Key News

Asian markets were mixed despite the passage of the US stimulus bill as regional news weighed on sentiment. Japan was off nearly -2% as Tokyo will go into self-quarantine for the weekend. Meanwhile, Singapore was off -0.7% after announcing that Q1 GDP fell -2.2% year over year. Tech fared poorly following Apple’s decision to postpone its 5G iPhone. However, Taiwan and regional semiconductor stocks benefited from Micron Technology’s stronger-than-expected forecast.  Healthcare performed well as Gilead could allow other drug makers to manufacture Remdesivir, which has been used with COVID-10 patients. Korea was weighed down by Samsung though breadth was quite strong. Indonesia rallied 10% while India had a nice rebound of ~4%. Hong Kong was off in quiet session despite its February exports rising +4.3% versus estimates of -20% (as Bob Uecker said in the movie Major League “Just a bit outside!”). Imports were equally surprising, -0.1% versus estimate -15%. Tencent was up +0.47% on strong February gaming numbers while Alibaba’s Hong Kong listing gained +0.67%.

Health care stocks outperformed on the Mainland. China has historically underspent on health care and that is likely to change following the coronavirus outbreak. A lasting increase in policy support is expected to come for the sector.

Alibaba’s Hong Kong listing has not yet been added to Southbound Connect. Discussion on the subject has quieted down as well. I spoke with contacts in Beijing and Hong Kong to see if they have heard anything, but no one has. However, they universally agree that both Mainland and Hong Kong exchanges want it, so its addition to the mutual market access program is likely to come, though it may take longer than expected.

Economic activity continues to pick up as indicated by CICC’s high-frequency economic data. One brokerage noted that restaurants are reopening in China with customers slowly coming back. How did they know? Restaurant dishwashers are running more frequently. How do they know restaurant dishwashers are running more frequently? Because your dishwasher is spying on you! Smart dishwashers connect to your WiFi and transmit data to the manufacturer who then sells the data. We’ve seen similar data from GPS firm TomTom on how traffic in Chinese cities is picking back up. Scary, but true!

H-Share Update

The Hang Seng had a lackluster session closing -0.74%/-174 index points to close at 23,352 on volumes off nearly 20% from yesterday. Today was the lowest volume session since Friday March 6^th. Breadth was off with 13 advancers and 36 decliners led lower by HSBC -1.3%/-29 index points, China Construction Bank (CCB) -1.11%/-22 index points, and Industrial & Commercial Bank of China (ICBC) -1.7%/-19 index points. Today’s best performer was AAC Technology +4.85%/+4 index points after an analyst upgraded the stock, followed by CSPC Pharma +1.87%/+4 index points. Securities broker CITIC was the worst performer -5.68%/-9 index points. Hong Kong-domiciled companies outperformed China-domiciled companies -0.55% versus -0.86% using the HS China Enterprise and HS HK 35 indexes as proxies. The Chinese companies listed in Hong Kong within the MSCI China All Shares Index -0.28% with health care outperforming +1.75%, communication +0.38% and utilities +0.19%. Discretionary was the worst sector -1.31%, energy -1.06%, financials -1%, industrials -0.72%, industrials -0.71%, materials -0.61%, and tech -0.48%. Southbound Connect volumes were lighter than usual with buyers just outpacing sellers. Volume leader Tencent was sold 7 to 5, CCB bought 5 to 1 and CPIC had buyers just outpace sellers. Mainland investors bought $235mm worth of Hong Kong stocks as Connect trading accounted for 8.2% of Hong Kong turnover.

A-Share Update

Shanghai & Shenzhen’s trading day resembled a frown as the indices managed to stay above the intra-day lows losing -0.6% and -0.8%, respectively. Volume was off 14% from yesterday as 964 stocks advanced and 2,743 declined. Large caps outperformed mid and small caps. The Mainland stocks within the MSCI China All Shares Index eased -0.28% with health care outperforming +2.68%, staples +0.29% and financials +0.01%. Tech was the biggest loser off -1.76%, industrials -1.33%, discretionary -1.28%, materials -1%, real estate -0.67%, utilities -0.53%, energy -0.25% and communication -0.12%. Northbound Connect volumes were light as sellers outpaced buyers by a small margin on both the Shanghai and Shenzhen. MSCI Inclusion stocks and volume leaders Ping An and Kweichow Moutai saw buyers outpace sellers by a small margin. Foreign investors sold -$191mm worth of Mainland stocks as Northbound Connect trading accounted for 4.8% of mainland turnover.

Last Night’s Prices & Yields

• CNY/USD 7.07 versus 7.11 yesterday
• CNY/EUR 7.75 versus 7.68 yesterday
• Yield on 1-Day Government Bond 1.10% versus 1.09% yesterday 
• Yield on 10-Year Government Bond 2.59% versus 2.63% yesterday
• Yield on 10-Year China Development Bank Bond 3.01% versus 3.05% yesterday
• Commodities were higher on the Shanghai & Dalian Exchanges with Dr. Copper up +0.44%