Key News

Asian equities had a positive day with China and Hong Kong returning from yesterday’s holiday in a sour mood. The G-7’s China comments might have been a factor, though the PBOC’s replacement of maturing short-term loans with the same amount tightened liquidity conditions slightly. Many investors appear to be waiting for further clarity from the Fed on their views of inflation.

Today’s market action in HK saw growth names outperform value.

Sports apparel maker Xtep (1368 HK) jumped +20.72% after prestigious private equity firm Hillhouse Group announced a $64mm equity investment and $65mm convertible bond investment in Xtep Global.  

There was a fair amount of chatter concerning a Chinese nuclear reactor in southern China having an issue.

This Friday will be a monster volume day in the US with S&P and FTSE Russell index rebalances along with Quad Witching (stock and index futures and options expiration).

H-Share Update

The Hang Seng Index opened lower and stayed there closing -0.71% at 28,638 while the Hang Seng TECH was off -0.38%. Volume increased +9.78% from last Friday which is 88% of the 1-year average. The 211 Chinese companies within the MSCI China All Shares were off -0.42% with tech +0.63%, communication +0.6% and discretionary +0.34% while utilities -3.48%, materials -2.49%, healthcare -2.18%, real estate -2.14% financials -1.46% and energy -1.14%. Hong Kong’s most heavily traded by value were Tencent +0.67%, Meituan -1.56%, BYD +4.66%, Alibaba HK +0.58%, Xiaomi flat, Ping An -1.48%, Geely Auto +4.76%, AIA -1.73%, Wuxi Biologics -3.04% and China Construction Bank -1.28%. Southbound Stock Connect volumes were moderate/higher a touch as mainland investors sold -$51mm of Hong Kong stocks as Southbound trading accounted for 14.5% of Hong Kong turnover. BYD saw strong inflow while Tencent and Xiaomi sold in size.

A-Share Update

Shanghai, Shenzhen and STAR Board diverged -0.92%, -0.83% and +0.83% as volume declined -12% from Friday. The 531 Mainland stocks within the MSCI China All Shares declined -1.23%, with communication and tech +0.11% and +0.05% while real estate -2.44%, materials -2.41%, financials -1.935, healthcare -1.86%, utilities -1.51% and industrials -1.27%. The Mainland’s most heavily traded by value were China Three Gorges +10%, BYD +2.33%, Jiangsu Hoperun Software -3.88%, Ping An -3.36%, COSCO Shipping +0.85%, Kweichow Moutai +0.65%, Tianqi Lithium -9.08%, Jiangsu Yanghe Brewery -3.45%, and East Money -1.66%. Northbound Stock Connect volumes were elevated as foreign investors sold -$804mm of mainland stocks as Northbound trading accounted for 5.1% of Mainland turnover.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.40 versus 6.39 Friday
• CNY/EUR 7.75 versus 7.77 Friday
• Yield on 1-Day Government Bond 1.50% versus 1.55% Friday
• Yield on 10-Year Government Bond 3.12% versus 3.10% Friday
• Yield on 10-Year China Development Bank Bond 3.54% versus 3.52% Friday
• Copper Price -1.15% overnight