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Clean Energy & Autos Rise, Market Shrugs Off Anti-Monopoly Meeting

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Asian equities were mostly lower overnight though on lighter volume. While US stimulus was a positive for the market, I think investors are looking forward to time with family and friends this holiday season.

Hong Kong had a positive day with the Hang Seng gaining +0.86% as investors reacted to yesterday’s announcement on expanding the number of stocks in the index from 52 to 65 or 80. Simply put, the index’s ~50% weight to financials over the last decade has been a terrible drag on performance. Adding Alibaba HK and Meituan to the index, both at 5% weights, dropped financials’ weight from 48% at the end of 2019 to 42% today. The other big news in Hong Kong was that volume leader Xiaomi gained +7.59%, hitting a 52-week and all time high as the mobile phone maker continues to roll out new products.

You may read today that the State Administration for Market Regulation had a meeting with the six largest internet companies on anti-monopoly rules. The belief is that the companies cannot be hurting their customers and merchants by trying to undercut one another. The market did not seem overly concerned as Meituan gained +3.91%, Tencent fell by a slight -0.26%, and Alibaba by an even slighter -0.16%. More importantly, Mainland investors were net buyers of Meituan and Tencent via Southbound Stock Connect (Alibaba HK is still not Southbound eligible). I remember three years ago when Mainland investors sold Tencent. Shortly thereafter, the company was unable to secure approval for new online games due to violent content.

JD Health gained +6.91% overnight. Although the stock is now eligible for Southbound Connect, Mainland investors were not significant buyers. HK is finally benefitting from the IPO of its healthcare outfit, with the stock gaining +5.65% overnight.

Other volume leaders included BYD, which gained +2.43%, Geely Auto, which gained +6.33% China Construction Bank, which fell -1.6%, Haier Smart Home, which was flat as the mainland appliance maker lists in Hong Kong, and Great Wall Motors, which gained +12.47%. Autos and clean energy had an especially strong day in both Hong Kong and the Mainland overnight as rumors of Apple’s electric vehicle brand, confirmation of new domestic policies to support clean energy, and, according to a Mainland broker, the realization that the US stimulus bill maintained solar subsidies.

Shanghai and Shenzhen were up +0.76% and +0.74%, respectively, as alcohol stocks took a breather while mid and small cap growth stocks had a good day. There was a report that 1 million people in China have received coronavirus vaccines. CNY appreciated a touch versus the US dollar while bonds rallied and copper took a hit on concerns of rising global coronavirus cases.

Bloomberg had a report noting fixed income giants Pimco and BlackRock are allocating to Chinese high yield with an emphasis on real estate developers, who make up a large part of Hong Kong’s high yield market.

Many markets in Asia will be open for half days only tomorrow.

H-Share Update

The Hang Seng grinded higher from start to finish +0.86%/+223 index points to close at 26,343. Volume rose +4% from yesterday, which is 1% more than the 1-year average while breadth was positive with 29 advancers and 21 decliners. The 204 Chinese companies listed in Hong Kong gained +0.86% led by tech +4.43%, discretionary +3.78%, staples +2.49%, utilities +2.29% and health care +0.23% while financials -0.97% and communication -0.2%. Southbound Stock Connect volumes were moderate as Mainland investors were net buyers of Hong Kong stocks.

A-Share Update

Shanghai and Shenzhen gained +0.76% and +0.74% to close at 3,382 and 2,281, respectively. Volumes were off -2.95% from yesterday but still 10% above the 1-year average while breadth was positive with 2,009 advancers and 1,691 decliners. The 521 Mainland Chinese companies within the MSCI China All Shares Index were up +0.91% led by tech +2.54%, discretionary +2.14%, industrials +2.09% and energy +1.01% while real estate -0.46%, staples -0.36% and health care -0.15%. Northbound Stock Connect volumes were moderate as foreign investors bought $663 million worth of Mainland stocks today.