NetEase’s Hong Kong Debut +5.6% As The Company Joins Alibaba, Tencent, and Meituan (“ATM”) on The Exchange
Asian equities followed US equities south as Fed Chair Powell’s dismal US economic outlook led to a bout of profit taking as leading sectors were clipped. I finally got a great acronym from a broker “ATM” for Hong Kong’s growth leaders Alibaba -1.21%, Tencent -0.85% and Meituan Dianping +3.38%. NetEase’s Hong Kong listing jumped +5.6% which should benefit the US listing, which we discuss below.
We received clarity that JD.com’s Hong Kong listing will take place next Thursday. In Hong Kong, Macau stocks were hit hard as value stocks took the brunt of the downdraft. However, one broker noted that their desk saw buying on the dips. The Mainland saw leading sectors clipped as the one bright spot was autos on the Telsa truck EV but also May auto sales +14.5% to 2.19mm vehicles. Mainland volume leader Contemporary Amperex (300750 CH) jumped +4.66% as Tesla’s battery provider.
A Mainland media source noted online video platform iQiyi hired Netflix’s head of Asia Pacific. We also heard rumors that Tencent-backed live streamers Douyu and Huya may merge in order to better compete with Bytedance’s TikTok.
I’ve previously noted Alibaba’s Hong Kong listing has outperformed the US shares despite the shares being interchangeable i.e. one can convert this US shares for HK shares and vice versa. This struck me as strange as free lunches don’t exist with so many super-computer “eyeballs” looking for opportunities. I happened to chat with Bill, an institutional sales/trader and all around great guy, who works at a large global investment bank. He spoke to his arbitrage desk who pointed out one needs to consider the conversion factor. Using my trusty Bloomberg terminal, the performance disparity disappears.
The Hang Seng opened lower and went Charmin the rest of the day to close -2.27%/-569 index points at 24,480. The 25k level held up as well as my diet. Volume picked up 11.9% while breadth laid a goose egg with 0 advancers and 50 decliners. Index heavyweights were off with HSBC -4.78%/-111 index points, AIA -2.86%/-71 index points, and China Construction Bank -1.72%/-35 index points. China-domiciled stocks were off -1.96% while Hong Kong-domiciled stocks were off -2.52% using the HS China Enterprise and HS HK 35 indices as proxies. The Chinese companies listed in Hong Kong and within the MSCI China All Shares Index were off -1.44% with discretionary +0.51%, healthcare -0.72%, communication -1.08%, staples -1.2%, tech -1.66%, industrials -1.96%, financials -2.11%, utilities -2.18%, materials -2.2%, and energy -2.82%.
Southbound Connect volumes were moderate as Mainland investors bought the dip in Hong Kong. Volumes leaders Tencent, Semiconductor Manufacturing and Meituan Dianping all saw buyers outpace sellers. Mainland investors bought $57mm worth of Hong Kong stocks today as Southbound Connect trading accounted for nearly 7% of Hong Kong turnover.
Shanghai & Shenzhen gave up modest gains in the afternoon session -0.78% and -0.51%, respectively, as volume surged +18% from yesterday. Breadth was off with 1,029 advancers and 2,608 decliners as Shanghai closed at 2,920 and Shenzhen at 1,865. Mid and small caps did not go as low as large caps. The Mainland stocks within the MSCI China All Shares Index -0.82% with communication +0.16%, industrials -0.16%, tech -0.27%, discretionary -0.35%, healthcare -0.55%, materials -0.69%, real estate -1.07%, utilities -1.13%, financials -1.16%, energy -1.37%, and staples -1.81%.
Northbound Connect diverged again as Shanghai Connect (large caps) were sold while Shenzhen Connect (mid caps) were bought. On the Shanghai Connect, volume leader Ping An was bought while Kweichow Moutai was sold. On the Shenzhen Connect, Contemporary Amperex Tech and BOE Technology were both bought. Shenzhen inflows outpaced Shanghai outflows as foreign investors bought $20mm of Mainland stocks as Northbound Connect trading accounted for 5.1% of Mainland turnover.
Last Night’s Prices & Yields
- CNY/USD 7.07 versus 7.06 yesterday
- CNY/EUR 8.05 versus 8.01 yesterday
- Yield on 1-Day Government Bond 1.25% versus 1.27% yesterday
- Yield on 10-Year Government Bond 2.77% versus 2.82% yesterday
- Yield on 10-Year China Development Bank Bond 3.09% versus 3.14% yesterday