Key News

The positive trade news continues this morning with reports that China will commence agriculture purchases including soybeans and pork without imposing the 25% tariff implemented last year and forego August’s decision to halt US imports entirely. This morning’s goodwill gesture reciprocates the US decision to postpone October 1^st tariffs to October 15^th which should provide the opportunity for further talks. The feasibility of a trade truce/”interim deal” that focuses on goods each side needs/wants seem likely while a full trade deal may be more difficult. Small wins usually leads to bigger wins so we’ll maintain our optimism.

It was a quiet night as China, Japan and South Korea were closed for the Mid-Autumn festival though Hong Kong had a strong day as investors cheer on the trade talks while supporting global central bank liquidity. Revelers all over China are bringing out the moon cakes for the Mid-Autumn festival. I’ve not met a cake I didn’t like as evidenced by mid-section. Also, LSE has rejected HKEX’s bid for the UK exchange.

H-Share Update

The Hang Seng gained +0.98%/+265 index points to close at 27,352 though volumes were light /off nearly 25% while well off the 1 year average. Breadth was very strong with 46 advancers and 1 decliner as index heavyweights AIA +1.89%/+52.1 index points, CCB +1.13%/+23.2 index points and HSBC +0.75%/+20.3 index points. Geely Auto was the best performer +4.75%/11.1 index points as car purchase restrictions have been lifted. The sole decliner was Sino Land -0.89%/-0.93 index points. The mainland stocks within the MSCI China All Shares gained +0.91% led higher by autos in discretionary +2.79%, real estate +2.39%, tech +1.33%, materials +1.23% and industrials +1.19%. Tencent was basically flat at +0.06% as communications lagged +0.11%. Southbound Connect were closed.

Weekly A-Share Performance (Shanghai & Shenzhen were closed today)

For the week the Hang Seng gained +2.48%, Shanghai +1.52% and Shenzhen +1.79%. YTD Hang Seng +5.83%, Shanghai +21.55% and Shenzhen +32.6%. YTD within the MSCI China All Shares, mainland Chinese stocks +28.83%, Hong Kong listed Chinese stocks +9.91% and US listed Chinese stocks +23.14%, excluding today’s performance.

Liquidity High for China Equities

One factor that comes up on occasion is the liquidity of the Chinese market. Arguably, China is the most liquid stock market globally. Yesterday in the US, the most heavily traded stock was Bank of America (BAC US) which traded 72mm shares (this is based on stocks with a market cap over $50mm which eliminates penny stocks). The most heavily traded stock yesterday in mainland China was BOE Technology Group (000725 CH) which traded 728mm shares! The most heavily traded stock in the US would have been the 86^th most heavily traded stock in China. This is based on share volume so what about the dollar value of shares traded? Yesterday, Apple (AAPL US) traded $7.13 billion while the most heavily traded stock by dollar value was Ping An at RMB 7.23 billion/$1.021B.

August’s Industrial Production, retail sales and fixed asset investment are scheduled to be released on Sunday.

Last Night’s Stats

• CNY 7.07 versus 7.08 yesterday
• Yield on 1 Day Chinese Gov’t Bond 1.99% versus 1.99% yesterday (Closed Friday)
• Yield on 10 Year Chinese Gov’t Bond 3.09% versus 3.0449% yesterday (Closed Friday)
• Yield on 10 Year China Development Bank Bond 3.62% versus 3.59% yesterday (Closed Friday)
• Commodities were higher on the Shanghai & Dalian Exchanges with Dr. Copper off 0.04% yesterday. (Closed Friday)