Groundhog Day as Light Volume Day Pre-Trade Talks
Hope you had a great weekend! Apologies for the late delivery as I ran into a commute issue followed by a computer issue. Happy Monday!
Asian equity markets were down overnight with Korea an outlier to the downside (again). Investors sat on their hands awaiting US China trade talks tomorrow and Wednesday amongst very low expectations. There appeared to be some pre-meeting negotiating as President Trump denied Apple’s request for tariffs waiver on their Mac computers despite Chinese purchases of US soybeans picking up. HK protests continue to weigh on sentiment with real estate weak. After the close China Life (2828 HK) pre-announced their 1H 2019 profits will rise 11% to 135%.
Financial heavyweights ICBC and Cinda are taking a stake in troubled Jinzhou Bank. This is the second bank following Baoshang Bank to be “saved” after running into troubles.
Tencent renewed its NBA broadcasting rights for the next five years costing $1.5B, 3X their previous agreement according to one sell side broker. The Fornite World Cup had 40mm participants with the winner earning $3mm.
Weimob (2013 HK) declined -7.89% after a private placement to BlackRock and Singapore sovereign wealth fund GIC. I had thought having prestigious investors would have a positive effect though the evidence suggests otherwise.
The Hang Seng declined -1.03%/-291 index points despite a small late day rally after a press conference suggesting China is taking a hands off approach on the HK demonstrations. Volumes were basically flat day over day/well below the 1 year average accompanied by poor breadth of only 6 advancers and 43 decliners led lower by index heavyweight AIA -1.9%/-56.6 index points, ICBC -2.36%/-28.3 index points and CCB -1.13%/-22.7 index points. Tencent managed a +0.54%/+16.2 index point gain on a sell side upgrade pre-earnings. The HK stocks within the MSCI China All Shares declined -0.38% as real estate was weak -1.19% and financials -1.08% though healthcare +0.9%, utilities +0.44% and communications +0.38%. Southbound Connect volumes were very light though buyers slightly outpaced sellers on the day with volume leader Tencent seeing buyers barely outpace sellers. Banks were bought across the board.
The Shanghai & Shenzhen traded in a tight range -0.12% and +0.09% on light volumes off -2.6% day over day and well off the 1 year averages accompanied by declining breadth of 1,196 advancers and 2,318 decliners. Small and mid caps outperformed mega/large caps as financial and real estate sector. The mainland stocks within the MSCI China All Shares declined -0.43% led lower by real estate -1.04%, financials -0.95% and discretionary -0.74% while staples +0.69%, utilities +0.66% and communications +0.06%. Northbound Connect volumes were light though Shenzhen Connect volumes exceeded Shanghai Connect. Shanghai Connect experienced outflows while the Shenzhen Connect experienced inflows for a total of $8mm of total inflow on the day.
June Industrial Profits -3.1% versus April’s 1.1%
Takeaway: Month over month sales and profits improved though the year over year declined as industrial and manufacturing profits declined. SOEs’ profits declined -8.7% while private companies’ increased 6% year over year according to a mainland media source. It reported that 26 sectors had profits rise with 15 declining in June. The release came out on Saturday so it had limited impact on today’s trading.
CNY 6.89 versus 6.87
Yield on 1 Day Chinese Gov’t Bond 2.12% versus 2.12%
Yield on 10 Year Chinese Gov’t Bond 3.18% versus 3.18%
Yield on 10 Year China Development Bank Bond 3.68% versus 3.67%
Commodities were lower on the Shanghai & Dalian Exchanges with Dr. Copper -0.36%.