Daily Posts

Internet Platform Companies Bounce on Bottom Fishing

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Key News

Asian equities were largely higher led by growth stocks though almost universally on light volumes following a strong day in US equities. South Korea’s Kosdaq returned +1.48% versus the widely followed Kospi, which rose +0.7%. While we’d like to see rebounds on high volumes, Asian investors are focused on US Treasury yields with the 2 pm EST Wednesday Fed forecast release at the top of mind.  

The news front was quiet, though I suspect that the nattering nabobs of negativity will push an afternoon speech by President Xi regarding China’s need to raise its technological know-how. “Platform” companies, the large internet companies, will not be allowed to practice anti-competitive practices, which is nothing new. Don’t Chinese policymakers need these companies?! These companies play a critical role in helping China raise domestic consumption, which is a key policy initiative. An institutional broker stated the same, saying that the market already knows this and did not consider it a factor today. A local broker noted that nibbling at the names might indicate the worst is already priced in.

The Hang Seng Index opened higher up +0.67% and stayed there closing at 29,027 while the 200 Chinese companies listed in Hong Kong and within the MSCI China All Shares Index rose +1.65%, led by all the stocks that were kicked to the curb yesterday. Tech, healthcare, discretionary, and staples were all higher. Cyclical/value stocks underperformed with energy, material, and financials off a touch. Hong Kong volumes were off -20% from yesterday, which is just above the 1-year average. Hong Kong volume leaders by value were Tencent, which gained +0.4%, Xiaomi, which rose +8.01% on its removal from the EO list, Meituan, which was up +3.91%, Alibaba, which was flat, GCL Poly Energy, which rose +9.57% after issuing a net loss warning for 2020 after 2019 results were driven by an equity interest sale (below is a profile of GCL), China Construction Bank, which rose +1.61%, Hong Kong Exchanges, which gained +1.61%, AIA, which fell -2.5%, China Mobile, which rose +1.92%, and, which gained +2.73%.

Southbound Connect volumes were moderate as Mainland investors bought $678 million worth of Hong Kong stocks today as Tencent and Xiaomi saw big inflows. Meituan saw net outflow as Southbound Connect trading accounted for 12.6% of Hong Kong turnover. Shanghai, Shenzhen, and STAR diverged +0.78%, +1.08%, and -0.25%, respectively, while the Mainland stocks within the MSCI China All Shares Index gained +0.91%. Mainland volumes were off -8.85% from yesterday and -15% below the 1-year average. Growth stocks within staples and healthcare rebounded, while liquor stocks, electric vehicle plays, and cleantech names also rebounded. Real estate stocks and financials had a strong day driven by value hunters. Kweichow Moutai rebounded +1.77% though it saw a small amount of Connect outflow. Northbound Stock Connect volumes were moderate/high as foreign investors bought $857 million worth of Mainland stocks today as Northbound Connect trading accounted for 6.3% of Mainland turnover. Bonds rallied today while CNY was flat versus the US dollar and copper eased a touch. 

The Wall Street Journal reported that Alibaba is being asked to divest its media holdings. For whatever it’s worth, I have not seen this reported in China. Anywhere. 

According to Bloomberg, private equity giant Warburg Pincus cut Ant Group’s valuation range from $200B to $250B, which is down from the $280B pre-IPO level but still well above the 2018 $150B valuation. While this may be a touch high, it is not the end of the world for the company. This could be interesting as analysts will do a sum-of-the-parts (SOTP) valuation on Alibaba.

GCL-Poly Energy Holdings – Profile

GCL-Poly Group is currently one of the largest TYN Photovoltaic companies in the world. GCL-Poly is committed to promoting the global popularization of TYN applications. After several years of development, it has become the world’s largest supplier of photovoltaic materials and the world’s most professional photovoltaic system plan provider and has many large photovoltaic power sources worldwide. GCL-Poly has over 2GW of photovoltaic power stations that have been built and are to be developed in the United States, South Africa, China, etc.; in terms of TYN System integrated business, it provides TYN power station investors with projects including project development, design, procedure, construction, financing, and operation One-stop TYN system solution.

Last Night’s Exchange Rates & Yields

  • CNY/USD 6.50 versus 6.51 yesterday
  • CNY/EUR 7.75 versus 7.75 yesterday
  • Yield on 1-Day Government Bond 1.65% versus 1.50% yesterday
  • Yield on 10-Year Government Bond 3.27% versus 3.26% yesterday
  • Yield on 10-Year China Development Bank Bond 3.67% versus 3.67% yesterday
  • China’s Copper Price -0.13% overnight