Daily Posts

Ant Group IPO Date Speculation Grows, China’s Uber Slayer Didi Chuxing Enters IPO Rumor Mill

Key News

Asian equities were mixed with Japan lagging, though markets were lifted on reports that US stimulus talks might be back on track. The Hang Seng managed a gain of +0.11%, though volumes were light. The big news was the green light for Ant Group’s Hong Kong IPO from the local regulators as speculation on the listing date is either the first or second week of November. We still need the Mainland/STAR Board IPO to be approved, though the approval is expected this week. A Mainland media source is saying that the dual listing in Hong Kong and the Mainland’s STAR Board will be on November 6th, though in speaking with a Hong Kong trader last night, he felt the 2nd week of November was more likely.

We also had news that China’s Uber slayer Didi Chuxing is considering a 2021 IPO. As a result, Hong Kong’s volume leaders were Alibaba Hong Kong, which gained +0.74%, followed by Tencent, which gained +0.53%, Meituan Dianping, which rose +0.7%, Ping An Insurance, which rose +0.36%, China Construction Bank, which was off -1.06%, Xiaomi, which was flat at 0.0%, and Electric Vehicle (EV) bus maker BYD, which gained +8.96%. Interest in EVs continues as supportive policies are lifting the sector while car sales continues to rebound. Autos and e-commerce lifted the consumer discretionary sector while staples also had a strong day, despite that Sun Art fell -6.03%. Real estate was off in both markets as early September sale prices looked only marginally higher at +0.34% versus estimates at +0.5%.

Tax payments are due in China, leading to speculation that the PBOC will add liquidity to the banking system to offset the cash drain. Financials were weak in both markets, while growth stocks outperformed as Shanghai and Shenzhen gained +0.47% and +1.33% respectively. Mainland liquor stocks had a strong day, which lead staples higher. Volumes were light in both markets as investors sit on their hands and cash due to the US election and Ant IPO coming. We’ve noted that Shanghai and Shenzhen have been in a range since July. It will be interesting if the Five-Year Plan policy meetings provide the catalyst to punch through. 

CNY has gained 6.76% since May 27th, a high of 7.16 closing today at 6.68. Remember that China hasn’t cut interest rates unlike many EM countries or like Japan and Europe’s negative interest rates. I suppose this is not that surprising. A few weeks back we noted HSBC’s target of 6.50 which is looking increasingly likely. 

There was chatter that both New Orient Education (ticker EDU US) and GDS Holdings (GDS US) will be relisting in Hong Kong. 

H-Share Update

The Hang Seng managed a gain +0.11%/27 index points to close at 24,569 as volume dropped -19% to back below the 1-year average. Breadth was even with 23 advancers and 23 decliners, while the broader Hang Seng Composite rose +0.45% with 234 advancers and 214 decliners. The 204 Chinese companies listed in Hong Kong were up +0.46%, led by discretionary +2.13%, staples +1.73%, materials +.1.23%, tech +1.09%, and health care +0.84%, while energy was off -1.43%, real estate -0.64%, and financials -0..49%. Southbound Connect volumes were light as Mainland investors bought $147mm of Hong Kong stocks as Southbound trading accounted for 10.1% of Hong Kong turnover.

A-Share Update

Shanghai & Shenzhen gained +0.47% and +1.33% to close at 3,328 and 2,279 respectively as volume declined -10% back below the 1-year average. Breadth was positive with 2,358 advancers and 1,264 decliners as mid and small caps outperformed large caps. The 517 Mainland stocks within the MSCI China All Shares Index rose +1.04%, led by staples +2.47%, discretionary +2.3%, communication +1.36%, industrials +1.29%, tech +1.1%, health care +1.1%, and utilities +0.51%, while real estate was off -0.36%, and financials -0.14%. Northbound Stock Connect volumes were light as foreign investors sold -$166mm of Mainland stocks as Northbound trading accounted for 5.4% of Mainland turnover.

Last Night’s Exchange Rates & Yields

  • CNY/USD 6.68 versus 6.68 yesterday
  • CNY/EUR 7.89 versus 7.87 yesterday
  • Yield on 1-Day Government Bond 1.34% versus 1.25% yesterday
  • Yield on 10-Year Government Bond 3.20% versus 3.20% yesterday
  • Yield on 10-Year China Development Bank Bond 3.74% versus 3.74% yesterday