PI/PPI/Aggregate Financing/Money Supply/New Loans Released, Mary Meeker’s Internet Trends Released
Hope all is well!
- May CPI: 2.7% versus estimate 2.7% and April’s 2.5%
- May PPI: 0.6% versus estimate 0.6% and April’s 0.9%
- Aggregate Financing: 1400B versus estimate 1450B and April’s 1360B
- New Loans: 1180B versus estimate 1300B and April’s 1020
- M2:8.5% versus estimate 8.6% and April’s 8.5%
Takeaway: Pork prices drove the CPI higher as the African swine flu outbreak is having a material effect on prices paid by the world’s largest consumer of pork. Without the pork/food prices spiking, CPI was flat month over month. New loans and financing were a touch weak though showed signs that policy support of the economy is occurring.
- Trade rhetoric weighed on market sentiment with both sides using the media to convey their positions in advance of a Trump Xi meeting at the G 20 summit. This could be pre-negotiating jockeying though for the time being the hardened stances are weighing on sentiment. US equity weakness spread across Asia as Hong Kong protests on a new extradition law that would allow extradition from HK to China and a spike in the HK $ volatility were also factors.
- An absolute must read is Mary Meeker’s annual Internet Trends report. I was worried that Ms. Meeker’s move from Kleiner Perkins to her new shop Bond Capital might disrupt publication but my colleague Brian noticed its released. While providing a comprehensive overview of the internet and e-commerce trends, the China section is written by prestigious Chinese private equity firm Hill House Capital. The China section is a very strong validation of the China internet and e-commerce opportunity.
The Hang Seng gave back recent gains falling -1.73%/-480 index points as a combination of factors weighed on sentiment as volumes plunged nearly 16% day over day well below the 1 year average on poor breadth as only 1 stock advanced and 49 declined. It was all red today as AIA fell -2.59%/-70.7 index points, Tencent -2.09%/-56.5 index points and HSBC off -1.15%/-32.9 index points. Apple supplier Sunny Optical was the worst performer falling -6.05%/-8.9 index points after reporting May shipments fell 5% month over month though still up strong year over year 38%. The HK stocks within the MSCI China All Shares were off -1.26% with utilities the only sector in the green as trade sensitive tech fell -3.13%, Tencent pulled communications down -1.77% and real estate off -1.69% on light May sales. Autos were off following May sales declined for the 12th straight month. One broker did note BYD’s chairman has been buying the stock. Southbound Connect volumes were light though dominated by buyers as ICBC, CCB and Tencent all experienced buyers outpacing sellers by a strong margin. This might be the only positive on the day as mainland investors bought the dip.
The Shanghai and Shenzhen eased -0.56% and -0.64% on moderate volumes above the 1 year average as 1,059 stocks advanced and 2,478 stocks declined. The higher CPI was the main driver as higher consumer prices means less money for other activities. Mega caps slightly outperformed mid and small though it was a modest pullback. The mainland stocks within the MSCI China All Shares eased -0.75% as rare earth stocks’ gain helped materials -0.05% while communications and tech fell -1.41% and -1.2%. Staples felt the brunt of the CPI reading falling -1.08% with food/alcohol stocks off. Northbound Connect volumes were moderate as foreign buyers were back leading to $185mm of net buying following $1B of buying both Monday and Tuesday. The buying is noteworthy as we had seen large inflows leading up to the Q1 rally. Foreign investors became net sellers in April and May as the market rolled over. Foreign investors are clearly buying low and then selling high in what could be a repeat of this trend.
- CNY 6.91 versus 6.91 yesterday; the PBOC is giving CNY a lot of verbal support
- Yield on 1 Day Chinese Gov’t Bond 1.7% versus 1.7%
- Yield on 10 Year Chinese Gov’t Bond 3.31% versus 3.31%
- Yield on 10 Year China Development Bank Bond 3.76% versus 3.77%
- Commodities were mixed on the Shanghai & Dalian Exchanges with Dr. Copper +0.09%