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Week In Review, Hong Kong and Mainland China Markets Closed

Week In Review

  • On Monday, China’s March Industrial Profits were announced to have fallen by -34.9%. Despite this abysmal pre-market release, markets in both Hong Kong and Mainland China ended the trading session higher. Evidently, markets had already priced in the decline and investors turned their attention to the future.
  • On Tuesday, TAL Education (TAL US) had a mixed earnings release. The company grew revenue by 18% for the latest fiscal year, which was in-line with most analyst estimates. Liquor companies Kweichow Moutai and Wuliangye Yibin released strong first quarter results as their sales had grown during quarantine.
  • On Wednesday, the earnings parade continued with Standard Chartered (2888 HK) and BYD (1211 HK) among the standouts for positive releases as well as guidance. (JD US) also filed for a Hong Kong listing.
  • On Thursday, China Manufacturing PMIs for April compiled by the government as well as by private company IHS Markit and covering both private companies and SOEs came in slightly lower than expected. However, the Non-manufacturing PMI compiled by IHS Markit, which includes construction companies, came in slightly higher than expected. 
  • Mainland and Hong Kong markets are closed today.

Key News

Japan and Australia, the only Asian markets open overnight, ended the session decidedly lower, perhaps in anticipation of Wall Street this morning. Markets in the US are faltering thanks to disappointing tech earnings. Amazon announced that despite notable sales growth in the first quarter, their expenses soared after having to compensate couriers for taking the risk of delivering packages during the coronavirus outbreak as well as new hiring . Meanwhile, Apple failed to deliver forward guidance.

Special treasury issuance is likely to total approximately RMB 1 million or 1% of GDP. Local government bond issuance is likely to rise to nearly RMB 4 trillion or 4% of GDP. Crisis-oriented lending will mostly target commercial banks, which will have the responsibility of making sure loans reach individuals and small businesses in need. The PBOC may further lower Reserve Requirement Ratios (RRR) and the Loan Prime Rate (LPR) to facilitate new lending. However, as we have discussed repeatedly, the PBOC still maintains a great deal of “dry powder” having not eased as aggressively as other global central banks.

Average A-share revenues grew by +10% on average in 2019. In the first quarter, A-share revenues declined by -8% on average. As life returns to normal in China and global case numbers stabilize, we remain positive about the recovery ahead.

It was also confirmed that the National Peoples Conference will go ahead on May 22nd.