Key News

Asian equities were largely higher though Japan was flat with Malaysia and Indonesia were off. Hong Kong and Mainland China had a slow start to trading but quickly headed north, driven by President Xi’s comments that China would meet 2020 economic goals. The Ministry of Finance announced it would allow local governments to sell $122 of debt (i.e. stimulus) and perception that the coronavirus epidemic is coming under control. Markets never looked back on the news!

We are not out of the coronavirus storm yet. However, the number of confirmed cases is close to flat since yesterday. The number of confirmed cases has reached 45,204, the number of deaths has reached 1,117, and 5,115 people have recovered. According to our partners at CICC, 26,724 people were removed from the group under medical observation in a positive development. Our thoughts and prayers are with the people of Hubei province, where 74% of confirmed cases and 97% of deaths have occurred.

Hong Kong Television Network (1137 HK) dropped 13.4% after selling 90 million new shares via a private placement at a 15% discount to Tuesday’s close. HKTV is a home shopping tv station. The stock went from HK $3 to nearly HK $7 in the last month though it closed today at HK $5.20.

Chinese bonds have sold off in a fairly dramatic fashion in an indication that that risk on/equities might have legs. Nonetheless, the Yuan has shown resilience gaining one to two basis points against the Dollar, Euro, and Pound overnight.

Stay tuned tomorrow morning when we will review MSCI’s pro forma and Alibaba’s pre-US market results.

H-Share Update

The Hang Seng traveled from the lower left to the upper right gaining +239 index points/+0.87% to close at 27,823. Technical analysts must have been happy to see the elevated volume well above the 1-year average and +1% day over day. Breadth was equally impressive with 43 advancers and just 5 decliners. The Hang Seng was driven higher by AIA Group +1.5%/40.7 index points, HSBC +1.19%/+32 index points and China Construction Bank +1.09%/+23.1 index pints. Macau casino stocks were Galaxy Entertainment and Sands China were the day’s best performers +4.4%/+16.4 index points and 3.84%/13.3 index points. Diaper maker Hengan International was the worst performer off -0.64%/-0.8 index points. Hong Kong-domiciled companies outperformed China-domiciled companies +1.19% and +0.7%, respectively, using the HS China Enterprises and HS HK 35 indexes as proxies. The Hong Kong-listed Chinese companies within the MSCI China All Shares Index gained +0.79%, led higher by autos within discretionary +2.75%, , tech +1.85%, materials +1.46%, utilities +1.07%, energy +0.89%, real estate +0.77%, industrials +0.63%, staples +0.59%, financials +0.56%, communication +0.46% and healthcare +0.42%. Southbound Connect volumes were higher than average but are falling back to earth. Mainland investors were very active buyers of Hong Kong stocks as CCB bought more than 12 to 1, Tencent 5 to 1 bought and Semiconductor Manufacturing slightly sold. Mainland investors bought $753 million of Hong Kong stocks today. Southbound Connect accounted for 8% of Hong Kong turnover.

A-Share Update

Shanghai & Shenzhen opened lower but then traveled from the lower left to the upper right gaining +0.87% and +1.55%, respectively, while volume was up slightly day over day/above the 1 year average. Breadth was very strong with 3,139 advancers and only 502 decliners as mid caps and small caps outperformed mega caps and large caps handily/~1%. The Mainland stocks within the MSCI China All Shares Index gained +1.08% led higher by tech +2.52%, materials +2.04%, health care +1.41%, communication +1.37%, industrials +1.03%, financials +0.66%, discretionary +0.62%, energy +0.58%, utilities +0.36% and staples +0.36%. The real estate sector was off -0.008%. Foreign investors were active via the Northbound Connect trading platform as Shenzhen volume exceeded the Shanghai’s. Elevated trading volume were mixed between buyers and sellers though foreign investors bought $213 million of Mainland stocks today. Northbound Connect accounted for just over 4% of mainland turnover.

Alibaba’s Hong Kong IPO lockup expires on February 18^th.

Last Night’s Prices & Yields

• CNY/USD 6.97 versus 6.98 yesterday
• CNY/EUR 7.61 versus 7.64 yesterday
• CNY/GBP 9.03 versus 9.04 yesterday
• Yield on 1-Day Government Bond 1.44% versus 1.44% yesterday
• Yield on 10-Year Government Bond 2.83% versus 2.79% yesterday
• Yield on 10-Year China Development Bank Bond 3.26% versus 3.21% yesterday
• Commodities were largely higher on the Shanghai & Dalian Exchanges with Dr. Copper pulling off a James Bond +0.07%