Tencent Goes Beast Mode Pre-Q1 GDP Tomorrow
Asian equities were mixed overnight as investors await China’s Q1 GDP release tomorrow. I can almost imagine the 80s rock band Europe hit single “The Final Countdown” in the background. Economists are expecting -6% year over year with pretty dismal estimates for March retail sales and industrial production. Of the three, I’m optimistic that retail sales might surprise to the upside versus the estimate of -10%. From February to March things definitely got better and not worse in China. I’m going to predict retail sales surprise somewhat to the upside.
After the close, Japan announced it had stepped up quarantine measures recently. The Philippines had been rallying the last few days but got smoked overnight. One broker said it was related to an ETF redemption though seems unlikely to me. There has been some buzz around iPhone demand following the debut of the new low-cost model in China. Apple’s supply chains in both Hong Kong and Taiwan outperformed.
Mainland China had a good day as foreign investors bought $539mm of Mainland stocks through the Northbound Connect trading platform, which brings the week to date total over $3 billion.
Without a doubt, the big story was volume leader Tencent’s big day +2.99% on volume nearly 3X Alibaba’s Hong Kong listing, which was up +2.48% as the 2nd most heavily traded stock. Q1 gaming results were released showing a 40% year over year increase in revenue according to Mainland media sources. Without Tencent’s performance, the Hang Seng would have fared far worse. Interesting that the fifth most-traded stock of the day Meituan Dianping was also up +1.02%. However, financials, which make up 55% of the Hang Seng Index, suffered.
It is worth noting that the Shanghai, Shenzhen and Hang Seng have all been sitting at the 2,800, 1,700 and 24,000 levels for two to three weeks.
The Hang Seng opened lower and stayed there -58%/-138 index points to close at 24,006 on moderate volume that was lower from yesterday -5% but above the 1-year average. Breadth was off with 10 advancers and 36 decliners as index heavyweight Tencent was today’s best performer +2.99%/+81 index points, HSBC -2.22%/-43 index points and China Construction Bank -1.77%/-35 index points. Hang Lung Property was the worst performer -2.78%/-2 index points. China-domiciled companies held up slightly better than Hong Kong-domiciled companies, -0.54% versus -0.71%. The Chinese companies listed in Hong Kong within the MSCI China All Shares Index gained +0.24% led by Tencent’s stellar performance lifting communication +2.16%, health care +0.88%, tech +0.66%, energy +0.39% and discretionary +0.03%. Utilities were off -3.17%, financials -1.22%, industrials -0.8%, real estate -0.52%, real estate -0.12% and discretionary -0.11%.
Southbound Connect saw two rare events: 1) Trading was tilted toward selling and 2) China Construction Bank didn’t make the top 10. The top four volume stocks all had more selling than buying Tencent 3 to 2 , Sunac 2 to 1 , Semiconductor Manufacturing IC 3 to 2 and Sunny Optical 10 to 1. However, the fifth most-traded stock Meituan Dianping saw 3 to 2 buying. Volume was light as Mainland investors sold $7mm worth of Hong Kong stocks today, accounting for 8.1% of Hong Kong turnover.
Shanghai & Shenzhen opened lower and closed -0.31% and -0.57%, respectively. Both indexes staged a late morning rally that pushed them into positive territory before falling back into the red prior to a late afternoon rally leading to gains of +0.31% and +0.48%. Volume was off -7% from yesterday though just above the 1-year average while breadth was nearly 50/50 with 1,735 advancers and 1,822 decliners. Small and mid-caps outperformed large caps by a small margin though sector dispersion was the driver. The Mainland stocks within the MSCI China All Shares Index +0.19% led by communication +1.14%, tech +0.77%, utilities +0.62%, health care +0.59%, industrials +0.5%, real estate +0.17%, and discretionary +0.17%. Energy was off -0.49%, staples -0.37%, materials -0.3% and financials -0.03%. Northbound Connect volumes were moderate as foreign investors were active buyers of Mainland stocks. Volume leader and MSCI Inclusion stock Kweichow Moutai saw 3 to 1 buyers while Wuliangye Yibin saw 2 to 1 buyers. Foreign investors bought $539mm worth of Mainland stocks today as Northbound Connect accounted for 5.1% of the Mainland’s turnover today. For the week, foreign investors have bought $3.032 billion worth of Mainland stocks.
Last Night’s Prices & Yields
- CNY/USD 7.07 versus 7.07 yesterday
- CNY/EUR 7.70 versus 7.71 yesterday
- Yield on 1-Day Government Bond 0.46% versus 0.49% yesterday
- Yield on 10-Year Government Bond 2.53% versus 2.55% yesterday
- Yield on 10-Year China Development Bank Bond 2.81% versus 2.84% yesterday
- Commodities on the Shanghai & Dalian Exchanges were mixed/lower with Dr. Copper -0.24%