TGIF! Apologies again as still dealing with some issues on the home front. Enjoy the weekend!

Key News Overnight

• NY Fed President spoken in NY yesterday but his dovish voice reverberated across Asia lifting Asian equities.
• The Chinese Foreign Ministry confirmed a conversation between the US and Chinese trade teams did take place Thursday. The hope would be it leads to a trip as the lack of progress has weighed on investor sentiment. Reading the trade tea leaves there appears to be a quid pro quo on China buying US agriculture goods for less pressure on Huawei. Reuters reported China made its largest purchase of US sorghum (soybeans) last week in what could be interpreted as an olive branch. The issue is Huawei is being investigated by the Department of Justice though the Commerce and Treasury Departments have applied pressure on the company.
• The updated list of Southbound Connect eligible securities did not include Meituan Dianping nor Xiomi as many market participants had assumed.
• The Shanghai Stock Exchange’s STAR will officially open on Monday. The Nasdaq like tech/growth company oriented board will have the first IPOs list Monday with one broker reporting some issues being oversubscribed 1,500 times above the listing amount. Unfortunately the STAR listings are not Stock Connect eligible which limits foreign participation.

The Hang Seng jumped in morning trading and plateaued gaining +1.07%/+303.7 index points to close at 28,765 as volumes jumped 11% day over day but were still well off the 1 year average. Breadth was strong with 45 advancers and only 5 decliners. The index ended the week up +1.05%/+11.03% YTD. Index heavyweights AIA jumped +2.73%/+87.1 index points, Tencent +1.46%/+42.5 ip on news they are working with BMW on autonomous vehicles (a slight departure from their core business though it does leverage their extensive tech/data abilities), and Ping An +1.43%/+23.1 index points. Sunny Optical had a strong day +2.85%/+5.4 ip though HK subway operator MTR -2.69%/-6.8 ip on a charge taken on repairing damage done in the extradition law demonstrations. The HK stocks within the MSCI China All Shares gained +1.24% with energy +1.82% on Iranian tensions, tech +1.46%, financials +1.42% on strong STAR subscriptions lifting brokers, Tencent pulled communications +1.39%, materials +1.33% as gold stocks rally, healthcare +1.27% on a broker upgrade, and discretionary +1.19% as all sectors ended in the green. Southbound Connect volumes were light in mixed trading with CCB seeing outsized buying.

Shanghai & Shenzhen gained +0.79% and +0.75% though came off the intra-day highs to end the week -0.22% and +0.22%. Volumes were off slightly day over day and still well off the 1 year average though breadth was strong with 2,352 advancers and 1,008 decliners. Large caps outperformed small and mid caps as brokers rallied on the STAR news leading to a strong day for financials. The mainland stocks within the MSCI China All Shares gained +1.24% as real estate gained +2.66%, financials +1.48% and materials +1.03%. Healthcare was the only sector that declined though just -0.07%. Northbound Connect volumes were moderate though inflows were very strong with $899mm flowing into mainland stocks. Shenzhen Connect volumes almost matched Shanghai Connect volumes as foreign investors appear focused on more than just large caps.

Autohome (ATHM) had an analyst cut its rating due to lagging forecasted auto sales though the move seems somewhat backward-looking.

Education/tutoring companies EDU reports next Tuesday with TAL following on Thursday.

JD.com reported it begin selling JUUL e-cigarettes on its e-commerce website.

• CNY 6.88 versus 6.87
• Yield on 1 Day Chinese Gov’t Bond 2.45% versus 2.39%
• Yield on 10 Year Chinese Gov’t Bond 3.19% versus 3.19%
• Yield on 10 Year China Development Bank Bond 3.67% versus 3.68%
• Commodities were weaker on the Shanghai & Dalian Exchanges with Dr. Copper -0.43%