Key News

Asian equities were mostly higher overnight as Hong Kong and Mainland China gained as inflation fears subsided after a good day for US equities on Monday. Volumes were higher all around and growth stocks received some much-needed attention from buyers. Meanwhile, CNY appreciated to near its three-year high of 6.4 per US dollar.

Inflation concerns were abated by a fall in most commodity prices, though copper still saw a gain overnight, and investors’ realization of CNY’s strength versus the US dollar so far this year. As such, investors appear to be rotating back into growth and consumer names and the value/cyclical rotation may have peaked.

Video game companies gained on news that China has released new game approvals for the month, which included multiple approvals of games developed by Tencent, Netease, XD, and Archosaur Games.

In financials, brokers rose on a rosy day for equities while bank stocks gained as investors often use them to gain exposure to currency beta.

Health care names were mostly higher, especially pharmaceuticals. However, Sino Biopharma was a laggard within the sector after its Q1 earnings release.

Online real estate platform Beike denied rumors that the company is being investigated for monopolistic behavior. The recent IPO likely has not yet reached the critical mass at which it would become a target for regulatory scrutiny, though it is growing.

H-Share Update

The Hang Seng gained +1.75% to close at 28,910 on volumes that rose significantly from yesterday’s volume slump. The 200 Chinese companies listed in Hong Kong and within the MSCI China All Shares Index were up +2.52% led by communication services +3.94%, information technology +3.37%, consumer discretionary +2.49%, financials +2.49%, and consumer staples +1.85%. Hong Kong’s most heavily traded stocks by value were Bank of China, which gained +0.96%, Sino Biopharma, which fell -2.87%, ICBC, which gained +1.41%, CCB, which gained +1.29%, and Xiaomi, which gained +4.13% as the company’s stock will be added back into FTSE indexes. Mainland investors bought a net HKD 7.9 billion worth of Hong Kong stocks via Southbound Stock Connect, which accounted for 13.6% of Hong Kong turnover.

A-Share Update

Shanghai, Shenzhen, and the STAR Board gained +2.40%, +1.91%, and +2.95%, respectively, on volumes that were +30% higher than yesterday. The 517 Mainland listed stocks included in the MSCI China All Shares Index were up +3.36% led by consumer staples +4.58%, health care +3.14%, communication services +2.83%, and consumer discretionary +2.63%. The most heavily traded stocks on the Mainland by value traded were Inner Mongolia Baotou Steel, which gained +0.63%, Chongqing Iron & Steel Co., which fell -0.41%, BOE Tech, which gained +0.46%, and East Money Information, which gained +7.44%. Foreign investors bought a net RMB 21.7 billion worth of Mainland stocks via Northbound Stock Connect, which accounted for 7.7% of the market share.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.41 versus 6.42 yesterday
• CNY/EUR 7.85 versus 7.84 yesterday
• Yield on 1-Day Government Bond 1.53% versus 1.50% yesterday
• Yield on 10-Year Government Bond 3.09% versus 3.09% yesterday
• Yield on 10-Year China Development Bank Bond 3.54% versus 3.52% yesterday
• Copper Price +0.84%