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ATMX Lead Hong Kong Growth Stocks, US-China Political Rhetoric Indicator Flashes Green

Key News

Asian equities had a quiet night on light summer volumes. Hong Kong celebrated Ant Group’s Hong Kong filing by lifting growth stocks as evidenced by the volume leaders. Alibaba HK was up +4.16%, Tencent gained +1.29%, Xiaomi gained +5.74%, Meituan Dianping gained +0.47%, and JD.com HK gained +5.97%.

Bloomberg TV Asia interviewed Wuxi Biologics CEO Chris Chen, who stated they are working with multiple biotech companies on several vaccines. The CEO expressed confidence that they would have COVID-19 treatments available by year-end, which is great news. It is earnings season in Hong Kong, which is leading investors to focus on individual results rather than the broad market.

Mainland China underperformed on a slow news day. It is possible that investors are raising cash to participate in Ant Group’s STAR Board listing as tech was particularly weak.

Stocks have historically reacted strongly to US-China political rhetoric. In order to avoid being shaken out of a trade, it can be helpful to watch CNH, China’s offshore currency, which trades during US trading hours. CNH broke below 6.90 to close at 6.89. Our institutional brokers use CNH’s price change to determine whether political rhetoric has any bite to it. While some investors see headlines and hit the sell button, these institutional brokers happily buy the shares. It may be prudent to check CNH before you act emotionally!

H-Share Update 

The Hang Seng ended a choppy day by closing +0.02%/+5 index points at 25,491 on light volume that was +3% higher than yesterday and just above the 1-year average. Breadth was off with 15 advancers and 31 decliners with Tencent +1.29%/+39 index points, HK Exchanges +1.87%/+25 index points, and HSBC -1.16%/-24 index points. China-domiciled companies outperformed Hong Kong-domiciled companies +0.08% versus -0.11% using the HS China Enterprise and HK 35 Indices as proxies. The 205 Chinese companies listed in Hong Kong within the MSCI China All Shares Index gained +0.27% with health care +2.05%, real estate +1.22%, communication +1.16%, staples +1.11%, energy +0.14%, tech +0.04%, discretionary +0.04%, financials 0.9%, industrials -1.23%, materials -1.42%, and utilities -2.66%.

Southbound Stock Connect volumes were light as Mainland investors were net buyers of Hong Kong stocks. Shanghai Connect volume leaders were Xiaomi, which was bought 8 to 7, Tencent, which was bought 3 to 1, and SMIC, which was sold slightly.

A-Share Update

Shanghai and Shenzhen were up in the morning but fared poorly in the afternoon falling -1.3% and -1.88% to close at 3,329 and 2,237, respectively. Volume was up 3%, but just above the 1-year average while breadth was awful with 584 advancers and 3,160 decliners. Mid and small caps fared worse than large caps. The 510 Mainland stocks within the MSCI China All Shares Index fell -0.91% with utilities +0.64%, communication +0.36%, health care +0.25%, staples +0.08%, energy +0.07%, real estate -0.61%, industrials -0.92%, materials -1.15%, financials -1.3%, discretionary -1.89%, and tech -2.53%.

Northbound Stock Connect volumes were light in mixed trading. Shanghai Connect volume leaders were Kweichow Moutai, which was sold slightly, Citic Securities, which was bought 3 to 2, and Shanghai Fosun Pharmaceutical, which was sold 5 to 1. Shenzhen Connect volume leaders were Wulliangye Yibin, which was sold 5 to 3, Luxshare, which was sold 9 to 5, and East Money Information, which was sold 2 to 1. Foreign investors sold -$170mm worth of Mainland stocks today.

Last Night’s Exchange Rates & Yields

  • CNY/USD 6.89 versus 6.91 yesterday
  • CNY/EUR 8.14 versus 8.17 yesterday
  • Yield on 1-Day Government Bond 1.15% versus 1.15% yesterday
  • Yield on 10-Year Government Bond 3.05% versus 3.04% yesterday
  • Yield on 10-Year China Development Bank Bond 3.60% versus 3.58% yesterday