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Key News

Asian equities had a mixed start to the week as India and Taiwan outperformed. Meanwhile, Hong Kong and China’s morning rally ran out of steam in the afternoon session. News that banks should support private companies by increasing their loan activity appeared as the excuse for the intra-day reversal. It was a relatively quiet night on the news front though India’s struggle with coronavirus garnered attention. Over the weekend it was reported that several online education companies would be fined $80,000 though the market did not seem to care.

After the close, it was reported that Meituan will be investigated for anti-competitive practices. The company has $2.6 billion in cash on the books so we can be confident that Meituan can handle whatever fine is coming. There was some chatter about policies supporting domestic consumption circulating though not a lot of substance.

Bytedance is denying rumors it is going public, which is lifting its competitors in the online video space, including Kuaishou. The Wall Street Journal had an article on Bytedance’s move into games, which, in theory, poses a threat to Tencent and Netease though the article speaks to the company’s successful video app TikTok. TikTok has made the company a massive success with advertisers at the expense of its global rivals.

H-Share Update

The Hang Seng began the day up by +0.77% but reversed course in the afternoon session to close -0.38% on volume that rose +3% from Friday, which is just below the 1-year average. The Chinese companies listed in Hong Kong and within the MSCI China All Shares Index were off -0.98% with staples -2.04%, financials -1.57%, real estate -1.52%, utilities -1.42% healthcare -1.11%, and tech -1.02%. Hong Kong’s most heavily traded stocks by value were Meituan, which fell -0.46%, Tencent, which fell -0.55%, Ping An Insurance, which fell -1.26%, Xiaomi, which fell -2.4%, Alibaba HK, which gained +0.09%, Kuaishou Tech, which gained +6.85%, HK Exchanges, which gained +1.36%, AIA, which gained +1.18%, China Construction Bank, which fell -1.99%, and Great Wall Motor, which fell -7.31% after denying rumors of production halts due to a lack of chips. Southbound Stock Connect volumes were light as Mainland investors bought $255 million worth of Hong Kong stocks today as Southbound trading accounted for 13.7% of turnover. Tencent and Meituan were large net buy in southbound trading.

A-Share Update

Shanghai, Shenzhen, and the STAR Board gave up morning gains closing -0.95%, -0.75%, and +0.23%, respectively, as volume increased +16.74% from Friday, which is just above the 1-year average. Breadth was mediocre with 1,491 advancing stocks and 2,359 declining stocks. The Mainland stocks within the MSCI China All Shares Index were off -0.88% with communication +1.02% and staples -1.8%, industrials -1.6%, financials -1.36% and real estate -1.12%. Several healthcare subsectors outperformed while clean energy/cleantech plays were hit with profit-taking. The Mainland’s most heavily traded stocks by volume were OE Tech. which fell -0.41%, CATL, which fell -6.06%, broker East Money, which fell -1.8%, GEM Co, which gained 1.1%, Ping An Insurance, which fell -1.84%, Kweichow Moutai, which fell -1.48%, Wuliangye Yibin, which fell -1.79%, Long Green Energy, which fell -0.55%, Zijin Mining, which gained +3.43, and BYD, which fell -1.03%. I could not help but notice shoe manufacturer Huli Industrial Group was up +201% in its Mainland IPO. Northbound Stock Connect volumes were moderate as foreign investors bought $493 million worth of Mainland stocks as Northbound Connect trading accounted for 7% of Mainland turnover. CNY stayed at 6.49 versus the US dollar while bonds sold off and copper had a strong day.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.49 versus 6.50 Friday
• CNY/EUR 7.83 versus 7.84 Friday
• Yield on 1-Day Government Bond 1.65% versus 1.73% Friday
• Yield on 10-Year Government Bond 3.20% versus 3.18% Friday
• Yield on 10-Year China Development Bank Bond 3.58% versus 3.55% Friday
• China’s Copper Price +1.49% overnight