Hope all is well! While the US and HK will closed tomorrow, the mainland market is open so there will be a China Last Night tomorrow morning. If you are off tomorrow enjoy the three day weekend!

Key News

• The WSJ reported during US market hours US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing the week of April 29^th followed by Vice Premier Liu He visiting DC the week of May 6^th. The trips will lead to a May trade deal signing with Trump and Xi. The market’s reaction? Yawn. The market has completely baked in a trade deal getting done.
• Following yesterday’s economic release both UBS and Morgan Stanley raised their 2019 GDP estimates 6.4% from 6.1% and 6.5% from 6.3%. Standard Chartered maintained their 6.4% 2019 target.
• After the market close, Nintendo announced a partnership with Tencent to bring its popular Switch gaming console to China.
• March retail sales increased 8.7% year over year and Q1 retail sales increased 8.3% YoY as previously discussed. Last night the National Bureau of Statistics released that the online retail sales of goods and services increased 15.3% year over year. Online retail sales of physical goods increased 21% accounting for 18% of total retail sales of consumer goods. Rumors of the death of the Chinese consumer have been greatly exaggerated.

The Hang Seng eased in the afternoon session following the US pullback -0.54%/-161 index points to close below the 30k level at 29,963. Volumes were light in advance of tomorrow’s Good Friday holiday falling -12.5% day over day and below the 1 year average for the first time in two and half weeks. There were only 12 advancers and 35 decliners led by CCB -1.4%/-32 index points, Tencent off -1.01%/-31 index points and ICBC -0.99%/-13 index points. Policy makers reiterated banks should provide credit to small medium enterprises which may explain some of financials weakness though it was a quiet day. HK stocks within the MSCI China All Shares fell -0.69% led a weak day in healthcare -1.67%, real estate and materials off -0.95%. Tech was a positive outlier +0.61%. Southbound Connect volumes were moderate with buyers outpacing sellers though volume leader CCB saw nearly 2 to 1 sellers, Ping An ten to 1 buyers and Geely Auto slightly buying.

Shanghai & Shenzhen fell -0.4% and -0.59% on volumes off -9% day over day though still 1.5X the 1 year average while breadth was skewed to decliners. Mid/small caps underperformed mega/large caps by a small margin. Real estate and healthcare were weaker than market falling -1.18% and -1.05%. Foxconn founder Terry Guo announced his intention to run for Taiwan’s presidency leading to a pick up in Taiwan related stocks in the mainland and HK.  Autos were off on profit taking while appliance makers were stronger on a subsidy for buying energy efficient appliances. Alcohol names were stronger after strong earnings from Anhui Kouzi Distrillery. Northbound Connect was closed due to tomorrow’s HK market holiday. Connect volumes account for ~3% of mainland volumes which is a partial explanation of the lackluster volumes. 

The State Administration of Foreign Exchange (SAFE) announced foreign investors bought $42B of mainland equities in 2018 which is an increase of 85% versus 2017. Bond purchases rose 68% to $96B.  In the first quarter of 2019, foreign investors bought $19B of stocks. I wasn’t able to ascertain if this includes Connect or is just QFII and RQFII programs. A positive sign of foreign investor interest in China’s mainland markets. 

March foreign direct investment increased 8% year over year to RMB 95B ($14b). Q1 FDI increased 6.5% YoY to RMB 242B. 

CNY 6.7 versus 6.68 yesterday

• Yield on 1 Day Chinese Gov’t Bond 2.31% versus 2.31% yesterday
• Yield on 10 Year Chinese Gov’t Bond 3.37% versus 3.43% yesterday
• Yield on 10 Year China Development Bank Bond 3.8% versus 3.84% yesterday

Commodities were largely lower on the Shanghai & Dalian Exchanges with Dr. Copper +0.4%