Key News

Shanghai and Shenzhen were off -1.04% and -1.95% on Friday on moderate volume and news Hong Kong-listed China Telecom could be banned from doing business in the US. The tech sector was the big loser on the rhetoric. South Korea had a strong day Friday despite another round of foreign selling while Japan and Taiwan posted modest gains.

Today, trading was very light in Asian equity markets with Hong Kong and Australia on market holiday today. Most markets were down with India off -3%, Japan and Korea off nearly 2%, the latter on heavy volumes as the country saw an increase in COVID-19 cases over the weekend. Sentiment appears decidedly mixed as investors weigh the global quarantine’s effect on economies. Shipping companies are idling 13% of the global fleet due to the drop in demand for goods globally.

March economic data starts coming out this week with US bank earnings on Tuesday and US retail sales on Wednesday. Meanwhile, China will report trade data and Q1 GDP this week. China’s loan growth was very strong as policymakers step on the stimulus pedal. Mainland markets were off on the lowest volume day of the year as the China Telecom news weighed heavily on Mainland investors with tech and telecom the weakest sectors. Health care had a strong day as both SH and SZ are sitting at support levels of 2,800 and 1,700. The most heavily traded stock on the Mainland was appliance maker Gree (000651) +5.5%.

FTSE has announced that Alibaba HK (9988 HK) will be added to the FTSE China 50 Index, which is tracked by the largest China ETF by assets. FTSE announced the inclusion will occur in three tranches in June, September, and December. The index caps the largest holdings at 10%, which should end up being Alibaba HK’s weight in the index. The ETF in question has $5.1B of AUM as of April 9^th so a 10% weight likely means $510mm of inflow. It’s a smart move to divide since 9989 HK has traded $535mm on average since listing in Hong Kong on November 26, 2019. The move is good for the index as it is currently 55% financials, which may drop to 45%. The exposures will go from horrible to slightly less horrible in my opinion. Besides the ETF having to buy the stock, the move is also important because it provides the Hong Kong Stock Exchange and Hang Seng Indices ammunition to lobby for Alibaba HK to go into Southbound Connect, the trading platform that allows Mainland Chinese investors to buy Hong Kong-listed stocks. Amazingly, the 711 million active buyers of Alibaba in China cannot own the stock because it is listed in the US and the Hong Kong listing is excluded from Southbound Connect.

H-Share Update

Hong Kong was closed last night for Easter Monday.

A-Share Update

Shanghai & Shenzhen fell -0.49% and -0.8%, respectively, on the lightest volume of the year, which was off -25% from Friday. Breadth was off with 1,099 advancers and 2,568 decliners as large caps “outperformed” mid and small caps due to sector composition. The Mainland stocks within the MSCI China All Shares Index fell -0.5% led lower by tech -2.59%, communication -1.24%, financials -0.64%, staples -0.62%, industrials -0.2%, and energy -0.14%. Health care had a good day +0.78%, materials -0.57%, real estate -0.29%, discretionary -0.09% and utilities -0.01%. Northbound Stock Connect was closed today.

March Inflation Data

Year over Year

CPI	4.3% versus estimate 4.9% and Feb’s 5.2%
PPI	-1.5% versus estimate -1.15 and Feb’s -0.4%

Takeaway: Low inflation provides ample room for PBOC easing.

March Loan Data

New Loans	2.85 trillion versus estimate 1.8 trillion and Feb’s 905B
Money Supply	5.15 trillion versus estimate 3.14 trillion and Feb’s 855B
Aggregate Financing	10.8% versus estimate 10.8% and Feb’s 10.9%

Takeaway: Government and PBOC efforts to direct credit to private companies in support of the quarantine’s economic effect appear to be working.

Last Night’s Prices & Yields

• CNY/USD 7.05 versus 7.04 on Friday
• CNY/EUR 7.70 versus 7.70 on
• Yield on 1-Day Government Bond 0.81% versus 0.78% on Friday 
• Yield on 10-Year Government Bond 2.57% versus 2.54% on Friday
• Yield on 10-Year China Development Bank Bond 2.87% versus 2.86%                                                        
• Commodities on the Shanghai & Dalian Exchanges were higher with Dr. Copper +1.29%