Hope you had a great weekend. Apologies as I had a family obligation this morning. 

Key News Overnight

• Profit taking ruled the day despite Friday’s strong credit data and positive weekend trade comments from Treasury Secretary Steven Mnuchin. Market momentum has slowed the last week and half following a very impressive first quarter. While most brokers noted consolidation and profit taking to explain the market action, one broker noted that MSCI’s transition of the All China indices to the China All Shares will not include Chinext stocks. Chinext is a growth board on the Shenzhen Stock Exchange which suffered a -1.7% loss on the day. There is some concern that the recent “green shoots” could dampen the easy monetary and fiscal policies though there is no indication of a policy pivot. Simply put the market is a taking a breather. It is possible we will see sideways action and consolidation until May when chatter around MSCI’s first 2019 China A inclusion.

Hang Seng opened higher +0.7% following Friday’s after the close positive credit data gaining +1.24% in morning trade before profit taking and Tencent’s weakness weighed on the market. The index closed -0.33%/-99 index points at 29,810 on moderate volumes 22% higher day over day and above the 1 year average accompanied by poor breadth of 13 advancers and 36 decliners.  Tencent weighed on the index -1.42%/-44 index points on  profit taking despite a number of sell side upgrades/higher price targets while AIA +0.88%/+25 index points and HSBC +0.3%/9 index points. The MSCI China All Shares’ HK stocks eased -0.36% led lower by communications due to Tencent -1.12%, healthcare -1.11% and tech -0.65%. Discretionary gained +0.57% led higher by autos and food deliverer Meituan Dianping’s strong day +2.6% while materials managed a gain +0.32% and financials +0.17%. Mainland investors were net buyers of HK stocks as Southbound Connect volumes were well off their highs. Volume leader Geely Auto was sold 10 to 1 while CCB saw very strong buying, real estate firm Sunac 3 to 1 selling, Tencent 1.5 to 1 selling and ICBC massive buying. 

Shanghai & Shenzhen followed Hong Kong’s open higher though slid to a small loss -0.34% and -0.84% on volumes 18% higher day over day and 1.5X the 1 year average. The Shanghai Comp was +2.05% at one point before profit taking ruled over jitters on monetary and fiscal policy after strong PMIs and credit data. Breadth was mixed with decliners outpacing advancers 2 to1 on the Shanghai though only barely on the Shenzhen Composite. Mega caps vastly outperformed mid and small caps largely driven by strong day from financials which gained +0.16% within the mainland stocks held by the MSCI China All Shares index. Utilities were worst sector losing -1.29% followed by healthcare -1.04% and real estate -0.84%. Northbound Connect volumes were light with net buying though decidedly mixed trading as volume leader Kweichow Moutai saw 3 to 1 selling, Ping An mixed and China Merchants Bank 1.5 sellers to buyers. 

Foreign investors will be given more access to mainland futures in order to allow them to hedge investments according to a mainland media source. Interesting that that article specifically mentioned MSCI index futures as a mainland futures contract is not available today. 

There was an interesting article on the necessity of China’s pension plans raising capital to handle an aging population. The article noted that China’s government pension plans could be exhausted by 2030 if action isn’t taken. 

This Wednesday after the mainland close March retail sales, industrial production and fixed asset investment will be released. 

There is increased chatter of the management changes at JD.com. 

CNY 6.70

• Yield on 1 Day Chinese Gov’t Bond 1.89%
• Yield on 10 Year Chinese Gov’t Bond 3.38%
• Yield on 10 Year China Development Bank Bond 3.86%

Commodities were mixed on the Shanghai & Dalian Exchanges with Dr. Copper gaining +0.67%