Key News

Asian equities were mostly higher as South Korea and Australia outperformed following a strong US market rally Friday driven by disappointing payroll data that raised hopes that the Fed will keep rates lower for longer. China’s Renminbi had another strong day versus the US dollar, closing at 6.42, appreciating from 6.48 last Wednesday and 6.56 at the end of March.

Copper and aluminum were up +3.49% and +2.85%, respectively, on the Shanghai Futures Exchange while iron ore and coal were up +6.59% and 3.98%, respectively, on the Dalian Exchange. Anything metal and mining-related was up significantly today as cyclical plays outperformed.

It is worth noting that while domestic Chinese investors are chasing these inflation plays, foreign investors were focused on traditional growth stocks. Meituan (3690 HK) was off -7.07% after the CEO posted and deleted a poem that was interpreted as critical of recent government internet regulations. Another factor cited was the end of the company’s April stock and convertible bond sale. Mainland investors were net sellers of Meituan via the Southbound Stock Connect trading platform that provides Mainland investors access to Hong Kong listed stocks.

Hong Kong opened higher but slid following reports that the CSRC, China’s SEC, would tighten regulation on foreign IPOs though the CSRC subsequently denied the rumor. Mainland financial media was focused on Kweichow Moutai’s recent slide (600519 CH), which puts the widely held stock at its 200-day moving average. With commodity prices rising, the stock’s slide could be a symptom of the rotation from liquor stocks to metals and mining plays by Mainland traders. Foreign investors were net buyers of the stock today.

Weibo Q1 Earnings Review

Social media company Weibo (WB US), which is often called the Twitter of China, kicked off Q1 2021 earnings season before the US market open. The company had an easy bar to exceed versus Q1 2021, which was in the thick of China’s quarantine, though the business had a strong quarter, beating analyst expectations. It is important to remember that Weibo must compete with Bytedance for advertising dollars.

% changes are year-over-year

• Revenues increased 42% to $458.9mm from $323mm in Q1 2020 versus analyst expectations of $434mm
• Advertising and marketing revenues increased 42% to $390mm
• Monthly active users declined -4% to 530mm in March 2021 while average daily users was 230mm in March -5%
• Adjusted net income was $130.7mm versus analyst expectations of $111mm
• Adjusted EPS was $0.57 versus analyst expectations of $0.47 and Q1 2020’s $0.30
• Q2 Revenue forecast is an increase between 25% to 30%

H-Share Update

The Hang Seng opened higher but slid to close -0.05% as volume increased +6.54% from Friday, which is just above the 1-year average. The 200 Chinese stocks listed in Hong Kong and within the MSCI China All Shares Index were off -0.32% as materials +4.59%, energy +3.93%, healthcare +2.33%, and industrials +1.48%. Meanwhile, discretionary -3.73%, communication -0.85%, and real estate -0.33%. Metals, mining, precious metals, and nonferrous metals were strong outperformers. Southbound Stock Connect volumes were high as Mainland investors sold $832 million worth of Hong Kong stocks as Southbound trading accounted for 15% of Hong Kong turnover. Hong Kong’s volume leaders by value traded were Meituan, which fell -7.07%, Tencent, which fell -0.83%, Alibaba HK, which fell -2.09%, Xiaomi, which fell -0.2%, Zijin Mining, which gained +8.13%, Fosun Pharma, which gained +25.07%, energy giant CNOOC, which gained +4.59%, Ping An, which gained +0.18%, ICBC, which fell -0.2%, COSCO Shipping, which gained +7.75%, and sportswear company Li Ning, which fell -5.8% on profit-taking after a strong April rally.

A-Share Update

Shanghai, Shenzhen, and the STAR Board diverged +0.27%, +0.19%, and -0.74%, respectively as volume declined -3% from Friday, which is just below the 1-year average. 1,901 stocks advanced while 1,934 declined. The 517 Mainland-listed companies within the MSCI China All Shares Index gained +0.57% led by energy +4.77%, materials +2.31%, healthcare +2.1%, discretionary +1.53%, and utilities +1.15%. Meanwhile, staples -0.92% and real estate -0.86%. Metals, mining, iron ore, coal and rare metals were higher while semiconductors were weak. The Mainland’s most heavily traded stocks by value were Kweichow Moutai, which fell -1.26%, Zijin Mining, which gained +3.61%, COSCO Shipping, which gained +2.46%, GEM, which gained +3.29%, Wuliangye Yibin, which fell -2.98%, Tianqi Lithium, which gained +7.63%, Ganfeng Lithium, which gained +4.59%, Chongqing Changan, which gained +9.99%, BOE Tech, which gained +0.91%, and Tongwei, which gained +7.17%. Foreign investors bought $705 million worth of Mainland stocks today as Northbound Stock Connect trading accounted for 5.8% of Mainland turnover. CNY appreciated versus the US dollar to 6.42, bonds were flat, and copper was up over 3%.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.42 versus 6.43 Friday
• CNY/EUR 7.80 versus 7.82 Friday
• Yield on 1-Day Government Bond 1.27% versus 1.29% Friday
• Yield on 10-Year Government Bond 3.15% versus 3.16% Friday
• Yield on 10-Year China Development Bank Bond 3.54% versus 3.52% Friday
• Copper Price +3.49% overnight