Key News

Asian equity markets were mixed as volumes plunged up to 70% as traders and investors must be doing last-minute holiday shopping. Mainland China was an outlier not only for strong performance, but also decent volumes. This is a 180 from yesterday’s plunge after news that the China Integrated Circuit Industry Investment Fund trimmed its stake tin three semiconductor stocks. Research analysts were out in force saying investors overreacted to the move and noting that the Fund is apt to investment in an increased number of semiconductor stocks leading to a strong tech rally. To call this a 180 would be an understatement.

The other strong catalyst today was Premier Li’s comments while visiting Chengdu yesterday, which were released after the market’s close on Monday. Premier Li reiterated that policy would support private companies through greater access to credit, lower financing costs and bank reserve requirement ratio cuts. The strong statement was widely reported by brokers prior to the market open leading to the Mainland’s surge.

Another factor was the strong performance of Tesla and its increased access to credit in China. Tesla’s strong performance had a knock on effect on Chinese listed EV companies, which number in the several hundred. No, that was not a typo! As the South China Morning Post noted “A gauge of 227 EV-related stocks jumped 3.3 percent.” Try naming an EV company other than Tesla? There are more than two hundred publicly traded EV stocks in China. 

There are widespread reports that Bytedance will have to spin off TikTok due to increased US government regulation. If you find this absurd you are in good company! The China paranoia in DC has reached an absurd level in my opinion. It would be great to see young people push back as politicians might be wise to look at the age demographics that are coming.

The Wall Street Journal had a positive China article (not a typo, a Christmas miracle!) on the potential IPO of Beijing-Shanghai High-Speed Railway Corp on the Shanghai Stock Exchange. The article states: “The company owns the 819-mile rail link that connects China’s political and financial capitals in less than 4 ½ hours. Last year, nearly 200 million passengers traveled on the line, which covers roughly the distance between New York City and Chicago.” On Amtrak NYC to Chicago takes……18 hours! If in China, you must take the high-speed rail as it is an experience. I’ll be taking the trip in early January!

That’s it for CLN in 2019! A great year but exhausting as 2020 is apt to be another exciting year. Many thanks for our readers! Enjoy your time with family and friends over the holiday!

H-Share Update

The Hang Seng slipped -0.15%/-42.2 index points to close at 27,864 in the half day session as volumes were off -51% day over day. Breadth was off with only 15 advancers and 28 decliners as CCB -0.75%/-16.2 index points, China Mobile +0.86%/+10.3 index points and Hong Kong Exchange Group -0.94%/-8.6 index points. Pork giant WH Group was the day’s top performer +1.14%/+2.4 index points though Sands China was right on its heels +1.13%/+3.9 index points. China Mengniu Dairy was the day’s worst performer -1.72%/-4.5 index points. The HS China Enterprises, Chinese domiciled companies listed in Hong Kong, slipped -0.15% while the Hand Seng HK 35 Index, Hong Kong domiciled companies listed in Hong Kong, was off -0.08%. The 207 Hong Kong listed stocks within the MSCI China All Shares Index slipped -0.17% as tech outperformed +1.2% and discretionary +0.27%. Staples was off -0.69%, real estate -0.63%, industrials -0.35%, healthcare -0.33%, utilities -0.33%, financials -0.26%, energy -0.18%, materials -0.12% and communication -0.09%. Southbound Connect volumes were light as one would expect in mixed trading. Volume leader CCB was sold 2 to 1.

A-Share Update

The Shanghai & Shenzhen rebounded after yesterday’s steep decline +0.67% and +1.38% as volumes slipped -17%. Shanghai & Shenzhen are sitting near “key” levels, i.e. big round numbers, 2,982 and 1,690. The breadth pendulum swung back with an amazing 3,307 advancers and only 358 decliners (remember yesterday was 454 advancers and 3,256 decliners). Mid and small caps outperformed large caps by 1%, reversing yesterday’s trend. The 501 Mainland stocks in the MSCI China All Shares Index gained +0.91% led by materials +2.15%, communication +1.81%, tech +1.74%, industrials +1.4%, energy +1.28%, discretionary +0.91%, financials +0.77%, healthcare +0.32%, staples +0.21% and utilities +0.01%. Real estate was the only losing sector -0.89%. Northbound Connect was closed today. 

Xinhua is reporting that Year to Date through November profits of state-owned enterprises increased +5.3% year over year to 3.2 trillion while revenues +6.4% to 55.75 trillion. The vast majority of SOEs are not publicly traded so we can’t infer too much from the release. 

Last Night’s Prices & Yields

• USD/CNY 7.0075 versus 7.0114 Friday
• CNY/EUR 7.7641 versus 7.7659 
• Yield on 1-Day Government Bond 1.776% versus 1.776% 
• Yield on 10-Year Government Bond 3.0973% versus 3.0999% 
• Yield on 10-Year China Development Bank Bond 3.6912% versus 3.6937%
• Commodities were mixed on the Shanghai & Dalian Exchanges with Dr. Copper +0.2%