Daily Posts

PBOC and CSRC Speeches Soothe Mainland Market

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Key News

Asian equities started the week mixed on light volumes as China outperformed. The most significant catalysts for China equities were speeches from the heads of both the People’s Bank of China (PBOC), China’s central bank, and the China Securities Regulatory Commission (CSRC), China’s version of the SEC. The PBOC’s Chairman Yi Gang stated that “China’s monetary policy is in the normal range, and still has space in terms of providing liquidity and also of moderating interest rates.” He then stated that “Monetary policy must strike a good balance between supporting growth and preventing risks. Macro-leverage ratio of China, which is the total debt to GDP ratio, was kept at a stable level.” The speech’s point was reinforced by the central bank’s decision on 1-year and 5-year loan prime rates, which were were left unchanged at 3.85% and 4.65%, respectively. Chairman Gang then went into the importance of green finance to assist in the fight against climate change.

CSRC Chairman Yi Huiman spoke Saturday night at the China Development Forum, where he said of the current market correction that “I think market fluctuations are natural phenomena as long as there is no excess leverage.” In addition to the lack of high margin leverage today, he also pointed to the rise of professional asset management in China. He then spoke on fraud protections and strengthening the IPO process.

The US and China will co-chair a climate change summit in October. When the media were not in the room, it is possible that the Alaska summit went better than is being reported. However, we have repeatedly stated that climate change is an area that can produce a small win, which could lead to bigger wins.

Baidu will list tomorrow in Hong Kong and is expected to raise $3.1 billion from the offering. The IPO is oversubscribed by more than 100X, which is somewhat misleading as the offering is split between a large institutional offering and a much smaller retail offering. This is a similar predicament to Bilibili’s Hong Kong IPO, which is oversubscribed more than 40X on the retail offering.  

It is being reported that JD.com will take a stake in local delivery company and platform Dada Nexus

H-Share Update

The Hang Seng Index had a choppy session closing -0.36% as turnover collapsed -34% following Friday’s FTSE Russell’s index rebalance, which is -13% below the 1-year average. Hong Kong volume leaders were Tencent, which gained +0.88%, Meituan, which fell -3.72% on significant Southbound Connect outflow, Xiaomi, which gained +1.9%, Alibaba HK, which fell -1.45%, HK Exchanges, which fell -2.31%, Ping An Insurance, which fell -0.9%, Sunny Optical, which fell -5.02%, China Mobile, which fell -0.66%, CNOOC, which fell -0.24%, and China Construction Bank, which gained +2.01%. Southbound Connect volumes were light as Mainland investors bought $56 million worth of Hong Kong stocks today and Southbound Connect trading accounted for 13.3% of Hong Kong turnover.

A-Share Update

Shanghai, Shenzhen, and the STAR Board gained +1.14%, +1.27%, and +0.93%, respectively, on light volumes, which were off -1.7% from Friday, off -13% from the 1-year average. Breadth was strong with 3,170 advancers and 677 decliners. Financials were strong after China Merchant Bank’s financial results and a rally in brokerages following trading data. Meanwhile, climate change-oriented securities such as clean technology were strong. Northbound Stock Connect volumes were moderate as foreign investors bought $1.101 billion worth of Mainland stocks today as Northbound Stock Connect trading accounted for 6.7% of Mainland turnover. CNY was off a touch versus the US dollar, bonds rallied, and copper’s slide continued.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.51 versus 6.51 Friday
  • CNY/EUR 7.76 versus 7.74 Friday
  • Yield on 1-Day Government Bond 1.50% versus 1.58% Friday
  • Yield on 10-Year Government Bond 3.23% versus 3.24% Friday
  • Yield on 10-Year China Development Bank Bond 3.63% versus 3.65% Friday
  • China’s Copper Price -0.70% overnight