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Asian Markets Take A Breather From Rally, China FX Reserves Beat Estimate

Key News

Asian markets were largely lower except for Mainland China, Malaysia, New Zealand, and the Philippines. Some stores and businesses in China have begun to reopen following closures meant to stem the spread of the coronavirus, though many remain closed. Nonetheless, the virus still manages to dampen market sentiment as it has been reported that the doctor who initially sounded the alarm about coronavirus has died from the disease.

Although the PBOC made no new open market injections of capital last night, Hubei province cut taxes for companies supporting virus control and the central bank’s Deputy Governor Pan Gongsheng said that that the central bank remains committed to boosting counter-cyclical adjustments. Xi Jinping spoke with President Trump for the first time since the outbreak started, telling the US President that he is confident that China will win the “People’s War” against the virus. Trump responded that he is confident in China’s ability to contain the virus. Nonetheless, flights between the two countries remain canceled for the time being. The call also involved an affirmation by both leaders of their commitment to implementing the phase one trade deal.

The number of confirmed cases stands at 32,523 while 638 people have died and 1,764 have recovered worldwide. That is according to the Johns Hopkins coronavirus dashboard, a reliable, refreshable tracker of the spread of the virus. Fortunately, the number of new cases reported in Hubei province was down -14.9% DoD.

On a positive note, the PBOC announced that its FX reserves increased in January, despite the consensus estimate, compiled by FactSet, that FX reserves would fall for the period. The central bank said that FX reserves stand at $3,115 billion, an increase from December’s $3,099 billion level. This signals that despite the outbreak China’s cross-border flows are likely to improve in 2020 compared to 2019.

H-Share Update

The Hang Seng took a breather from its impressive rally this week falling slightly by -0.33%. Turnover shrank by 24.5% DoD to HKD 99.4 billion. Southbound investors were net buyers of HKD 2.3 billion worth of Hong Kong stocks. Declines in the MSCI Hong Kong Index were led by financials -0.276%, but Hong Kong real estate was slightly up within the index +0.05%. Software names continued their strength as schools and companies continue remote study and work schedules. Gains in Hong Kong were led by WH Group +1.62%, China Unicom +1.44%, and Wharf Real Estate +1.31%. Mainland property names declined despite developers posting January sales growth.

A-Share Update

Mainland markets continued their recent gains last night and, despite dipping lower in morning trading, Shanghai and Shenzhen ended the day up by +0.3% and +0.5%, respectively. Northbound investors were net sellers of RMB 3.2 billion worth of Mainland stocks. Turnover rose 2% DoD. The Mainland stocks within the MSCI China All Shares Index were down by -0.42%. Gains were led by Kingsoft +9.82% and losers were headed up by Humanwell Healthcare Group -9.77%. Health care stocks led declines within the MSCI China A Index falling -0.19%, which is likely due to profit-taking following their rally earlier in the week. Meanwhile, information technology lead gains in the index, rising 0.2%. New Energy Vehicles (NEVs) also largely underperformed, while information technology and telecom stocks rose amid the surge in demand for remote communication.

Last Night’s Prices & Yields

  • CNY/USD 7.00 versus 6.97 yesterday
  • CNY/EUR 7.67 versus 7.65 yesterday
  • Yield on 1-Day Government Bond 1.44% versus 1.47% yesterday
  • Yield on 10-Year Government Bond 2.80% versus 2.84% yesterday
  • Yield on 10-Year China Development Bank Bond 3.24% versus 3.26%