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GDP/FAI/IP/Retail Sales Beat Expectations, CNY Rally/Bond Market Sell Off

Hope all is well!



Q1 GDP: 6.4% versus estimate 6.3% and Q1 2018 6.4%
Fixed Asset Investment: 6.3% versus estimate 6.3% and Feb’s 6.1%
Industrial Production: 8.5% versus estimate 5.9% and Feb’s
Retail Sales: 8.7% versus estimate 8.4%
Surveyed Jobless Rate: 5.2% versus Feb’s 5.3%

Takeaway: “Green shoots” may be an understatement as last night’s release shattered analyst expectations. China’s mainland bond market sold off heavily as the 10 Year Treasury Yield went up 11bps while CNY rallied. Equity markets appeared to price in today’s release with yesterday’s strong performance. China’s economy is responding to fiscal and monetary easing much quicker than anticipated as many hadn’t thought we’d see this level of strength until the second half of 2019. Earnings have lagged in Q1 though equity markets are forward looking and are anticipating a pick up in Q2 and beyond.

Key News

  • HK and mainland autos stock ripped on news a National Development and Reform Commission (NDRC) paper that suggested easing the congestion curbs limiting the number of license plates issued and supporting adoption of electric vehicles. The Shanghai Auto Show is occurring coincidentally.
  • Financials were weaker after the CSRC, China’s SEC equivalent, followed up a February statement overnight concerning margin. The CSRC takes a paternalistic role in overseeing the market due to the large number of individual investors.  


The Hang Seng had a choppy session ending -0.02%/-5 index points to close at 30,124 as investors appeared to have anticipated yesterday’s strong economic release. Turnover was flat day over day/slightly above the 1 year average while breadth was negative with 21 advancers and 24 decliners. Geely Auto gained +12%/+39 index points on the auto news while AIA eased -1.24%/-35 index points and Tencent +0.51%/+16 index points. HK stocks in the MSCI China All Shares gained +0.27% led by discretionary due to the autos, tech +1.78% led higher by China Railway Signal & Communication Corp which gained 6.86% after applying to list on the Shanghai Science and Technology Innovation Board. Real estate and utilities underperformed -1.49% and -1.43%. Southbound Connect volumes were moderate with sellers outpacing buyers though volume leader Geely saw slightly selling.

Shanghai & Shenzhen gained +0.29% and +0.72% on volumes +5% day over day and moderately positive breadth. Small and mid caps outperformed due to financials weakness weighing on large/mega caps. Mainland stocks in the MSCI China All Shares’ gained +0.38% led by autos in discretionary +2.35% followed by staples +1.37% led by food & beverage stocks while real estate and financials lagged -1.48% and -0.32%. Foreign investors pulled $280mm though selling was focused on Shenzhen listed companies rather than Shanghai. Shanghai Connect volume leader Keichow Moutai had slightly buyers though Ping An Insurance had 2 to 1 sellers.  

CNY 6.68

 

Significant bond sell off


  • Yield on 1 Day Chinese Gov’t Bond 2.31% versus 1.89% Tuesday
  • Yield on 10 Year Chinese Gov’t Bond 3.43% versus 3.32%
  • Yield on 10 Year China Development Bank Bond 3.84% versus 3.81%


Commodities were mixed on the Shanghai & Dalian Exchanges with Dr. Copper off +0.24%