Key News

Asian equities were mostly higher though South Korea and Southeast Asia disappointed to the downside. Monday’s session was a repeat of Friday’s as China’s cryptocurrency and commodity price crackdown dominated headlines sending metal stocks lower in both Hong Kong and Mainland China.

Internet stocks were also lower in Hong Kong following Friday’s downdraft in US-listed shares as investors reacted to new regulations affecting after-school tutoring companies such as TAL Education. It appears that investors are shooting first in this case as there has been a lack of transparency regarding the final regulations. It is important to note that the whole sector came down despite only a few tutoring stocks being affected.

Hong Kong investors reacted positively to the additions of BYD, Xinxyi Solar, and Country Garden to the Hang Seng Index.

Huawei denied its involvement with electric vehicle makers, sending BAIC Blue Park New Energy -10% and Changan Auto -10%.

Short-video platform and Bytedance rival Kuaishou Technology (1024 HK) released Q1 results after the Hong Kong close this morning. In a first for me, the company did not include its financial results in its press release, an early indication that its Q1 was not so stellar. While the company’s online video business is doing well as evidenced by strong topline growth driven by increased advertising, the company’s expenses and cost of revenues both increased significantly, which drove losses. Investors are moving to quality stocks with net income and positive free cash flow at the expense of hyper-growth/revenue but profitless technology stocks. However, Kuaishou may get a pass from investors due to the buzz around a potential Bytedance IPO.

• Revenues increased 36.6% to RMB 17B from RMB 12.5B, which was in line with analyst expectations
• Daily Users increased to 295mm from 253mm
• Adjusted Net Income was a loss of RMB -4.918B versus analyst expectations of RMB -5.7B
• Adjusted EPS -1.73 versus analyst expectations of RMB -1.47

H-Share Update

The Hang Seng Index opened lower but mitigated losses by grinding higher in the afternoon to close -0.16% as volume collapsed -20% from Friday, which is only 75% of the 1-year average. The 200 Chinese companies listed in Hong Kong and within the MSCI China All Shares Index were off -0.35% as real estate +0.41%, industrials +0.19%, and financials +0.13%. Meanwhile, materials -1.81%, tech -1.49% and discretionary -0.72%. Hong Kong’s most heavily traded stocks by value were Tencent, which fell -0.51%, Meituan, which fell -1.53%, Alibaba HK, which fell -1.44%, Xiaomi, which fell -2.91%, BYD, which gained +2.26%, JD.com HK, which fell -2.22%, Xinyi Solar, which fell -0.46%, AIA, which fell -0.2%, Sino Biopharma, which gained +3.19%, and Ping An Insurance, which fell -0.12%. Southbound Stock Connect volumes were light as Mainland investors bought $214 million worth of Hong Kong stocks as Southbound trading accounted for 13.6% of Hong Kong turnover.

A-Share Update

Shanghai, Shenzhen, and the STAR Board gained +0.31%, +0.75%, and +1.19%, respectively, as volume increased +3.92% from Friday, though was only 93% of the 1-year average. Breadth was decent with 2,319 advancers and 1,504 decliners. The 517 Mainland-listed stocks within the MSCI China All Shares Index gained +0.66% led by staples +1.43%, communication +1.42%, tech +1.26% and industrials +0.93% and utilities -0.81%. Meanwhile, healthcare -0.35% and discretionary -0.04%. The Mainland’s most heavily traded stocks by value were Changan Auto, which cratered -10%, East Money, which gained +2.49%, Changchun High & New Technology, which fell -5.77%, COSCO Shipping, which fell -4.13%, Kweichow Moutai, which gained +1.43%, CATL, which gained +3.3%, Tianqi Lithium, which gained +7.81%, Caida Securities, which gained +9.89%, Muyuan Food, which fell -8.58%, and Longi Green Energy, which fell -2.34%. Northbound Stock Connect volumes were moderate as foreign investors bought $293 million worth of Mainland stocks as Northbound trading accounted for 5.8% of Mainland turnover. CNY was steady, bonds were off a touch, and copper was off -1.23%.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.43 versus 6.44 yesterday
• CNY/EUR 7.84 versus 7.86 yesterday
• Yield on 1-Day Government Bond 1.49% versus 1.50% yesterday
• Yield on 10-Year Government Bond 3.09% versus 3.10% yesterday
• Yield on 10-Year China Development Bank Bond 3.54% versus 3.52% yesterday
• Copper Price -1.23%