Key News

Asian equity markets enjoyed a strong day though Mainland China, India and Thailand were closed. President Trump’s press conference, optimism on coronavirus, and oil’s climb on a suspected Saudi Arabia-Russia deal helped sentiment.

South Korea was a standout though foreign investors sold today as the nearly $8 billion Stock Market Stabilization Fund is expected to launch this week as part of South Korea’s ongoing stimulus efforts. To put that number in perspective, South Korea, as defined by MSCI, has a free float of $565B as of March 31^st so $8 billion is not so massive. I find it interesting that foreign investors are selling while the South Korean government buys. More importantly, if China was the First In and First Out (FIFO) with regard to coronavirus, South Korea is Second In Second Out. Major tech bellwether Samsung will report tomorrow, which should provide some color on the South Korean market.

Japan saw a large gain on speculation of economic stimulus despite increased worries about the coronavirus spreading as a nationwide quarantine is expected to be announced. Australia and Indonesia also gained +4% on the day.

Hong Kong had a nice bounce despite the Mainland market being closed. Volumes were up from Friday even though Southbound Connect, which normally accounts for around 10% of Hong Kong’s trading, was closed. Tencent (700 HK) was the most heavily traded stock by value +1.33% followed by Alibaba’s HK listing (9988 HK)  +2.67%  and HSBC (5 HK) +2.77%. It was revealed that Tencent participated in Pinduoduo’s (PDD US) private placement. There is also chatter Tencent will be IPOing its WeDoctor unit, a health care technology company, some time this year. HSBC and Standard Chartered cut their dividends as the Bank of England had requested, leading to a nice cratering in their stock prices. HSBC is now saying that they will reinstate their dividend policy later this year after pressure from shareholders, many of whom own the stock for the dividend. There are calls for the company to move its headquarters back to Hong Kong as well. Many dividend ETFs’ require a consistent dividend for inclusion due to their index methodologies. I would suspect HSBC will be “kicked out” of many dividend ETFs. Time will tell! Koolearn Technology (1797 HK), an online education company spun out from New Orient Education (EDU US), gained +12%.

H-Share Update

The Hang Seng climbed from the lower left to the upper right closing +2.21%/+13 index points to close at 23,749. Volume was +8.5% from Friday, which is surprisingly strong considering Southbound Connect, which typically makes up ~10% of Hong Kong turnover, was closed. Breadth was also very strong with all 50 stocks rising and 0 decliners! The index was led higher by HSBC +2.77%/+53 index points, Tencent +1.33%/+33 index points and China Construction Bank +1.47%/+29 index points. Swire Pacific +7.38%/+5.7 index points followed by CK Hutchison +6.29%/+28 index points and Shenzhou International +6.23%/+12.9 index points. Subway operator MTR was the worst performer +0.36%/+0.7 index point. Hong Kong-domiciled companies returned +2.93% versus Chinese companies domiciled companies +1.7% using the HS HK 35 and HS China Enterprise Indices as proxies. The 205 Chinese companies trading in Hong Kong within the MSCI China All Shares Index +1.59% led by tech +3.12%, energy +2.78%, staples +2.49%, discretionary +2.09%, health care +1.97%, materials +1.78%, real estate +1.69%, communication +1.51%, financials +1.25%, utilities +0.48% and industrials +0.42%. Southbound Connect was closed today.

A-Share Update

Shanghai & Shenzhen were closed today in observance of the Qing Ming Spring Festival.

Last Night’s Prices & Yields

• CNY/USD 7.0913 versus 7.093
• EUR/CNY 7.6565 versus 7.6545
• Bond Market Was Closed Today
• Yield on 1-Day Government Bond 0.8% versus 0.8% 
• Yield on 10-Year Government Bond 2.6345% versus 2.6345%
• Yield on 10-Year China Development Bank Bond 3.1536% versus 3.1536%
• Shanghai & Dalian Exchanges were closed.