Daily Posts

President Xi Keynote Speech at Belt & Road Summit


Key News

  • President Xi delivered the keynote speech at 2nd Belt and Road Forum in Beijing. The speech included several investor friendly points a reference that the currency would remain “stable at a reasonable and balanced level”. This is addressing US acquisitions of currency manipulation. Xi reiterated that China would enforce protection of foreign intellectual property rights and prohibit the forced transfer of technology. Xi also addressed concerns that B&R indebted poor countries to China’s advantage as the initiative is to benefit “all of its participants”. There was a focus on “green growth” and “sustainable financing” as evidenced by the California’s Lt Gov Eleni Koualakis attending. The speech also included a reference to China exporting its telecommunications capabilities including 5G. Regardless of US efforts China’s 5G push will be well received within the Belt & Road countries.
  • It didn’t receive much attention but the US Trade Representative released its annual Notorious Markets List yesterday. Alibaba remained on the list for the third year in a row while Pinduoduo was added. Pinduoduo’s users are less affluent and know that they are not buying real goods. They can’t afford the real thing so they buy a knock off (or maybe two or three since they are so inexpensive). I’m not defending counterfeiting but no one believes a Saysung TV is a Samsung.

The Hang Seng managed a gain of +0.19%/+55 index points to close at 29,605 in choppy trading. Breadth was positive with 28 gainers and 17 decliners as volumes declined 11% day over day and below the 1 year average. The index ended the week off -1.73% though many financials report next week which could provide a catalyst. HK is closed Wednesday for Labor Day so many folks will take the week off. China Mobile led the HSI higher +1.21%/+16 index points following President Xi’s 5G/telecom reference in his keynote speech. Energy giant CNOOC fell -1.64%/-12 index points on crude weakness while Tencent +0.31%/+9 index points as Nintendo reported earnings noting the strong sales of the Switch gaming console in 2019 which Tencent will distribute in China. HK stocks within the MSCI China All Shares gained +0.1% led by tech +1.16%, real estate +0.72% and communications +0.45% while energy slumped -0.99% and industrials -0.86%. Southbound Connect volumes were light with sellers outpacing buyers. Volume leader Tencent saw 2 to 1 sellers, real estate company Sunac 2 to 1 sellers though pork giant WH Group saw 4 to 1 buyers. 

Shanghai & Shenzhen ended a rough week with a thud falling -1.2% and -1.33% as investors are concerned with stimulus being pulled to strong economic data/”green shoots”. Again I believe this is overemphasized though we are clearly in a correction as the SH & SZ fell -5.64% and -6.35% for the week. Next week the mainland is closed Wed, Thur and Friday for Labor Day which is exacerbating the sell off. I did receive a MSCI China A inclusion research piece from a global bank. This will gain more attention as we enter May and receive the inclusion pro-forma mid-May. Small/mid caps managed “outperformed” mega/large caps by a small margin though several brokerages note that earnings momentum potentially favors larger “quality” companies. Volumes were light falling 15% day over day and only 1/3 above the 1 year average. Mainland stocks in the MSCI China All Shares lost -1.15% led lower by healthcare -2.12%, discretionary -1.93% led lower by autos and home appliances and industrials -1.83%. Staples eased -0.29% as liquor stocks had a strong day. Financials were off -0.85% though brokerages had a good day on news the IPO process would be eased. Northbound Connect volumes were moderate/high with sellers outpacing buyers as foreign investors withdrew -$154mm. Kweichow Moutai had 2 to 1 sellers while sellers outpaced buyers by a small margin in Ping An. 

Starbucks reported earnings after the close that included strong sales in China that grew 3%. Like Hermes, Starbucks’ China business is geared to the urban consumer while CAT and 3M, which blamed China for weak earnings, are geared to old China. As investors we want to be overweight the strongest part of China’s economy which is domestic consumption as it occurs online. 

China’s big four banks, CCB/ICBC,BOC/AgBank, report earnings Monday though the reports from several smaller banks could be an indication of strong results. We will know soon enough! 

May official PMIs are to be reported on Monday while the private Caixin PMI on 5/1. 

CNY 6.73 versus 6.74 yesterday .

Bonds got a bid yesterday.


  • Yield on 1 Day Chinese Gov’t Bond 2.05% versus 2.05% yesterday
  • Yield on 10 Year Chinese Gov’t Bond 3.44% versus 3.44% yesterday
  • Yield on 10 Year China Development Bank Bond 3.82% versus 3.84% yesterday


Commodities were lower on the Shanghai & Dalian Exchanges with Dr. Copper -0.69%