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Hong Kong Rallies On Return From Holiday, My Charts Don’t Lie

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Key News

Asian equities were largely off as Hong Kong had a strong day along with Taiwan, which returned from holiday by ripping +3.54%. It was a fairly quiet night though Hong Kong saw a strong reversal as the Hang Seng Index opened down by -0.36% and traded down to -0.79% before reversing to close up +1.1% at 31,084.

Many brokers speculated that the Hong Kong market might waver without Southbound Connect flows (Mainland investors buying Hong Kong stocks through the Connect platform). Hong Kong’s rally was broad as the 196 Chinese companies listed in Hong Kong and within the MSCI China All Shares Index gained +1.35%. Hong Kong volume leaders were Tencent, which gained +1.68%, Alibaba HK, which gained +1.06%, Meituan, which gained +2.78%, Ping An Insurance, which gained +2.87%, Kuaishou Tech, which gained +2.98%, HengTen Networks, which gained +8.27%, JD.com HK, which gained +6.44% on yesterday’s JD Logistics IPO filing, HK Exchanges, which gained +2.83%, Xiaomi, which fell -0.17%, and energy giant CNOOC, which gained +4.51%. CanSino biologics surged +8.39% on their vaccine rollout.

I had previously mentioned that China will be a significant beneficiary of most investors plowing money into broad Emerging Market ETFs. I noticed one of the largest Emerging Market ETFs saw nearly $1 billion of inflow in the last week despite many Asian markets being closed. Last night, the manager had to put that cash to work in the Taiwanese stocks in the index as the market reopened. Unsurprisingly, one of its top holdings Taiwan Semiconductor gained +4.91%. We can test our theory as Kweichow Moutai is their largest A-Share holding, meaning they need to buy it tonight.

Yicai reported that the State Post Bureau, China’s mail service, announced parcel deliveries increased +224% over the first five days of Chinese New Year’s from last year to 365 million packages. This is a pretty good validation of our thesis yesterday that limited travel during the holiday would create unusual beneficiaries.

Remember the Shakira song “My Hips Don’t Lie?” I am producing a remix called “My Charts Don’t Lie.” I had the thought after reading a Financial Times article saying China would stop rare earth exports to the US, despite the article’s admission that China needs to import certain rare earth metals, and the Wall Street Journal article insinuating that the Ant Group IPO was pulled to prevent certain individuals from benefitting from it. I disagreed as there had already been chatter on the fintech company avoiding financial regulatory oversight. Forget the news and look at the charts. Apologies if you spend all day humming the catchy song!

Baidu (BIDU) and iQiyi (IQ) are expected to report earnings after the close in New York today.

H-Share Update

The Hang Seng opened lower and grinded higher to close +1.1% at 31,084. Volume was off -5% from yesterday but still 145% of the 1-year average while breadth was decent with 29 advancers and 21 decliners. The 196 Chinese companies listed in Hong Kong and within the MSCI China All Shares Index gained +1.35% led by energy +2.68%, materials +2.27%, financials +2.15%, communication +1.62%, discretionary +1.34%, tech +1.21%, health care +1% and industrials +0.51%. Meanwhile, staples and real estate were off -0.44% and -0.4%. Southbound Connect is still closed.

A-Share Update

Shanghai, Shenzhen & STAR Board - Closed