China Internet/E-commerce in the headlines, HK Sentiment Improves, US Trade Representative Hearings
Hope all is well!
Key New Overnight
- Markets are in a lethargic/low volume Fed wait and see though HK sentiment picked up as the extradition law is delayed potentially permanently. HK head Carrie Lam gave a televised press conference after the market close.
- China internet & e-commerce companies were in the news overnight as Alibaba CFO Maggie Wu will assume responsibilities from Vice Chairman Joe Tsai. The well respected Tsai is assumed to be heading to retirement having bought a piece of the Brooklyn Nets. Tencent was a strong performer following the Shanghai’s local government pledge to make it the global e-sports capital. JD.com’s 6-18 sales event reported sales of $26B as of 2pm China time. The 6-18 event is a rival to Alibaba’s Singles Day (11-11, Nov 11) event.
- Healthcare outperformed again following KPC Pharmaceuticals (600422 CH) malaria resistance treatment. The news lifted both HK and mainland stocks.
- China’s holdings of US Treasuries declined by $7.5B to $1.1 trillion to the lowest level since June 2017. The decline is likely driven by China’s support of CNY.
- The US Trade Representative Office held public hearings on raising tariffs on the remaining $300b of Chinese imports but off camera beginning on Monday through next Tuesday. There was virtually no media coverage of Monday’s hearings despite well known brands such as Kenneth Cole, New Balance, Roku, iRobot and Best Buy testified on Monday. Over the next week, 600 companies and trade associations will testify in an attempt to explain how supply chains and global economy are intertwined. Hopefully someone is listening. One broker noted that by extending the holdings to two weeks plus a week to make a conclusion it effectively pushes a tariff decision post G-20.
The Hang Seng rose 1%/+271 index points on light volume and strong breadth of 48 advancers and 2 decliners on improved local sentiment. AIA surged +1.99%/+55.2 index followed by Tencent +1.52%/+40.9, and HK Exchange continues to ride the Alibaba HK listing gaining +2.73%/+26.8 index points. The HK stocks within the MSCI China All Shares gained +0.89% led by Tencent’s effect on communications +1.35%, healthcare +1.15%, tech +1.06% and financials +0.89% while utilities was the only sector in the red declining -0.22%. Southbound Connect volumes were light though buyers outpaced sellers as volume leader ICBC saw outsized buying.
The Shanghai & Shenzhen had a choppy session swinging from gains to losses twice though ending +0.09% and +0.16% on very light volumes and lower breadth of 1,296 advancers and 2,184 decliners. Small caps slightly outperformed mega/large caps. The mainland stocks within the MSCI China All Shares gained +0.25% led by staples +0.86%, healthcare +0.57% and financials +0.43% though real estate declined -0.45%, materials -0.41% and discretionary -0.24%. A mainland broker noted that several companies that are based near North Korea rallied including Changbai Mountain Tourism which gained nearly 10% on news of President Xi visiting N Korea in advance of the G-20 (I’m not making this up). While trading volumes were stagnant, Northbound Connect volumes were light though foreign investors were busy buying mainland stocks to the tune of $229mm.
Hengton Optic-Electric (600487) jumped +4.35% after announcing the purchase of Huawei’s undersea cable business as the latter sells non-core businesses to shore up its reserves.
Housing prices increased very slightly in the month of May in Tier One, Two and Three cities.
- CNY 6.92 versus 6.92 yesterday
- Yield on 1 Day Chinese Gov’t Bond 1.49% versus 1.48%
- Yield on 10 Year Chinese Gov’t Bond 3.22% versus 3.2499%
- Yield on 10 Year China Development Bank Bond 3.73% versus 3.73%
- Commodities were lower on the Shanghai & Dalian Exchanges with Dr. Copper +0.26%