JD.com Prepares To Join The Bull Parade
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- A Larger Piece of the Pie: A Discussion With MSCI on Choosing the Right Mainland China Exposure,
Tomorrow at 10 am EST
Asian equity markets were largely higher except for Japan and India. In a strong sign for bulls, the market’s resiliency is impressive. Coronavirus flare ups in the US and Beijing and the India/China border clash were tossed aside in the bulls parade. Beijing flights, trains and schools were cancelled while 27 neighborhoods saw movement restrictions. This isn’t a full lockdown though Beijing will take extra precautions. There were 31 new cases, which brings the total to 137 over the last six days. Secretary of State Pompeo will meet his equivalent Yang Jiechi in Hawaii today. We know that the meeting was requested by China, but little else.
Hong Kong managed a small gain as healthcare had a strong day following news that a subsidiary of Sino Biopharma Group (ticker 1099) published phase 1 and phase 2 drug trials for a new liver cancer treatment with no adverse side effects. Shares in Sino Biopharma rose +4.68% on the day. Hong Kong volume leaders Tencent +0.4%, Alibaba HK +2.16%, and Meituan Dianping +0.23%. Mainland China also bounced around to close higher. I’ve noticed Chinese bond yields have risen a bit over the last week as well.
JD.com’s Hong Kong listing (ticker 9618) will take place tomorrow as the company raises $3.8 billion. Demand for the stock is robust at an impressive 179X oversubscribed.
Diving into the recent Renminbi stability, I stumbled upon the US’ trade balance as a percentage of GDP, also known as the current account balance or the value of exports minus the value of imports. Considering the attention the trade war has garnered, this must be a huge number. It must be a massive number considering the political rhetoric and tension not just around China but also Europe, Canada, Mexico and Japan. Take a guess? -2.29%!!!! That’s it. That’s absurdly low. We’ve scorched the earth for 2.29% of GDP!
The Hang Seng bounced around the room to close +0.56%/+137 index points at 24,481. Volume was off -9% from yesterday while breadth was positive with 31 advancers and 13 decliners. Index heavyweights led the way with AIA +1.77%/+44 index points, HSBC +0.8%/+18 index points, and today’s best performer Sino Biopharmacuetical +4.68%. Broker CITIC was the worst performer -2.22%/+3 index points. Hong Kong-domiciled companies gained +0.67% while China-domiciled companies +0.43%. The Chinese companies listed in Hong Kong within the MSCI China All Shares Index gained +0.44% with healthcare +2.21%, staples +1.38%, real estate +0.97%, energy +0.44%, discretionary +0.42%, communication +0.38%, materials +0.25%, financials +0.11%, industrials -0.06%, tech -0.17%, and utilities -0.31%.
Southbound Connect volumes were moderate/light as Mainland investors were net buyers today. Volume leader Semiconductor Manufacturing had 3 to 2 buyers while Tencent had mixed trading with buyers just outpacing sellers. Meanwhile, Meituan Dianping had profit taking. Mainland investors bought $312m worth of Hong Kong stocks as Southbound Connect accounted for 8.5% of Hong Kon turnover.
Shanghai and Shenzhen also bounced around to close +0.14% and +0.29% at 2,935 and 1,903. Volume increased +4.3% which is well above the 1-year average while breadth was off with 1,580 advancers and 2,040 decliners. Large, mid, and small caps were in line with one another. The Mainland stocks within the MSCI China All Shares Index were +0.44% with healthcare +1.99%, utilities +0.84%, tech +0.23%, energy +0.11%, staples +0.0%, communication -0.01%, materials -0.12%, financials -0.29%,, discretionary -0.39%, and real estate -0.6%.
Northbound Connect volumes were moderate as foreign investors were net sellers of Mainland stocks today. Volume leaders Kweichow Moutai and Ping An Insurance had sellers outpace buyers by a small amount. Foreign investors sold -$383mm worth of Mainland stocks today as Northbound Connect trading accounted for 4.4% of Mainland turnover.
Last Night’s Exchange Rates & Yields
- CNY/USD 7.09 versus 7.09 yesterday
- CNY/EUR 7.96 versus 7.98 yesterday
- Yield on 1-Day Government Bond 1.35% versus 1.15% yesterday
- Yield on 10-Year Government Bond 2.88% versus 2.84% yesterday
- Yield on 10-Year China Development Bank Bond 3.16% versus 3.16%