Week in Review

• Asian equities were mostly higher on Monday as China’s Vice Premier Liu He provided reassuring comments following bond market turbulence in the wake of several SOE defaults.
• Hong Kong Chief Carrie Lam announced that shares in companies with dual listings in Hong Kong and the United States will become eligible for Southbound Connect, the trading platform that allows Mainland investors to buy Hong Kong stocks. However, companies with different share classes that confer unequal voting rights such as Xiaomi will not be eligible.
• JD Health is expected to list publicly in Hong Kong within the next two weeks. The company has already lined up prestigious investors including Hillhouse Capital, Singapore sovereign wealth fund GIC, and BlackRock.

Friday’s Key News

Asian equities ended a strong week on an uptick though volumes were anemic. Two tailwinds were the release of October’s industrial profits, which grew +28.2% year over year and the PBOC’s Q3 monetary report indicating no policy changes in the short run. The Hang Seng gained +0.28% after a +0.56% move yesterday led by real estate after industry giant Evergrande raised $1.84 billion spinning off its property management unit in an IPO. Financials had a strong day as value names play catch up to growth stocks’ fabulous year-to-date performance.

Hong Kong volume leaders were Tencent, which fell -0.51% and Meituan, which gained +1.3% and will report Q3 results on Monday. Tencent saw massive Southbound Stock Connect buying overnight totaling $185 million as the stock accounted for 1/3 of all purchases on Southbound Stock Connect today. Meituan’s trading volume was not quite as vigorous as Tencent’s, but equally impressive with nearly $100 million in net buying. Other volume leaders included Ping An, which gained +0.88%, China Construction Bank, which gained +2.18%, Xiaomi, which fell -2.07%, Alibaba HK, which gained +0.22%, and ICBC, which gained +4.28%.

Alibaba Health had a strong +6.13% gain after reporting strong earnings in Q3. Health care stocks had a strong day as coronavirus cases mount both globally and regionally. Japan and Hong Kong are seeing flare ups.

Trading in Mainland China mimicked that in Hong Kong as real estate and financials led the market higher. Notice below that for the week Shanghai was up Shenzhen was down. Interesting right. For the week foreign investors bought a healthy $2.559 billion worth of Mainland stocks. CNY was stable while Chinese bond yields look almost as tasty as Thanksgiving leftovers!

Monday is the trading day for MSCI’s Semi-Annual Index Review. Due to a holiday Monday, the Indian stocks included in the review were traded today, which caused trading volumes in India to rise to nearly 2X the 1-year average. The power of passive people!

I have the mid-section to prove I like a good India Pale Ale beer. The American Craft Beer Media Tasting Event took place in Shanghai with one of my favorites Dale’s Pale Ale scoring well while the popular New Belgium Brewing’s Voodoo IPA and Rogue Ale’s Newport Daze Hazy IPA mentioned in a fun article by Mainland media source Yicai. The beers unknown to me included Upslope’s Citra IPA and Belching Beaver’s Deftones Phantom Bridge IPA. I’ll try to hunt them down!

H-Share Update

The Hang Seng Index gained +0.28%/+75 index points following yesterday’s +0.56%/+149 index point move to close at 26,894. Volume was light, coming in at 92% of the 1-year average while breadth was positive with 29 advancers and 19 decliners. The 204 Chinese companies listed in Hong Kong and within the MSCI China All Shares Index gained +0.52% with real estate +2.28%, financials +2.2%, and health care +1.29%. Meanwhile, energy -1.16% and tech -0.97%. Southbound Stock Connect volumes were light as Mainland investors bought $685 million worth of Hong Kong stocks today. Southbound Connect trading accounted for 12.5% of Hong Kong turnover.

A-Share Update

Shanghai and Shenzhen gained +1.14% and +0.34% to close at 3,408 and 2,253, respectively, after a modest gain for the former and a modest loss for the latter. Volume was light at 88% of the 1-year average while breadth was mixed with 1,805 advancers and 1,907 decliners. The 518 Mainland Chinese stocks within the MSCI China All Shares Index gained +0.92% led by real estate +1.92%, financials +1.91% and discretionary +1.3%. Meanwhile, utilities were off -0.01%. Northbound Stock Connect volumes were light as foreign investors bought $376 million worth of Mainland stocks. Northbound Connect trading accounted for 5.6% of Mainland turnover.

Last Night’s Exchange Rates & Yields

• CNY/USD 6.58 versus 6.58 yesterday
• CNY/EUR 7.86 versus 7.82 yesterday
• Yield on 1-Day Government Bond 0.88% versus 1.00% yesterday
• Yield on 10-Year Government Bond 3.30% versus 3.29% yesterday
• Yield on 10-Year China Development Bank Bond 3.75% versus 3.75% yesterday
• China’s Copper Price +0.97%