Mainland Market Resilience
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Despite the US equity downdraft yesterday, Asian equities were mixed on a night with limited news flow and light trading volumes. Japan was off on light volumes and Australia was off -2%. Meanwhile, Singapore, Malaysia, Thailand and Indonesia posted small gains and Taiwan and India were closed for market holidays. Korea rebounded as domestic investors bought on expected stimulus and potential central bank buying of stocks as foreign investors sold for the 21st day in a row.
If China is FIFO (First In First Out) on containing the coronavirus, South Korea appears to be in second place. Hong Kong and Mainland China had a good day as news that China has been buying oil sent energy names flying. President Xi’s mention of 5G in a statement benefited tech and telecom stocks. Alibaba HK (9988 HK) and Tencent (700 HK) had a strong day +1.09% and +1.44%, respectively, as the #2 and #3 most heavily traded stocks in terms of value. HSBC took first place in terms of volume sinking another -2.6% after their dividend cut and share repurchase cancellation. In the Mainland market the most heavily traded stock was Yuyu Medical & Supply Company (002223 CH), which gained 9.99% after it announced the FDA had approved its ventilators for use in the US. There are only 11 asset managers who filed ownership with the SEC as of 12/31. This part of the disparity between the Mainland and Hong Kong markets. Mainland investors are far more positive than foreigners, which is reflected in stock performance. Korea has far higher foreign ownership than Mainland China, which has been a big problem as foreign investors sell.
There is a great deal of sensationalized news out there. I received several questions yesterday.
1. Is China re-entering a coronavirus lockdown?
No. However, China is concerned over students returning home from abroad with the coronavirus and a single county in Henan province imposed a new quarantine after an asymptomatic carrier gave coronavirus to three people.
2. Is China covering up the number of people who contracted coronavirus?
After the part chairman in Hubei province was removed, his replacement, former Shanghai mayor Ying Yong, announced that his first priority was defeating the coronavirus. The provincial government plans to go back and look at hospital patients and fatalities to determine if flu or pneumonia patients had coronavirus. Results will be released in June. A top health official announced that China would begin to report all asymptomatic cases today.
I am just heard about Luckin Coffee suspending their COO on submitting fabricated financials. I don’t own the stock but will try to investigate on behalf of those who might.
The Hang Seng opened lower -1.07%, hitting the day’s low of -1.43% during morning trading before fighting back to close at the day’s high +0.84%/+194 index points at 23,280. Volume was amazingly light off -31% from yesterday for the lowest volume day since February 19th though breadth was strong with 42 advancers and 8 decliners. The Bank of England’s “suggestion” that HSBC cut its dividend and share repurchase plan weighed further on the stock following yesterday’s 10% loss as the stock lost -2.63%/-50 index points. China Mobile popped +3.59%/+39 index points, Tencent +1.44%/+36 index points and energy giant CNOOC +7.47%/+34.9 index points. The three big Hong Kong-listed China energy companies finished 1st, 2nd and 3rd in daily top performance with PetroChina, China Petroleum & Chemical and CNOOC gaining +9.68%/+18.9, +8.85%/+26 index points and +7.47%/+34.9 index points, respectively. Techtronic Industries edged out HSBC as the day’s worst performer -3.03%/-6 index points. China-domiciled companies outperformed Hong Kong-domiciled companies +1.29% versus +0.38% using the HS China Enterprise and HS HK 35 as proxies. The Chinese companies listed in Hong Kong within the MSCI China All Shares Index gained +1.4% led by energy +7.38%, health care +3.69%, communication +1.76%, real estate +1.67%, tech +1.47%, staples +1.41%, utilities +0.59%, materials +0.43%, financials +0.27%, discretionary +0.18% and industrials +0.03%. Southbound Connect trading was closed today for the upcoming Tomb Sweeping Day holiday.
Shanghai & Shenzhen opened lower -0.25% and -0.07%, respectively, hitting lows in the morning -0.7%/-0.53% before rallying into the close +1.69% and +2.26%. Volume was up +1.8% from yesterday though still light compared to recent levels while breadth was very strong with 3,029 advancers and 645 decliners. It was a very broad rally with small caps and mid-caps outperforming large caps. The Mainland stocks within the MSCI China All Shares Index gained +2.09% led higher by tech +5.55%, energy +3.73%, industrials +1.82%, staples +1.81%, health care +1.63%, communication +1.51%, materials +1.41%, discretionary +1.29%, financials +1.27%, utilities +1.18%, and real estate +1.12%. Northbound Connect volumes were light but foreign investors were net buyers of Mainland stocks. MSCI Inclusion stock Kweichow Moutai was the volume leader with buyer volume 5 to 3 higher than selling volume. Foreign investors bought $610mm of Mainland stocks today as Northbound Connect accounted for 5.4% of Mainland turnover.
Last Night’s Prices & Yields
- CNY/USD 7.09 versus 7.10 yesterday
- CNY/EUR 7.71 versus 7.77 yesterday
- Yield on 1-Day Government Bond 1.1% versus 1.2% yesterday
- Yield on 10-Year Government Bond 2.59% versus 2.56% yesterday
- Yield on 10-Year China Development Bank Bond 2.96% versus 2.93% yesterday
- Commodities were lower on the Shanghai & Dalian Exchanges with most metals higher though Dr. Copper were off -0.33%