3pm) which led to a very late afternoon rally. The trade data is a strong assessment of the global economy which appears to have picked up in March. Imports may have lagged due to the VAT cut on April 1.
- New Loans: 221B versus estimate 76B and March’s 34B
- M2: 8.6% versus estimate 8.2% and March’s 8%
- Aggregate Financing: 2.860T versus estimate 1.850T and March’s 703B
Takeaway: This data was released after the Hong Kong close (4pm) leading a pick-up in global equity futures as another China “green shoot” has sprouted. Credit growth is a strong sign that policy maker’s efforts are having an effect. The strong pick up may dampen the possibility of another bank required reserve ratio cut though I would suspect the mainland markets will respond on Monday. China’s bond market sold off on the news while CNY picked up versus the US $.
The Hang Seng overcame a weak opening and lackluster session to end +0.24%/+70 index points as the trade balance data led to late afternoon rally. Volumes were below the 1 year average for the first time in 2 weeks as the index closed below 30k at 29.909. Breadth was strong with 29 advancers and 17 decliners with AIA losing -0.88%/-25 index points while CCB +0.87%/19 index points and Tencent +0.61%/19 index points. The HK stocks within the MSCI China All Shares gained +0.37% led higher by real estate 1.15%, financials +0.54% and tech +0.49%. Materials and discretionary were off -0.93% and -0.83% with the latter off driven by autos following a downgrade of Geely -4.09%. Southbound Connect volumes were light though buyers were with volume leader Geely which experienced 10 to 1 selling. CCB and ICBC saw very large buying though interestingly Sunac and Tencent were sold. Interesting to see mainland investors preferring value versus growth.
Shanghai & Shenzhen were lower on the day until the trade data was released leading to a late day rally to close -0.04% and -0.11% on very light volumes just above the 1 year average. Breadth was mixed on the day. Mainland stocks within the MSCI China All Shares were off -0.03% though utilities had a very strong day +1.65% though materials and real estate were off -1% and -1.18%. It was a quiet day as the credit data was released post close. Northbound Connect volumes tilted slightly to selling on light volumes as Keichow Moutai saw continued profit taking on 3 to 1 selling though Ping An saw net buying. Connect flows were net slightly on inflows.
A mainland media source noted the closure of Beijing Scitech Plaza as a victim of e-commerce. Opened in 1992, the mall was home to many luxury brands though newer malls and online buying.
Uber’s IPO filing provides an insight into Didi Chuxing, the tax cab hailing service that beat Uber in China leading to Did taking a seat on Uber’s board. According to Caixin, Uber’s Didi investment rose from $6B to $8B last year which would value Didi at $51.6B. Didi had been valued at $56B based on its latest fund raising in December 2017.
Peer to peer lender QD announced buying 18mm shares previously held by Beijing Kunlun Tech Co. Stock is up pre-market.
Bloomberg had an interesting report on the Ministry of Finance reporting that CDRs, China’s proposed version of ADRs, would receive favorable tax treatment. China’s biggest (and some would say best) companies have listed overseas in HK and the US in order to garner a global investor base as China’s retail driven mainland market makes mega-IPOs difficult. Ironically the hundreds of Chinese users of Alibaba and other US listed stocks can’t own the stock. We don’t know if CDRs would be similar to ADRs as a custody bank buys the local shares and issues an ADR here in the US. It is possible that the CDR could be funded by new stock. However if it mimics an ADR it could be a powerful catalyst for the US stocks. This would add to the confusion of more dual listed Chinese stocks though it could provide a strong catalyst as more information comes to light.
Bonds sold off as the credit data was released.
- Yield on 1 Day Chinese Gov’t Bond 1.89%
- Yield on 10 Year Chinese Gov’t Bond 3.32%
- Yield on 10 Year China Development Bank Bond 3.81%
Commodities were mixed on the Shanghai & Dalian Exchanges with Dr. Copper off -0.32%