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Key News

Asian equities followed Wall Street’s Friday lead with a strong day despite a coronavirus flare-up in South Korea after a young man visited several night clubs without knowing he had been infected with coronavirus.  Hong Kong was led higher by Tencent (700 HK)’s strong performance +4% on very strong volumes ahead of its earnings release Wednesday post the Hong Kong close. While Tencent’s social media platform WeChat gets a lot of attention, the company’s core business is online gaming, which probably had a relatively strong first quarter due to the quarantine. The second most-traded stock in Hong Kong overnight was Alibaba HK (9988 HK) +2.74%. The second most-traded in Hong Kong was Meituan Dianping (3690 HK), down -1.7% on news that SF Delivery, a large delivery company, would add food/restaurant delivery to its menu of services and compete with their core business.

Mainland China opened higher but faded over the course of the trading day despite the PBOC’s affirmation of continued support. We also saw strong Total Social Financing (TSF) and money supply growth released today. Increased US-China political rhetoric and profit-taking in strong sectors such as staples and healthcare may have been the culprits for the late-day slump. The most heavily traded stock in Mainland China was Gree Electric Appliances (000651 CH) +2.14%, which sold $44mm worth of goods through privately held Kuaishou, an online video platform, over the weekend.

April Aggregate Financing came in at RMB 3.09 trillion versus an estimate of 2.775 trillion and March’s 5.15 trillion. M2 money supply grew 11% year over year. Supporting private companies has been an important policy focus. Continued policy support will be necessary as China’s export-driven manufacturing sector continues to come under pressure from global quarantines.

There will be a slew of ADR earnings announcements this week. Tencent Music Entertainment will report post close today, Tencent will report Wednesday after the close in Hong Kong, Meituan Dianping and Pinduoduo will report on Thursday, and JD.com on Friday.

H-Share Update

The Hang Seng jumped higher at the open and stayed near the day’s high for the remainder of the day +1.53%/+371 index points closing at 24,602. Volumes were 7% higher than Friday and above the 1-year average. Breadth was strong with 47 advancers and only 3 decliners. The index was led higher by Tencent +4.02%/+116 index points, AIA Group +1.51%/+37 index points and Hong Kong Exchanges +2.97%/+26 index points. Sunny Optical was the day’s best performer +4.24%/+11 index points while  Hengan International was the day’s worst performer -0.77%/1 index point. Hong Kong-domiciled companies outperformed China-domiciled companies +1.39% versus +1.24% using the HS HK 35 and HS China Enterprise indices as proxies. The Chinese companies listed in Hong Kong within the MSCI China All Shares Index gained +1.63% led higher by communication +3.36%, real estate +1.61%, tech +1.53%, energy +1.06%, financials +0.9%, health care +0.88%, industrials +0.76%, utilities +0.73%, materials +0.7% and staples +0.13%. Discretionary was off -0.001%. Southbound Connect volumes were moderate as mainland investors trimmed their Hong Kong stock positions. Mainland investors sold $211mm worth of Hong Kong stocks as Southbound Connect trading accounted for over 10% of Hong Kong turnover.

A-Share Update

Shanghai & Shenzhen opened higher but eased over the course of the trading day -0.02% and -0.24%, respectively, on volumes that were above the 1-year average and flat from Friday. Breadth was off with 1,379 advancers and 2,266 decliners. Mid and small caps were off nearly 1% while large caps held up better. The Mainland stocks within the MSCI China All Shares Index were off -0.5% with only energy having a positive day +0.46% while discretionary -0.05%, real estate -0.14%, industrials -0.15%, utilities -0.15%, financials -0.23%, materials -0.28%, communication -0.33%, tech -0.49% staples -1.01% and healthcare -1.6%. Northbound Connect volumes were elevated, which is the new normal as Shenzhen Connect had higher volume and buying than Shanghai Connect. Today’s volume leader was Gree Electric Appliances 2 to 1 buying, Contemporary Amperex Technology was sold slightly, Muyuan Food was sold 2 to 1, and Midea Goup was bought 4 to 1. Foreign investors bought $373mm worth of Mainland stocks today as Northbound Connect trading accounted for just over 5% of the Mainland’s turnover.

Last Night's Prices & Yields

• CNY/USD 7.09 versus 7.07 on Friday
• CNY/EUR 7.68 versus 7.68 on Friday
• Yield on 1-Day Government Bond 0.91% versus 0.88% on Friday
• Yield on 10-Year Government Bond 2.67% versus 2.94% on Friday
• Yield on 10-Year China Development Bank Bond 3.02% versus 2.95% on Friday