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Live From Beijing!

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I arrived in Beijing this evening after being in Hong Kong since Sunday. Hong Kong appeared the same minus some graffiti in spots, and the Airport Express is more crowded than usual. My flight from NYC was utterly full as several business travelers noted that the cheap airfares led to them booking trips. A full day of meetings tomorrow here in Beijing!

Hong Kong locals tell me that, if you want trouble, you can find it on the weekends, but during the week, things are quiet. The students who are primarily responsible for the smaller but more passionate demonstrations are in class during the week. There does not appear to be a near term solution as public confidence in the police is very low. There was talk of Carrie Lam giving a speech this week to address affordable housing, which would be a good step in solving a major underlying issue.

Asian equity markets cheered Friday’s Phase One trade deal news, although a Bloomberg article after the market close dampened some of the enthusiasm. The report notes the China media has not widely covered the “deal,” nor has anything been signed. President Trump may not be as detail-oriented as others, so I’m not surprised he would relegate the details to his staff. Small wins tend to lead to bigger wins, which could include a Trump-Xi meeting at the APEC meeting in Santiago Chile in November.

September Data in CNY Year over Year

  • Imports: -6.2% versus estimate -2.3% and August’s –2.6%
  • Exports: -0.7% versus estimate +1.5% and August’s +2.6%
  • Trade Balance: 275B versus estimate 253B and August’s 239B

September Data in USD Year over Year

  • Imports: -8.5% versus estimate -6% and August’s -5.6%
  • Exports: -3.2% versus estimate -2.8% and August’s -1%
  • Trade Balance: $39.6B versus estimate $34.7 and August’s $34.8

Takeaway: The release occurred after the market’s open but had no effect as the market anticipated a poor release which it got. There will be more hope that these numbers will improve as trade talks lead to tariffs being removed.

H-Share Update

The Hang Seng gained +0.81%/+213 index points to close at 26,521. Although volumes were off 8% from Friday, they were still above the 1-year average. Breadth was positive with 30 advancers and 17 decliners, most notably HSBC +1.7%/+45.5 index points, CCB +1.47%/+30 index points and Tencent +1.05%/+26.7 index points. Pork giant WH Group was the index’s best performer +4.32%/+8.9 index points while diaper maker Hengan International lost -2.63%/-2.86 index points. The HK stocks within the MSCI China All Shares gained +0.71% led by healthcare +1.95%, financials +0.98%, real estate +0.91%, industrials +0.91% and utilizes +0.84%. Staples and energy were the only down sectors, being off -0.43% and -0.08% respectively. Southbound Connect volumes were high with buyers outpacing sellers. CCB had 3 to 1 buyers to sellers, CM Bank was sold heavily and Tencent bought nearly 5 to 1.

A-Share Update

The Shanghai & Shenzhen gained +1.15% and +1.43% as volumes surged 7% day over day. This was well above the 1 year average, and breadth was very strong with 3,153 advancers and just 500 decliners. Small and mid caps outpaced large caps by ~50bps. The mainland stocks within the MSCI China All Shares gained +1.53% led by tech +2.12%, financials +2.11%, communications +1.98%, energy +1.68%, discretionary +1.61%, industrials +1.42%, healthcare +1.35% and real estate +1.31%. All sectors ended the day in the green. Northbound Connect volumes were moderately high as buyers were active. Interesting to note that Shenzhen Connect volumes and buying activity were stronger than Shanghai. Foreign investors bought $382 million of mainland stocks today.

Last Night’s Prices

  • USD/CNY 7.06 versus 7.09 Friday
  • Euro/CNY 7.79 versus 7.84 Friday
  • Yield on 1-Day Government Bond 1.69% versus 1.69% Friday
  • Yield on 10-Year Government Bond 3.15% versus 3.11% Friday
  • Yield on 10-Year China Development Bank Bond 3.74% versus 3.70% Friday
  • Commodities were lower on the Shanghai & Dalian Exchanges with Dr. Copper -0.36%

Photos from Inside ETFs Hong Kong This Week