Hope all is well! 

Key News

• The Ministry of Industry and Information Technology announced 5G licenses could be granted as soon as next week leading to rally in mainland communication stocks though HK communications were dragged lower by the broader market move. China Tower managed a gain following a broker upgrade.
• The National Healthcare Security Administration plans on auditing the books of seventy seven domestic and foreign pharmaceutical companies following a domestic firm, Kangmei Pharmaceutical, overstated its cash position. Pharma stocks were weak on the news.
• The US weakness weighed on Asia combined with the lack of progress on the trade front has made investors hesitant to commit new capital. There has been a slight softening in rhetoric which could pave the way for a meeting this weekend at the finance minister conference pre-G 20 summit at month’s end.

The Hang Seng declined -0.49%/-132 index points on light volumes and weak breadth as sixteen stocks advanced and thirty three declined. Tencent declined -1.92%/-50 index points on no news and despite two broker upgrades while Ping An -1.56%/-22 index points and HSBC managed a +0.63%/+17.8 index points. The HK stocks within the MSCI China All Shares declined -1.24% led lower by healthcare -2.77%, tech -2.42%, materials -1.89%, discretionary -1.61% and staples -1.57% as all sectors declined. Southbound Connect volumes were very light though buyers did outpace decliners though volume leader Bank of China saw 3 to 1 sellers, ICBC had very strong buying and Tencent managed a small inflow.

The Shanghai & Shenzhen declined -0.96% and -1.43% on light volumes below the 1 year average as 658 stocks advanced and 2,982 stocks declined. The mainland stocks in the MSCI China All Shares declined -1% led lower by alcohol stocks in the staples -1.84%, healthcare -1.5%, materials -1.45%, tech -1.2% and industrials -1.19%. Communications managed a gain of +0.05% as the only sector in the green. Small caps underperformed as mega/large/mid declined. Maybe the only positive on the day was the inflow of $154mm from foreign investors via the Northbound Connect though volumes were very light. Interesting that the volume leaders experienced more sellers than buyers as Ping An, Kweichow Moutai, China Merchants Bank and Jiangsu Hengrui Medicine.

The model based on the mainland dividend yield/10 Year Treasury Yield mentioned yesterday inched up as stocks declined and bonds rallied.

Fairly quiet on individual stock news post earnings season.

• CNY 6.90 versus 6.90 yesterday
• Yield on 1 Day Chinese Gov’t Bond 1.72% versus 1.76%
• Yield on 10 Year Chinese Gov’t Bond 3.24% versus 3.27%
• Yield on 10 Year China Development Bank Bond 3.72% versus 3.74%
• Commodities were lower on the Shanghai & Dalian Exchanges with Dr. Copper +0.24%