Upcoming Event
Join us on Tuesday, May 25th at 8:20 am for our virtual mid-year conference:
Innovation: The Next Phase of China’s Secular Growth
Featuring the CFO of NIO Steven Feng and Former US Ambassador to China Max Baucus.
Click here to register.

Key News

Asian equities were mixed overnight following a risk-off day in the US as China remains on holiday until tomorrow. India outperformed off a low base as the country continues to grapple with a surge in new coronavirus cases. Thailand was an outlier to the downside. Hong Kong ended the session lower as banks outperformed on anticipation of rising interest rates and growth stocks took a hit. All told, it was a fairly quiet day in Asia as investors eagerly await the reopening of China’s markets tomorrow. Yesterday, we heard that the vaccine situation was improving in Europe. As economies reopen, there will be more demand for China exports, which rose nearly 40% in the first quarter of 2021.

CICC analysts do not believe there will be any more monetary policy tightening in 2021. We are likely to see some credit tightening, but a continuance of easy money policies. Most rate benchmarks have remained relatively stable in China so far this year.

Despite coming off a quarter where the year-over-year earnings comparisons looked amazing due to the low base, earnings, especially for quality growth names, could still go higher in Q1. Some companies have already reported positive earnings.

In an interview with the Financial Times on Monday, Secretary of State Anthony Blinken, when asked, refrained from describing the current issues with China as amounting to a Cold War and listed off all of the ways that the US is working constructively with China.

We could see a slight growth slowdown in China, i.e. the backside of being the first-in and first-out of coronavirus. China is likely to be the first to slow down somewhat following recovery precisely because it was the first to recover. However, the Chinese economy will be buoyed by strong demand for exports from the rest of the world.

The global semiconductor shortage continues, but few are discussing its potential impact on China. The shortage may have an impact on China in terms of electric vehicles, the further proliferation of smartphones, and the internet. However, it is also a golden opportunity to become a net exporter of the technology, though China is far from becoming as much.

Mutual funds’ announced their Q1 2021 China holdings recently. Fund managers reduced their exposure to companies in the Apple supply chain but maintained or increased their exposure to green technologies and semiconductors. They are also overweight in healthcare and underweight in consumer staples.

H-Share Update

The Hang Seng opened higher but fell into the close to end the session down -0.49% on volumes that remain low as Southbound Stock Connect remains closed. Hong Kong’s most heavily traded stocks by value were ICBC, which gained +0.05%, Bank of China, which gained +0.03%, China Construction Bank, which gained +0.10%, PetroChina, which gained +0.05%, China Petroleum & Chemical was flat, CNOOC, which gained +0.15%, Xiaomi, which fell -0.10%, and Ping An Insurance, which fell -0.10%.

A-Share Update

Mainland markets will be closed until Thursday.