Key News

Mainland China markets were slightly higher on the day while the rest of Asia was down barring New Zealand and Indonesia. Investors in Mainland China cheered the lower number of new cases of coronavirus on Tuesday. Nonetheless, Apple’s guidance that sales would be dampened by the outbreak powered declines across Asia.

The initial equity lockup on Alibaba’s Hong Kong-listed shares expired last night. The expiration is likely to blame for the -1.56% fall in the share price overnight. However, the stock was up on Monday, suggesting that demand remains strong enough to propel the listing as it is traded freely.

New financing rules have undoubtedly helped small and medium-sized businesses. The new rules gave companies and banks more flexibility with regard to the terms, mechanisms, and size of refinancing activities. While many recent stimulus measures have been issued as an emergency response, the refinancing rules are likely to stick. The PBOC has long been reforming the way that smaller, private companies raise money to bridge the gap between these companies and their huge, state-owned peers. The PBOC lowered its medium-term lending facility (MLF) rate by 10bp from 3.25% to 3.15% yesterday. The new loan prime rate (LPR) will be announced on February 20^th and is expected to be lower than the current rate.

Apple is the first US company to revise its guidance due to the coronavirus. Apple had originally forecasted revenue of $63 billion to $67 billion for the quarter and announced that those numbers will be difficult to meet. The company said that the virus and ensuing movement restrictions hampered sales and forced the company to close many stores within its massive China portfolio. While stores and factories reopened with limited hours last week, the company says that returning to business as usual has been a slow process.

HSBC announced an aggressive restructuring that weighed on its listings in Hong Kong and London as most analysts expect that the plan will not see results until 2023. The basic theme of the plan is a pivot, or rater a return, to Asia as most of the proposed cuts are to the bank’s European business. The Hong Kong Shanghai Banking Company (HSBC) will effectively be returning to its roots by focusing its energy on the market where it sees the highest growth, Asia.

H-Share Update

The Hang Seng was lower on the day -1.5% despite a mild rise in Europe and Wall Street’s closure for the Presidents’ Day holiday. Turnover picked up 6% on the day. Despite declines, Southbound investors bought a net HKD 2.4 billion worth of Hong Kong stocks. Gaming names saw some pressure despite Macau’s announcement that casinos would reopen on Thursday. Semiconductor names fell on the US announcement of further curbs on sales of US semiconductor technology to Huawei and potentially others. IT and hardware declined following Apple’s announcement of expected coronavirus pressure on Q1 earnings. HSBC’s Hong Kong listing fell -2.78% following the announcement of an aggressive restructuring including the slashing of 35,000 jobs over the next three years. The Hong Kong domiciled stocks within the MSCI China All Shares Index were down by -0.1% on the day. Cathay Pacific was a leader in loss, falling -2.1% upon revising its first half 2020 guidance.

A-Share Update

Diverging from performance in Hong Kong, Shanghai and Shenzhen gained +0.1% and +1.1%, respectively. Both indexes were lower in the morning, but, after hitting a trough at around 11 AM, bounced back to end the day higher. Despite broad gains in Mainland markets, Northbound investors sold a net RMB 3.5 billion worth of Mainland stocks last night. CICC brokers saw dome profit-taking pressure in the market last night. Unlike in Hong Kong, Mainland-listed semiconductor names rose on the Mainland. The Mainland names within the MSCI China All Shares Index declined by -0.8% last night.

Last Night’s Prices & Yields

• Yield on 1-Day Government Bond 1.31% versus 1.31% yesterday
• Yield on 10-Year Government Bond 2.87% versus 2.89% yesterday
• Yield on 10-Year China Development Bank Bond 3.27% versus 3.29% yesterday
• CNY/USD 6.99 versus 6.98 yesterday
• CNY/EUR 7.55 versus 7.56 yesterday
• CNY/GBP 9.11 versus 9.08 yesterday