Quiet Night in Asia, China Markets See Profit Taking
Asia had a quiet night with little market-moving news. Mainland China was hit with a bout of profit-taking following a nice move higher since early May. Shanghai closed just below the 3,600 level while Shenzhen closed at 2,400. Let’s see if these big, round number index levels can act as support.
CNY was off versus the US $ following the recent jawboning from policymakers after a strong move. Since June 1st 2020 to today, CNY has appreciated by +10.92% versus the US dollar.
Vice Premier Liu He spoke with Treasury Secretary Yellen yesterday about “The Biden-Harris Administrations’ plans to support a continued strong economic recovery and the importance of cooperating on areas that are in U.S. interests, while at the same time frankly tackling issues of concerns,” which, though vague, reinforced China’s desire for more dialogue. Mainland and foreign media noted President Xi’s plans to “present a true, multi-dimensional and panoramic view of China.”
Hong Kong was uniformly mixed as healthcare was off despite rising cases of coronavirus in Southeast Asia.
Alibaba held a cloud summit last week. The company plans to take multiple steps to grow its cloud business, including integrating Ali Cloud with its work communication service Ding Talk and expanding low-cost offerings. CICC analysts believe the company will continue to expand its cloud service into new industries while maintaining profitability due to economies of scale.
The Hang Seng was off -0.58% as volume shrank -4.31% which is 92% of the 1-year average. The 211 Chinese companies listed in HK within the MSCI China All Shares were off -0.57% with energy +1.41%, utilities +0.92% and industrials +0.17% while healthcare -1.71%, materials -1.37%, discretionary -1.03% and tech -0.94%. HK’s most heavily traded by value were Tencent +0.08%, Meituan -0.38%, Alibaba HK -1.74%, Geely Auto +5.94%, Xiaomi +0.34%, Ping An -0.48%, AIA -1.25%, JD logistics -087%, CK Asset +2%, and JD.com HK +0.67%. Southbound Stock Connect volumes light as mainland investors bought $87mm of HK stocks as Southbound Connect trading accounted for 11.1% of HK turnover.
Shanghai, Shenzhen and STAR Board were off -0.76%, -1.18% and -2.31% as volumes were off -3.6% from yesterday which is 110% of the 1-year average. There were 1,110 advancing stocks and 2,797 declining stocks today. The 532 mainland stocks within the MSCI China All Shares were off -1.13% led by energy +0.33% while healthcare -2.33%, tech -1.83%, communication -1.44%, staples -1.08%, discretionary -1.04% and industrials -0.86%. Northbound Stock Connect flows were moderate/high as foreign investors sold -$315mm of mainland stocks as Northbound Connect trading accounted for 5.1% of mainland turnover. CNY was off a touch versus the US $ to 6.39 while bonds were off and copper off a touch.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.38 versus 6.38 yesterday
- CNY/EUR 7.79 versus 7.81 yesterday
- Yield on 1-Day Government Bond 1.70% versus 1.71% yesterday
- Yield on 10-Year Government Bond 3.07% versus 3.04% yesterday
- Yield on 10-Year China Development Bank Bond 3.54% versus 3.52% yesterday
- Copper Price -0.03% overnight