TGIF!

Trade Data in US $

• Exports: -1.3% versus estimate -1.4% and May’s +1.1%
• Imports: -7.3% versus estimate -4.6% and May’s -8.5%
• Trade Balance: $50B versus estimate $45B and May’s $41B             

Trade Data in CNY

• Exports: 6.1% versus estimate 6.9% and May’s 7.7%
• Imports: -0.4% versus estimate 3.7% and May’s -2.2.5%
• Trade Balance: 345B versus estimte278B and May’s 279B
• Aggregate Financing: 2260B versus estimate 1900B and May’s 1400B
• New Loans: 1660B versus estimate 17000B and May’s 1180B
• M2 YoY: 8.5% versus estimate 8.6% and May’s 8.5%

Takeaway:  The data was released after the market close so it had no effect on today’s price action. CNY deappreciated versus the dollar after the decidedly mixed release. The disparity between the US $ and CNY denominated data allows one to craft your own story. Here in the US, the data is reported in dollars because it looks worse. In China, the data is largely reported in CNY because it looks good. Regardless of currency the import/export data is a bad sign not for China but for the global economy. As the middle person in global trade, China’s trade data reflects the global economy more so than the China domestic economy. For evidence see Singapore’s GDP release last night which declined -3.4% quarter over quarter and grew a mere +0.1% YoY. The irony of the trade war is that it hurts the US as much as China. China’s imports from the US fell -31% YoY though imports from the EU +8.5% YoY. The export data likely suffers the high base as Chinese manufacturers pushed goods out the door in June 2018 prior to tariffs being implemented. While aggregate financing and new loans diverged slightly they were inline with expectations. Key News Overnight

• Remember the data came out after the market close so it was fairly quiet overnight. Solar/environmental names got a boost from new policies supporting the sector. Budweiser Asia IPO appears to be struggling as the majority of institutional subscriptions are from “fast money” hedge fund community. Several brokers noted the resiliency of the equity markets around President Trump’s comments that China isn’t buying enough agricultural goods.
• One broker reported that China’s Social Security Fund is going to increase its equity position by RMB 600B. China’s underfunded pension plans are going to have to raise their equity exposure which would provide an added investor base in the mainland market. I have not seen this report verified elsewhere.

The Hang Seng opened in negative territory, grinded higher in the morning session before giving back the majority of its gains to close +0.14%/+39.8 index points at 28,471. Volume was anemic declining -7% day over day and well off the 1 year average. Breadth was mixed with 24 advancers and 22 decliners led by index heavyweight AIA +1.3%/+40 index points, Tencent slipped -0.62%/-17.6 index points, CCB +0.64%/+13.2 index points and China Life +1.81%/+8.2 index points on strong volumes though no news. The HK stocks within the MSCI China All Shares declined -0.3% led lower by healthcare -18.82%, staples -1.45%, discretionary -1.17% and materials -1.02%. Remember AIA is a HK domiciled company so not included MSCI China nor China All Shares. Financials managed +0.46%, tech +0.39% and real estate +0.32%. Southbound Connect volumes light though buyers managed to outpace sellers with volume leader Tencent seeing buyers slightly outpace sellers. The Shanghai & Shenzhen opened lower but grinded to higher +0.44% and +0.51% on light volumes off -5% day over day and well off the 1 year average. Breadth was moderately good with 2,184 advancers and 1,366 decliners. Large caps outperformed small caps by a small margin. One factor may be investors studying the STAR board and realizing the IPOs are likely small cap companies. The mainland stocks within the MSCI China All Shares gained +0.5% led by financials +0.92%, real estate +0.92% and staples +0.53%. Energy was off -0.3% followed by utilities -0.11%. Northbound Connect volumes were light though foreign buyers outpaced sellers with $212mm of inflows. Tencent Music Entertainment (TME US) had a big intra-day pop that one broker attributed to a new institutional investor filing. I don’t see any new filers on my Bloomberg terminal though the pop quickly faded. Alibaba had a similar move but to the downside which remains unexplained.

• CNY 6.88 versus 6.86
• Yield on 1 Day Chinese Gov’t Bond 1.86% versus 1.8%
• Yield on 10 Year Chinese Gov’t Bond 3.19% versus 3.19%
• Yield on 10 Year China Development Bank Bond 3.67% versus 3.69%
• Commodities were mixed on the Shanghai & Dalian Exchanges with Dr. Copper +0.26%