Daily Posts

Mainland Mojo Risin’, Renminbi Sticks The “Triple Lindy” Unnoticed

Key News

Markets do not like uncertainty and Biden’s win eliminates a big one, fueling a big rally overnight in Asia, accompanied by strong volumes. Unfortunately, Pfizer’s positive vaccine news came after Asia’s markets had closed. As the middle person in global trade, China’s strong trade data helped the region as well. Hong Kong and Mainland China had a strong day on the belief President Biden will engage with China versus President Trump’s confrontational style. Hong Kong and Mainland technology, 5G, and telecom stocks all performed well under this assumption.

Hong Kong had strong volumes that were 140% of the 1-year average as volume leaders were Tencent +1.3%, Alibaba HK +2.91%, Xiaomi +1.79%, Meituan Dianping +2.57%, Semiconductor Manufacturing +2.49%, Ping An +2.69%, Sunny Optical +8.1%, and Geely Auto +0.72%. Shanghai and Shenzhen had a strong day +1.86% and +2.25%, respectively, as the growth-oriented Shenzhen outpaced Shanghai. All sectors were in the green today. Foreign investors bought a very healthy $2.984 billion worth of Mainland stocks today, titled toward Shenzhen growth names. The Shenzhen Composite closed a whisker above the 7/13/20 high (2,329). Let’s see if it maintains the momentum going forward as a breakout from here could lead to a strong run.

Takeaway: The release was strong across the board as exports and imports increased as China’s trade balance with most countries was led by increases in exports. China’s trade data is similar to a poker tell as it provides an indication of not only the state of China’s domestic economy but also the global economy. The global economy is requesting more goods from China providing an indication that global economies are percolating.

“No respect” was Rodney Dangerfield’s comedic punchline from the 1980s. “Back to School” was a Dangerfield movie notable for his “Triple Lindy” dive, bouncing off three diving boards. The bad 1980s special effects aside, has anyone noticed CNY at 6.61? Non-USD Emerging Market Bonds are down about -2.5% YTD while Chinese bonds are up +7% YTD. I know this based on my personal investments. The amount of interest here in the US for Chinese bonds?  Zero Point Zero (0.0%).  If I gave away  renminbi-denominated bonds on the street corner for free, I doubt anyone would accept them. Adding insult to injury are investor driven inflows into non-USD EM bonds just as the majority of EM central banks are cutting rates, which hurts their currency versus the US dollar. China? No interest rate cuts. Want to be the ultimate contrarian? Buy Chinese bonds. Need help with tickers? Email me. I expect no one to email me.  

New Orient Education (EDU US) relisted in Hong Kong today with ticker 9901 HK led by Credit Suisse, BofA Securities and UBS. I’m still making my way through the 461-page Hong Kong filing. Biotech company RemeGen Co. (9995 HK) rose +33.97% as it also went public today, selling 76 million shares at HKD 52.10, raising $487 million.

Wednesday post-US close we will receive MSCI’s pro-forma for the monthly Semi-Annual Index Review. This is a busy week for US-listed Chinese companies’ earnings with Tencent Music Entertainment (TME US) expected tomorrow.

2020 threw another anomaly at us as there was a very minor earthquake in New England yesterday.

Takeaway: +0.7% year over year while declining -0.5%. No one cares about this release except for gold enthusiasts who will notice that gold reserves declined slightly.

H-Share Update

The Hang Seng opened higher before trading flat to close +1.18%/+303 index points at 26,016. Volume was 140% of the 1-year average while breadth was strong with 35 advancers and 13 decliners. The 204 Chinese companies within the MSCI China All Shares Index gained +1.35% led by tech +2.89%, financials +1.73%, industrials +1.68%, materials +1.5%, discretionary +1.46%, health care +0.24% etc. Southbound Connect volumes were elevated as Mainland investors bought $349 million worth of Hong Kong stocks today as Southbound Connect trading accounted for 12% of Hong Kong turnover.

A-Share Update

Shanghai and Shenzhen opened higher and kept grinding higher to closer +1.86% and +2.25% at 3,373 and 2,333, respectively. Volume was 22% higher than Friday and 135% of the 1-year average. Breadth was wicked strong with 3,392 advancers and 401 decliners. The 518 Mainland stocks within the MSCI China All Shares Index rose +2.34% led by tech +3.86%, materials +2.62%, financials +2.48%, energy +2.43%, staples +2.24%, health care +2.23% etc. Northbound Connect volumes were moderate/high as foreign investors bought $2.984 billion worth of Mainland stocks today and Northbound Connect trading accounted for 7% of Mainland turnover.

Last Night’s Exchange Rates & Yields

  • CNY/USD 6.62 versus 6.61 Friday
  • CNY/EUR 7.87 versus 7.85 Friday
  • Yield on 1-Day Government Bond 1.81% versus 1.61% Friday
  • Yield on 10-Year Government Bond 3.24% versus 3.21% Friday
  • Yield on 10-Year China Development Bank Bond 3.71% versus 3.67% Friday