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Chinese Equities Display Lowest 30-Day Volatility Among Global Markets

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Key News

Asian equities were largely higher today following US stocks and oil prices. Japan and India saw decent gains, but Mainland China took a breather. Energy names had a strong day in both Hong Kong and the Mainland. In Hong Kong, telephone operator China Unicom (762 HK) gained +2.24% after reporting earnings, which we saw with China Mobile yesterday. Macau casino names were stronger along with autos on chatter that China’s EV subsidies will stay intact. With China’s May holiday coming up, airlines rebounded as well. Tencent was the most heavily traded stock in Hong Kong +0.54% on 2X the volume of #2 Alibaba HK -0.58% and Ping An Insurance +0.32%. The Mainland was off slightly as alcohol stocks followed Kweichow Moutai’s earnings higher while healthcare had a decent day. Today, the highest volume stock on the Mainland was a healthcare company Da An Gene Company (002030 CH). Candidly, it was a quiet night

My esteemed colleague Jonathan Shelon wrote a whitepaper last year declaring China an asset class in its own right. The idea is that one must break China out of Emerging Markets, which is what many investors do with Japan, a developed market. China is now 40% of the MSCI Emerging Markets Index, but 700 of 1,400 stocks in the index are Chinese.  Have you noticed that Chinese equities have been far less volatile than other markets recently? The 30-day volatility of Brazil (Bovespa) is 101 while even the S&P 500 30-day volatility is 74. The Hang Seng’s? 26! Meanwhile, all of Europe is sporting a 30-day volatility handle in the 60s. (Wall Street traders like to use the term handle to describe numerical digits. Such as “The S&P 500 is up 2 handles” i.e. 2 points. Traders also love Patagonia vests for some reason.) (JD US) followed its deal with appliance maker Gome by announcing a partnership with Volvo to allow one to control their home appliances from their car.  Also, Exxon Mobil began construction on a $10B ethylene plant in China. Ethylene, according to the good people at Google, is a hydrocarbon “widely used in the chemical industry” 

H-Share Update

The Hang Seng bounced around the room to close +0.35%/+83 index points to close at 23,977.  Volume was flat from yesterday while breadth was positive with 37 advancers and 12 decliners. The index’s volume leaders were AIA -0.64%/-15 index points, Tencent +0.54%/+14 index points and today’s best performer Macau casino Galaxy Entertainment +3.59%/+11 index points. Shenzhou International was the day’s worst performer -1.73%/3 index points. Hong Kong-domiciled companies outperformed China-domiciled companies +0.58% versus +0.35% using the HS HK 35 and HS China Enterprise indexes as proxies. The Chinese companies listed in Hong Kong within the MSCI China All Shares Index gained +0.36% led higher by utilities +1.7%, energy +1.32%, health care 1%, real estate +0.97%, staples +0.95%, communication +0.51%, and industrials +0.22%. Discretionary was off -0.35%, tech -0.34%, financials -0.18% and materials -0.15%. Southbound Connect volumes were light as Mainland investors were buyers of Hong Kong-listed stocks. Volume leader Tencent had 2 to 1 buy trades versus sell trades, China Mobile was sold 2 to 1 and Sunac was sold 4 to 1. Mainland investors bought $146mm worth of Hong Kong stocks as Southbound Connect trading accounted for nearly 8% of Hong Kong’s turnover.

A-Share Update

Shanghai and Shenzhen had a choppy day swinging between gains and losses. The market sold off into the close, leaving Shanghai & Shenzhen -0.19% and -0.5%, respectively, as volume picked up +10% from yesterday while breadth was off with 1,517 advancers and 2,127 decliners as large caps held up better than mid and small caps. The mainland stocks within the MSCI China All Shares eased -0.18% with energy +2.34%, staples +0.35%, health care +0.35%, discretionary +0.23% and real estate pulled a James Bond +0.07%. Tech was off -1.18% followed by communication -1.14%, industrials -0.5%, financials -0.33%, materials -0.13% and utilities -0.01%. Northbound Connect volumes were light in mixed trading. Volume leaders and MSCI Inclusion stocks Kweichow Moutai was bought 8 to 5 while Ping An Insurance was split equally between buyers and sellers. Shanghai Connect had buyers outpace by a small amount while Shenzhen Connect was the opposite. Foreign investors bought $97mm of mainland stocks as Northbound Connect trading accounted for just 4.5% of mainland trading.

Last Night’s Prices & Yields

  • CNY/USD 7.0813 versus 7.0828
  • EUR/CNY 7.6759 versus 7.7009
  • Yield on 1-Day Government Bond 0.56% versus 0.46% yesterday
  • Yield on 10-Year Government Bond 2.53% versus 2.56% yesterday
  • Yield on 10-Year China Development Bank Bond 2.82% versus 2.84% yesterday                
  • Commodities on the Shanghai & Dalian Exchanges were higher with Dr. Copper +2.16%