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200 Million Will Watch A Sporting Event You’ve Never Heard Of, Week In Review

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Week In Review

  • To see mobile payments in action, check out our latest video showing how street vendors in Lanzhou, China are using mobile payments to revitalize their businesses.
  • Ant Group released the term sheet for its IPO on Monday. Per the sheet, on November 5th Ant Group will trade in Hong Kong with the ticker 6688 HK and on Shanghai’s STAR Board with ticker 688688 CH as it raises $17.2B on each exchange for a grand total of $34.4B. In Hong Kong, the company will sell 1.670 billion shares at HKD 80 ($10.32) and 1.670 billion shares in Shanghai at RMB 68.80 ($10.24), valuing the company at $313 billion.
  • The USDA and US Trade Representative reported Tuesday that China has fulfilled 50 of the 57 agricultural commitments from the Phase One trade deal as reported by Food Manufacturing.
  • Hong Kong and China equities brushed off the US selloff Wednesday as investors focus on Q3 earnings. Ping An Insurance largely disappointed in its Q3 report. Meanwhile, electric vehicles (EV) maker BYD reported strong earnings Thursday, which lifted its share price.

Key News

Charts of Asian equities looked eerily similar overnight as most were either flat or off a touch in the morning before collapsing in the afternoon. Apple’s earnings weighed on its Asian suppliers while increased global coronavirus cases and US election uncertainty continue to concern investors. Hong Kong ended the week with a thud. Hong Kong volume leaders included Tencent, which fell -2.31%, Alibaba HK, which fell -3.11%, Meituan Dianping, which fell -3.03%, Xiaomi, which gained +0.92%, BYD, which fell -1.6%, Semiconductor Manufacturing, which gained +3.41%, Ping An Insurance, which fell -1.18%, and Hong Kong Exchanges, which fell -3.44%.

There were not many places to hide on a day like today. Cash raising in advance of Thursday’s Ant Group IPO may have played a role in the selloff. Mainland China was off as well, though there was chatter that earnings season has led to some rotation as policymakers’ emphasis on technological self-reliance lifted some tech plays. It is worth noting that the Mainland’s highest volume stock was BYD, which gained +0.9%.

Alibaba’s Singles Day sales event kicks off this weekend. It is interesting to note that Mainland investors were very active buyers of Hong Kong stocks via Southbound Stock Connect with Tencent seeing 1.5X more buyers than sellers.

Tomorrow, Shanghai will play host to the 2020 League of Legends World Championship, which will pit Team Suning against South Korea’s Team Damwon. League of Legends is an exceedingly popular video game globally, but especially in China. The game is produced by Riot Games. 6,000 spectators are expected to watch the finals at Pudong Stadium and another 200 million are expected to watch online. That’s not a typo: 200 million! That’s twice the amount of people that watched the Super Bowl. Information regarding the prize money has not been disseminated, but the prize is likely a few million dollars.

On Thursday we had the release of the Five Year Plan communique, which included definitive hints that growth and technological economic sectors will be beneficiaries of the new policy platform.

Back on October 8th we reviewed Lufax Holdings prior to its IPO, which takes place today on the Nasdaq. The company is selling 175 million shares with pricing coming in at the high end of the range: $13.50. The share price suggests the company will be raising $2.363B and valuing the company at $38B.

Yesterday was by far the biggest day of Q3 earnings releases for Mainland Chinese equities as 358 Chinese companies have reported earnings thus far. As of yesterday’s close, utilizing Bloomberg’s earnings analysis tool, Mainland stocks’ total sales growth in the third quarter was +2.33% and earnings growth was +24% quarter-over-quarter. See the table below for the quarter-over-quarter changes by sector.

H-Share Update

Hong Kong sold off heavily in the afternoon to close -1.95%/-479 index points at 24,107. Volume increased +13% from yesterday, placing it 26% above the 1-year average. Breadth was off with 8 advancers and 41 decliners. The 204 Chinese companies listed in Hong Kong and within the MSCI China All Shares Index were down -1.97%. Utilities and real estate were up +0.42% and +0.07%, respectively. Meanwhile, staples -4.09%, discretionary -2.64%, communication -2.27%, financials -2.23%, health care -2.12%, energy -1.3% materials -1.15%, industrials -0.94%, and tech -0.77%. Southbound Connect volumes were moderate as Mainland investors bought a net $764 million worth of Hong Kong stocks as Southbound Connect trading accounted for 11.7% of turnover in Hong Kong.

A-Share Update

Shanghai and Shenzhen were flat until a late afternoon collapse occurred sending the indexes lower by -1.47% and -2.29% to close at 3,2224 and 2,198, respectively. Volumes were +11% from yesterday, which is about 10% above the 1-year average. Breadth was off with 573 advancers and 3,402 decliners. The 518 Mainland stocks within the MSCI China All Shares Index fell -1.11%. Discretionary and utilities gained +0.31% and +0.16%, respectively. Meanwhile, staples -1.71%, communication -1.71%, health care -1.51%, financials -1.42%, materials -1.34%, real estate -1.24%, and industrials -0.82%. Northbound Connect trading volumes were moderate as foreign investors sold a net -$849 million worth of Mainland stocks as Northbound Connect trading accounted for 7% of Mainland turnover.

Last Night’s Exchange Rates & Yields

  • CNY/USD 6.70 versus 6.72 yesterday
  • CNY/EUR 7.81 versus 7.83 yesterday
  • Yield on 1-Day Government Bond 2.05% versus 1.70% yesterday
  • Yield on 10-Year Government Bond 3.18% versus 3.19% yesterday
  • Yield on 10-Year China Development Bank Bond 3.67% versus 3.67% yesterday