Key News

Asian markets were half up and half down last night following Thursday’s market selloff due to the announcement of more than 15,000 new cases of the virus thanks to a new methodology for diagnosing the illness. Hong Kong, Shanghai, Shenzhen, Korea, Taiwan, and Malaysia saw modest gains, while Singapore, India, Malaysia, Indonesia, Japan, and the Philippines were down on the day. Markets have been notably resilient in rebounding past initial coronavirus-fueled losses. The VIX is down by nearly 25% since its recent peak on January 27^th, though one can expect more volatility in the near term. We hope for the sake of those in the epicenter of the outbreak and for our clients that the worst is over.

One broker noted that researchers found that those who have recovered from 2019nCoV or coronavirus can now donate their blood to be used to cure the disease. This may mean a significant improvement in the ability to treat and cure the disease following Thursday’s improvement in the ability to diagnose the virus. While the growth of new cases saw a pickup this week, the mortality rate continues to fall.

With Alibaba’s stellar earnings release, we are continuing to see positive developments in the E-Commerce space. JD.com and Meicai have stepped up their hiring of temporary workers, offering delivery jobs to thousands as demand surges. Many are still stuck at home, which means they must order online. Big E-Commerce companies are going to great lengths to meet demand.

China’s central bank continues to pledge support for the economy. International investors and analysts are increasingly looking to the PBOC’s guidance to get a read not only on China but also on the global economy. As China now accounts for nearly 20% of global GDP, the bank’s decisions have far-reaching effects. Central bank policy in China also diverges from much of the world. Even in the face of the viral outbreak, the PBOC has responded with targeted liquidity injections rather than broad rate cuts, signaling an enduring conservatism in monetary policy that is hard to find among developed market central banks.

H-Share Update

The Hang Seng ended the day gaining +0.3% after opening lower following declines on Wall Street on Thursday. Southbound investors bought another net HKD 2.8 billion worth of Hong Kong stocks last night. In a surprising turn of events, steel names began to climb back as after the China National Steel Association announced a recovery in inventory and its expectation that the virus-fueled demand slump will not outlast the firs quarter. Alibaba HK declined -1.01% last night despite the company’s awesome earnings in the fourth quarter of 2019. This was likely due to management noting that coronavirus will hurt revenue, which was not exactly a surprise. Properties names +34.18% lead sector gains in Hong Kong last night, following the announcement of strong government support for developers, along with Utilities +6.92%.

A-Share Update

Shanghai and Shenzhen both gained +0.4% last night, reversing yesterday’s selloff. The Communist Party’s Politburo Thursday meeting on stepping up virus prevention evidently had a positive effect on markets. The ChiNext Index reached a record high and has completely reversed coronavirus losses and then some. Northbound investors bought a net RMB 3.4 billion worth of Mainland stocks today. The rally in Hong Kong-listed properties names was mirrored in Shanghai, +14.55%.

Last Night’s Prices & Yields

• CNY/USD 6.98 versus 6.98 yesterday
• CNY/EUR 7.58 versus 7.56 yesterday
• CNY/GBP 9.10 versus 9.11 yesterday
• Yield on 1-Day Government Bond 1.14% versus 1.33%
• Yield on 10-Year Government Bond 2.86% versus 2.82% yesterday
• Yield on 10-Year CDB Bond 3.28% versus 3.25%