May Economic Release Overview

Takeaway: The 3 pm local time release came after the Mainland China close so was a non-factor in today’s market action. Yes, the year-over-year comparisons will largely weaker, but, as China moves farther away from its Q1 2020 quarantine, this should shock no one as the low base comparison from a year ago becomes “harder”. The release came prior to the close in Hong Kong but had a minor effect on stocks.

Key News

Asian equities were largely off as Japan, Australia, and South Korea managed small gains. Investors took profits in growth names in both China and Hong Kong ahead of the Fed meetings today. Selling was indiscriminate on light volume though several negative catalysts did not help.

China will release strategic reserves in commodities in its attempt to cool high commodity prices. A lithium miner also announced that it will raise production. This led to a nasty day in materials, metals, auto, and electric vehicle (EV) stocks. EV and auto names were also hit with speculation that the global chip shortage may continue to crimp production. Again, these stocks have been top performers and fit with the narrative that the best performers lately did the worst today.

Chinese tutoring stocks were weak overnight on reports a new regulator will be created to oversee the space. The attempt to limit the costs of parenthood by focusing on tutoring companies

Healthcare stocks were hit on chatter that new bulk drug purchases will have new rules. Mama said there would days like this though volumes were light, indicating buyers did not step up to meet sellers as they wait for clarity in US Fed policy at the press conference at 2:30pm EST.

Angelalign Technology, a maker of teeth braces, went public in Hong Kong, gaining +140%.

We all know about Three Gorges Dam. The hydro-electric utility’s recent IPO is going well (600905 CH).

There was some Mainland chatter about US asset manager Capital Group raising its stake in Kweichow Moutai.

Details are emerging on China’s Uber for truckers Full Truck Alliance (YMM US), which is expected to list on June 21^st. The company is pricing the stock between $17 and $19 which would raise $1.6B for the company and value it at $20B.

H-Share Update

The Hang Seng Index and Hang Seng Tech Index opened lower and stayed there closing -0.7% and -1.64%, respectively, on light volumes that fell -3.71% from yesterday, which is 85% of the 1-year average. The 211 Chinese stocks listed in Hong Kong and within the MSCI China All Shares Index were down -1.43% with utilities +0.94%, energy +0.54% and financials +0.4% while materials -4.37%, healthcare -3.69%, discretionary -2.38%, tech -2.14%, industrials -1.81% and staples -1.37%. Hong Kong’s most heavily traded stocks by value were Chinese braces maker Angelalign Technology, which gained +131%, Meituan, which fell -4.5%, Tencent, which fell -0.58%, BYD, which fell -8.2%, Alibaba HK, which fell -1.45%, Xiaomi, which fell -0.71%, Ping An Insurance, which fell -0.56%, Geely Auto, which fell -4.11%, Wuxi Biologics, which fell -3.39%, and AIA, which gained +1.22%. Southbound Stock Connect flows were moderate as Mainland investors sold -$339 million worth of Hong Kong stocks today as Southbound trading accounted for 12.9% of Hong Kong turnover. Meituan, Tencent and Xiaomi were sold.

A-Share Update

Shanghai, Shenzhen, and the STAR Board were down -1.07%, -2.32%, and -2.88%, respectively, as volume declined -6.71% from yesterday, which is 99% of the 1-year average. 1,075 stocks advanced while 2,783 stocks declined. The 531 Mainland stocks within the MSCI China All Shares Index were down -1.83% with real estate +1.11% and financials +0.22% while discretionary -3.07%, healthcare -3.06%, materials -2.98%, industrials -2.59%, communication -2.31%, staples -1.38% and utilities -0.27%. The Mainland’s most heavily traded stocks by value were China Three Gorges, which gained +7.14%, BYD, which fell -9.18%, broker East Money, which fell -6.55%, Jiangsu Hoperun Software, which gained +3.45%, Longi Green Energy, which fell -5.07%, COSCO Shipping, which fell -5.17%, Eastroc Beverage, which gained +10%, CATL, which fell -5.58%, Kweichow Moutai, which fell -1.6%, and Ganfeng Lithium, which fell -9.13%. Northbound Stock Connect volumes were moderate as foreign investors sold -$63 million worth of Mainland stocks today as Northbound Connect trading accounted for 5.7% of Mainland turnover. CNY was flat versus the US dollar, bonds were off a touch, and copper was down -1.85%.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.40 versus 6.41 yesterday
• CNY/EUR 7.76 versus 7.77 yesterday
• Yield on 1-Day Government Bond 1.55% versus 1.60% yesterday
• Yield on 10-Year Government Bond 3.13% versus 3.12% yesterday
• Yield on 10-Year China Development Bank Bond 3.54% versus 3.52% yesterday
• Copper Price