Daily Posts

Wait & See Pre-Powell Testimony

Hope all is well! 

Key News Overnight

  • Markets briefly celebrated the demise of the proposed HK extradition law though sentiment was weighed down by the coming Fed Chair Powell’s comments tomorrow and Thursday and the announcement the US is going to sell $2B of weapons to Taiwan as Asian equity markets were broadly lower following US equity markets. Several global multi-nationals provided weak earnings guidance which is apt to weigh on markets combined with Morgan Stanley’s lowering of equity exposure. Lack of progress on the trade truce was cited as another lingering concern. The S&P 500’s EPS is starting to come down which will raise the P/E ratio as enter Q2 earnings season. The lack of trade solution has likely taken its toll on capital expenditures as policy makers may have underestimated how intertwined the global economy and supply chains are.
  • Auto names were mixed as mainland auto makers rose on the positive vehicle sales in June, +4.9% YoY for the first up month in 12 months, though HK listed auto makers were down on a profit warning from Geely Auto (175 HK) which estimates 1H 2019 profit could fall by 40% after the HK market close yesterday. Geely was off -3.78% overnight.
  • Education related stocks in HK were weak after an announcement of increased oversight of public and private schools. One sell side firm defended education stocks saying it is a non-event though publicly traded tutoring stocks were off on the news.
  • Anta Sports (2020 HK) reopened today following a Muddy Waters report gaining +0.2%. The stock is widely held by passive and active managers who are apt to by the dip.


The Hang Seng fell -0.76%/-215 index points to 28,116 on light volumes -7% day over day and below the 1 year average though breadth was off with only 2 advancers and 46 decliners. Ping An was off -1.62%/-25.8 index points while CCB was off -0.81%/-16.2% and ICBC off -0.72%/-8.8 index points though there was no specific company news. Apple suppliers were broadly weaker in HK and Taiwan on the lack of trade progress. The HK stocks within the MSCI China All Shares were off -0.78% with all sectors in the red led lower by tech -2.17%, staples -1.5%, real estate -1.41%, healthcare -1.22% and discretionary -0.99%. Communications was off only -0.16% as telecom stocks were firm and Tencent off only -0.06%. Southbound Connect volumes were light with buyers outpacing sellers as volume leader Tencent saw 2 to 1 buying. 

Shanghai & Shenzhen were mixed with the former off -0.18% and the latter up +0.21% on very light volumes -24% day over day and well off the 1 year average while breadth was mixed with 1,844 advancers and 1,624 decliners. Small and mid caps outperformed large caps. The mainland stocks within the MSCI China All Shares were off -0.24% as utilities were off -0.66%, energy -0.63% and real estate -0.58%. Materials and discretionary managed small gains of +0.12% and +0.06%. Northbound Connect volumes were very light though sellers outpaced buyers as foreign investors sold $380mm of mainland stocks. had a worthwhile read on the China internet and e-commerce space citing positive comments from both UBS and Credit Suisse. 

Tencent reportedly is giving 23,000 employees, 42% of staff, up to $1.5 billion in a new equity incentive program according to media source Yicai. 

Global consultant McKinsey released a new McKinsey Global Institute China-World Exposure Index. I am making my way through the comprehensive report which highlights China’s role in the global economy by studying eight dimensions of China’s globalization. I’ll report back tomorrow with more details. 

HUYA’s lock up expires today.

  • CNY 6.88 versus 6.88
  • Yield on 1 Day Chinese Gov’t Bond 1.76% versus 1.43%
  • Yield on 10 Year Chinese Gov’t Bond 3.22% versus 3.22%
  • Yield on 10 Year China Development Bank Bond 3.69% versus 3.69%
  • Commodities were mixed on the Shanghai & Dalian Exchanges with Dr. Copper -0.22%