Key News

Asian equities were mixed with the Hang Seng +0.69, Kospi -0.23%, Singapore’s STI -0.27%, and the Nikkei -0.09. The news cycle in Asia was relatively light last night as were the market’s moves. Investors seem to be awaiting major economic releases set to come out of China tomorrow including 3Q GDP, September retail sales, and industrial production. For the first time in a while, trade is not the top story. US and Chinese officials continue a productive dialogue on trade as tariff increases originally planned for this month have officially been delayed.

Hong Kong markets were up for the second day despite Carrie Lam’s speech being interrupted by protestors yesterday. The South China Morning Post had an interesting report on some Chinese manufacturers moving their businesses to Hong Kong. Traditionally, Hong Kong has been a springboard for mainland exports, but the article suggests that the city may become a manufacturing hub itself and a whole swath of goods will carry a “Made in Hong Kong” label if trade disputes heat up again. As the Mainland becomes an increasingly services-oriented economy, perhaps the opposite will be true of Hong Kong. But, I think this is highly unlikely given the lack of developed land in the island.

Check back tomorrow for our full review of China’s economic data release.

H-Share Update

The Hang Seng ended up +0.69% Hong after seeing a strong start to the trading day despite Wall Street’s mild retreat the day before. However, turnover fell by 12.4% DoD, likely due to the market holding on for tomorrow’s economic releases. Northbound and Southbound connect both saw net buyers, suggesting mild optimism for tomorrow’s release. China banks saw some gains, but may face competitive pressure going forward as China continues to open its financial markets up to international bankers. Mainland Chinese property names largely fell due to reports of high office vacancy in the Mainland.

China Eastern Airlines slid on light passenger numbers compared to peers. Competition continues to heat up in China’s booming travel and tourism industry.

A-Share Update

Shanghai was down -0.05% and Shenzhen +0.02% last night, relatively unchanged. However, both markets were volatile over the day with the market’s consumption of policy news affirming China’s push to allow more foreign players to enter the banking space, leading to gains in the financial sector. This is an interesting story because large local banks will no longer have a stronghold on China’s market as more international banks are allowed to enter. However, this will perhaps prove to be a much-needed reshuffling of the space and will produce winners and losers among the local mainstays.

Pork prices gained as the Ministry of Agriculture confirmed that the supply of China’s staple meat will remain tight.

Last Night’s Prices/Yields

• Yield on 1-Day Government Bond 1.73% vs 1.84% yesterday
• Yield on 10-Year Government Bond 3.16% vs 2.17% yesterday
• Yield on 10-Year China Development Bank Bond 3.57% VS 3.58% yesterday
• RMB 7.08 vs 7.09 yesterday