Galloping Growth Stocks Lead Hong Kong
Asian equities ended a relatively quiet night mixed. China and Taiwan are closed tomorrow and Friday, while Hong Kong is closed tomorrow and open on Friday. Tencent climbed over HKD 500 at the open but profit taking brought it down -1.33%. Several brokers commented that the Tencent profit-taking pulled the entire Hong Kong market down as investors pocketed some cash before the holiday.
Sinopharm Group (1099 HK) +2% on news it started phase 3 human trials for a coronavirus vaccine in the United Arab Emirates. Fingers crossed that they go well. Mobile phone maker Xiaomi +9% after announcing a share buyback plan. Meanwhile, growth names galloped with Alibaba HK +0.64%, Meituan Dianping +0.9%, NetEase HK +2.56%, JD.com HK +2.09%, and Semiconductor Manufacturing +3.42%.
Mainland markets were quiet though healthcare experienced some profit-taking. There was news of increased regulation for online streaming content providers, which I don’t think is a big issue.
Canada’s National Post had an interesting article titled “Trump threat to “decouple” US and China hits trade, investment reality”. The well written article went beyond the sound bites to actually look at data! According to the article, Chinese imports rose to $8.6B in April including 423,891 metric tons of soybeans which is 2X the 208,505 sold in March. For these reasons and more, I believe there will be plenty of China bark, but no bite. For what it’s worth, the same probably applies to EU tariffs.
I did a poll on Twitter on what stock one would have wanted to own over the last twenty years among Microsoft, Amazon, NetEase and Apple. Amazon was the winner, which was unsurprising despite the small sample size. Remarkably, NetEase is the outperformer. From June 29, 2000 to June 22, 2020, NTES +12,353%, AMZN +7,209%, MSFT +710% and AAPL +11,225%. When it comes to US-listed Chinese companies, people are quick to talk about the risk. But, what about the reward?
The Hang Seng grinded lower throughout the day to close -0.5%/-125 index points at 24,781. Volumes were off -3% but remained above the 1-year average. Breadth was off with only 11 advancers and 38 decliners. Tencent was off -1.33%/-36 index points, HSBC -1.2%/-27 index points and AIA +0.93%/+24 index points. AAC was the best performer +5.44%/+5 index points while broker CITIC was the worst -2.61%/-4 index points.
Hong Kong-domiciled stocks fell -0.44% while Mainland-domiciled stocks were off -0.57% using the HS HK 35 and China Enterprise indexes as proxies. The Hong Kong-listed Chinese companies within the MSCI China All Shares Index declined -0.31% with tech +3.99%, healthcare +1.35%, discretionary +0.43%, materials +0.02%, financials -0.46%, utilities -0.63%, industrials -0.72%, staples -0.8%, real estate -0.91%, communication -1.11%, and energy -1.5%.
Southbound Connect is closed.
Shanghai and Shenzhen bounced around the room to close +0.3% and +0.01% at 2,979 and 1,947, respectively. Volumes were off -4% while 1,240 stocks advanced and 2,395 declined. Large caps outperformed mid and small caps today for the first time in ages. The Mainland stocks within the MSCI China All Shares Index rose +0.46% with real estate +1.97%, utilities +1.21%, tech +1.13%, financials +0.67%, materials +0.58%, discretionary +0.54%, energy +0.3%, staples +0.19%, industrials +0.09%, and healthcare -0.8%.
Northbound Stock Connect volumes were moderate as foreign investors were net buyers of Mainland stocks. Volumes were higher in Shenzhen than in Shanghai as we’ve seen for quite some time. Gree Electric Appliances was bought in 4 to 1 while East Money Information was sold 3 to 1 in Shenzhen. Inner Mongolia Yili was the volume leader in Shanghai as the stock was bought 4 to 1. Meanwhile, Kweichow Moutai was sold 2 to 1. Foreign investors bought $262mm worth of Mainland stocks today as Northbound Connect trading accounted for 5.4% of Mainland turnover.
Last Night’s Exchange Rates & Yields
- CNY/USD 7.08 versus 7.06 yesterday
- CNY/EUR 7.98 versus 8.00 yesterday
- Yield on 1-Day Government Bond 1.18% versus 1.38% yesterday
- Yield on 10-Year Government Bond 2.86% versus 2.91% yesterday
- Yield on 10-Year China Development Bank Bond 3.17% versus 3.23% yesterday