Hope all is well! 

Key News

A fairly quiet night as summer doldrums are in full effect though worth noting India was off as its Kashmir situation heats up while South Korea and Hong Kong underperformed regional returns which were largely flat/slightly up. The dreaded R word, recession, is being talked about as HK demonstrations weigh on tourism, shopping, hotels, and the property market. There is chatter that BOE Technologies (000725 CH), +2.84%, on speculation it will become Apple’s supplier for iPhone screens (the 6th largest US shareholder is the firm I work for! Amazing we hold more shares than the largest asset managers globally. With BOE going into MSCI indices, that will change soon enough.). Staying with the Apple theme, Luxshare Precision (002475 CH) was off -2.05% though several sales/trader were chatting it up as the AirPods maker sees multiple sell-side upgrades. The stock had hit its 52 week high on Tuesday (I’ll refrain from mentioning how much stock we own to keep my ego in check…12th largest US shareholder! Apologies. Knocking on wood.). Warren Buffet investment in EV maker BYD (1211 HK) had great revenue growth though slumped -6.6% on poor net income as shares hit a 52 week low. Despite BYD’s results, there has been a significant increase in mainland media on China becoming a fossil-free vehicle country. While not happening in the short run, it is interesting to see the government’s support. Fire water manufacturer Kweichow Moutai (600519 CH), another MSCI China A inclusion stock, gained +3.56% after two Chinese sovereign wealth funds CIC and SAFE filed increases in their positions.

Goldman Sachs filed paperwork with China’s securities regulator the CSRC to raise its ownership in its Goldman Sachs Gau Hua Securities to a majority owner 51% according to a mainland media source. This would follow similar moves from foreign brokerage firms such as more recently Morgan Stanley and Credit Suisse.

Wednesday President Xi commented on the need to strengthen China’s educational system leading to a nice pop in education-related stocks.

The Hang Seng fell -0.84%/-221 index points on light volumes below the 1-year average accompanied by awful breadth of just nine advancers and 41 decliners. Insurance giant AIA slumped -1.61%/-44.3 index points, Hong Kong China Gas fell -3.58%/-17.2 index points after yesterday’s drop following disappointing results as analysts cut their ratings/price targets though Geely Auto +7.61%/+14.9 index points on earnings. Real estate/property names really underperformed. The HK stocks within the MSCI China All Shares declined -0.39% led lower by real estate -1.72%, tech -0.87%, utilities -0.84%, materials -0.72%, energy -0.69% uncle!!! Discretionary and healthcare were the only positive sectors gaining +1.82% and +0.47% as Geely powered the former while solid earnings propelled the latter. Southbound Connect volumes were moderate as buyers were out in force. This was day 16 of continued buying from mainland investors in HK. CCB had another monster day of buying as buyers bought HK $765k of stock while sellers sold only $6k. Tencent had not quite 2 to 1 buyers to sellers. 

The Shanghai & Shenzhen gained +0.11% and +0.4% in choppy trading as the market overcame a mid-day swoon and powered higher into the close. Volumes were just below the 1-year average while breadth was mixed with 1,759 advancers and 1,728 decliners. It was a fairly uniform move as large, mid, and small moving approximately the same amount. The mainland stocks in the MSCI China All Shares gained +0.9% as staples gained +1.95% on Kweichow’s move, healthcare +0.99%, and communications +0.43% while real estate lost -0.92%, materials -0.74% on gold’s weakness, and tech -0.72%. Northbound Connect volumes were moderate though foreign buyers were active as $213mm worth of mainland stocks were purchased. Once again Shenzhen Connect volumes exceeded Shanghai Connect volumes. 

CNY 7.08 versus 7.06

Worth noting the slight bond market sell-off.

• Yield on 1 Day Chinese Gov’t Bond 2.11% versus 2.16% 
• Yield on 10 Year Chinese Gov’t Bond 3.0599% versus 3.0399% 
• Yield on 10 Year China Development Bank Bond 3.55% versus 3.54%

Commodities were largely higher on the Shanghai & Dalian Exchanges with Dr. Copper -0.04%.