Hope all is well! 

Key News

• Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer are back in Beijing. Mnuchin was quoted in the New York Times as saying negotiations are entering the “final laps”.
• Manufacturing PMI: 50.1 versus estimate 50.5 and March’s 50.5
• Non-manufacturing PMI: 54.3 versus estimate 54.9 and March’s 54.8
• Caixin China PMI Manufacturing: 50.2 versus estimate 50.9 and March’s 50.8 

Takeaway: The official and Caixin manufacturing PMIs came in a tad light after a strong March indicating the pace of expansion moderated. Manufacturing saw a slight pullback in output and new orders though export orders and imports picked up. The Non-manufacturing PMI saw a slight decline in new orders and export orders though business expectations are elevated. The market has become concerned that stimulus will be pulled due to the strong economic releases. While by no means “bad”, the manufacturing PMIs indicate the economy’s fragile state. Policy makers are not apt to pull fiscal and monetary stimulus until the economy is on firmer ground. China’s stimulus is very different than 2008’s “shock and awe” debt fueled stimulus. This stimulus is geared to the consumer as evidenced by the April tax cut and payroll tax cut. The stimulus targets small businesses that historically have had difficulty gaining access to credit. The resiliency of the non-manufacturing PMI stands as strong evidence that these policies are working. As we enter Q1 earnings season for US listed Chinese internet and e-commerce companies we will find out if the stimulus has trickled into income statements. 

The Hang Seng fell -0.65%/-193 index points to 29,699 on light volumes ahead of tomorrow’s holiday. Breadth was poor with 5 advancers and 44 decliners led lower by energy giant CNOOC -3.41%/-25.9 index points, Tencent eased -0.67%/-20.7 index points and CCB -0.86%/-19 index points. Pork giant WH Group surged +5.44%/+13.4 index points on multiple analyst upgrades and price target. Pork prices are rising due to African swine fever. HK stocks within the MSCI China All Shares eased -0.61% led lower by energy -1.77% and materials -1.35% though staples and healthcare managed slight gains of +0.45% and +0.24%. It was a very light day on news flow.  Southbound Stock Connect was closed today. 

Shanghai & Shenzhen ended a six day slide on the last day of trading for the week gaining +0.52% and +0.68% on light volumes. Breadth was strong with 2,564 advancers and 984 decliners as investors preferred small and mid caps to mega/large caps by a small margin. Mainland stocks within the MSCI China All Shares gained +0.48% led by communication +1.18%, materials +0.99% and utilities +0.97% though tech lagged -0.09% and financials +0.11%. Foreign investors sold $81mm of mainland stocks via the Connect trading program as volume leader Ping An Insurance saw 4 to 1 selling and Kweichow Moutai 2 to 1 selling. 

There appears to be interest in the China earnings of US and global multi-nationals.

• Dutch healthcare giant Philips reported revenue growth of 2% though China revenue grew at a double digit rate. China represented almost 13% of the company’s revenue.
• Samsung Electronics, 17% revenue exposure to China, saw firm revenue decline 14% driven by lower by memory and display products. 

A mainland broker noted that several Chinese mutual fund families are launching IPO mutual funds in advance of the Shanghai Science and Technology board launching. The capital being raised is not insignificant at a few billion dollars. 

JP Morgan upgraded both JD.com and Vipshop to Overweight while raising their price targets to $38 and $11. 

An Asia trading desk noted that today was the last day for mainland stocks to report 2018 earnings. The nearly 4,000 listed companies reported a total revenue increase of 11% though net income managed only a +0.05%. This was largely inline with muted expectations. US listed Chinese internet and e-commerce companies are just entering their earning season. 

Ant Financial no longer holds shares in peer to peer lender QD according to a SEC filing. 

CNY 6.73 versus 6.73 yesterday

• Yield on 1 Day Chinese Gov’t Bond 1.92% versus 1.92% yesterday
• Yield on 10 Year Chinese Gov’t Bond 3.43% versus 3.44% yesterday
• Yield on 10 Year China Development Bank Bond 3.81% versus 3.84% yesterday

Commodities were higher on the Shanghai & Dalian Exchanges with Dr. Copper +0.08%