Year of the Pig Performance Review: Were You Slaughtered or Did You Feast?
Despite the media’s hysteria surrounding the coronavirus markets were quiet overnight as Asia began New Year holidays and vacations. Mainland China, Taiwan, South Korea, and Vietnam were closed today while Hong Kong, Singapore and Malaysia had half days. Japan, Hong Kong, Australia, India, and Singapore had small gains while Malaysia, Thailand and Indonesia were off slightly.
Mainland media sources reported 571 cases of the coronavirus. The most interesting article I’ve seen on the subject is the decision to build a new 1,000-bed hospital with the goal of having it completed by February 3rd in Wuhan. Can you imagine trying to do the same in the US? Not possible. Another Mainland media source reported that Alibaba’s Taobao shopping platform sold 80mm face masks in 48 hours. Macau names were stable despite chatter that hotels and casinos might close in an attempt to prevent the flu from spreading as other major tourist sites such as Disney Shanghai have done. We don’t know if the coronavirus will spread globally, but the Chinese government is clearly taking strong measures to prevent the spread. The virus is nowhere near as deadly as SARS or MERS. The vast majority of the deaths have been elderly patients with pre-existing conditions. Have you noticed the difference between the financial media versus other media outlets regarding the coronavirus? US markets have completely ignored the coronavirus so the financial media has followed suit. On the other hand, general news sources have made this flu outbreak seem like the end of human civilization! In my opinion, t is far too early, at the very least, to come to that conclusion.
Alibaba’s Hong Kong listing 9988 HK gained +0.56% on reports that Altaba, the shell company holding Yahoo’s Alibaba shares, sold its last remaining 1.6mm shares of Alibaba. The selling by Altaba will raise Alibaba’s free-float market cap for index providers such as MSCI. We should expect that Alibaba’s weight within Emerging Market and China indexes will increase from its current levels during MSCI’s March 2nd Quarterly Index Review. BABA’s weight in the MSCI China Index is currently 17% and nearly 6% of the MSCI Emerging Markets Index. There is also the possibility that 9988 HK will be included in the Hang Seng Index this year, which may lead to its inclusion in Southbound Connect. More importantly, a stampede towards Hong Kong is taking place as other US-listed Chinese companies realize that by pursuing a secondary listing in Hong Kong means potentially being included in the Hang Seng index and becoming available for Southbound Connect. Netease and Trip.com (formerly known as C-trip.com) have already filed for Hong Kong listings. I expect Baidu, Pinduoduo and others to follow suit shortly. US-listed Chinese companies may benefit from the potential secondary listings due to arbitrage.
As a part of tradition, people sit with their families to watch the New Year Gala on CCTV. Every year, about 120 million people watch the gala as an integral part of the national celebration. In 2020, Kuaishou, a live streaming short video platform similar to Bydance’s Tiktok, will partner with CCTV, and give away 1 billion yuan in Red Envelopes (around 150 million US dollars) to its Chinese audience in celebration. There are rumors that Kuaishou is pursuing a US initial public offering this year. We believe this partnership could provide a massive boost to Kuaishou’s active user count.
The year of the pig is over! How did Chinese stocks do? It depends on your definition of China!
2/11/2019 to 1/24/2020 – Hang Seng in US $ +3.87%
2/11/2019 to 1/23/2020 – Shanghai Comp in US $ +13%, Shenzhen Comp +29.78%; US listed Chinese companies outperformed the Shanghai but not the Shenzhen
The MSCI China All Shares Index outperformed MSCI China 15% versus 11.4% from 2/11/19 to 1/23/20
Because Hong Kong is closed Monday and Tuesday while the Mainland is closed until next Friday, China Last Night will not be published the first two days of the week. We will be attending the Inside ETFs conference in West Hollywood Florida early next week. If you are attending the conference please come on by and say hello!
The Hang Seng slipped to an intra-day low of -0.48% but climbed back to close +0.15%/+40 index points at 27,949 as turnover plunged 60% from yesterday in the half-day session. Breadth was evenly mixed with 21 advancers and 21 decliners as China Mobile bounced +2.5%/+32.3 index points as the day’s best performer, HSBC -0.34%/-9 index points and HKEX +0.74%/+7.3 index points. Geely Auto was the day’s worst performer -1.18%/-2.6 though CSPC Pharma was just behind it -1.16%/-3 index points. Hong Kong and Chinese companies listed in Hong Kong were up by +0.21% and +0.22%, respectively, using the HS HK 35 Index and the HS China Enterprise Index as proxies. The Chinese companies listed in Hong Kong within the MSCI China All Shares Index gained +0.27% led higher by tech +0.89% following a sell side upgrade of Semiconductor Manufacturing International Corporation (981 HK), utilities +0.62%, healthcare +0.55%, industrials +0.5%, communication +0.41%, materials +0.27%, energy +0.08%, discretionary +0.06%, real estate +0.06%, financials +0.04% and staples +0.01%. Southbound Connect remains closed.
Mainland markets are closed until next Friday.
Last Night’s Prices & Yields
— Mainland equity and bond markets were closed today —