Daily Posts

Chinese Solar Stocks Rally on Rooftop Installation Policy

Key News

Asian equities were mostly up today on light volumes as India outperformed while South Korea and SE Asia were off. According to Reuters, the Biden administration is banning several Chinese manufacturers of monocrystalline silicon and polysilicon, which are used in making solar panels, due to “forced labor allegations in Xinjiang”. There was no mention of investors not being able to hold the companies. Of the entities named, the only one with a stock listed in China that I found, Hoshine Silicon Industry (603260 CH), fell -7.15%. DAQO is the US-listed ADR of a company name, which I assume will not do well today. 

Guess what the best performing sub-sector was in China today? Solar! Coincidentally it was announced that China will embark on a push for establishing solar panels on rooftops. Though details are limited, the Mainland stocks in the solar space ripped on the news. Similar to tariffs, an import ban will simply raise the price of solar in the US (ie. inflation).

Hong Kong listed Chinese internet/growth stocks had a good day while the Mainland had a value day as Shanghai gained while Shenzhen and STAR Board saw profit-taking. The PBOC injected liquidity in the financial system by a small amount by issuing more new short term/7 day repurchase agreements than those that matured today.

Southbound Stock Connect, the trading venue that allows Mainland investors to buy Hong Kong listed stocks, reported a large buying of Meituan today while Tencent was sold. Tencent is still the largest Southbound Connect holding, though the ownership percentage of Southbound Connect has fallen from 6.95% to 6.77% of Tencent’s market cap over the last month. Meituan, #4 behind banks/yield plays CCB and ICBC, has 6.66% of its market cap held by Mainland investors, which is off its high of 7.68%.

Hong Kong healthcare stocks were up while Mainland healthcare stocks fell as the latest bulk buying of medicine took place. JD.com held its analyst investor day with strong initial feedback as multiple analysts reiterate their buy/outperform ratings, though I’ve not seen any analysts raise their price targets.

After the US market closes today, MSCI will announce its annual country classification. I don’t believe the China A inclusion nor an upgrade of South Korea to developed from EM will be announced today but a consultation to review such moves is feasible. Worth noting copper rallied today.

H-Share Update

The Hang Seng Index and Hang Seng TECH Index bounced around the room, gaining +0.23% and +0.24% respectively as volume declined -14% from yesterday to 81% of the 1-year average. The 209 Chinese companies listed in Hong Kong within the MSCI China All Shares Index gained +0.39% led by energy +1.3%, discretionary +0.97%, real estate +0.86%, healthcare +0.52%, and materials +0.25%, while utilities fell -0.75%. Hong Kong’s most heavily traded by value were Meituan, which rose +2.27%, Tencent, which rose +0.09%, Alibaba HK, which rose +1.45%, Geely Auto, which fell -1.14%, AIA, which rose +0.62%, Anta Sports, which fell -1.37%, Sunny Optical, which rose +0.42%, Xiaomi, which was flat, Genfeng Lithium, which fell -2.52%, and Chinasoft International, which fell -0.29%. Southbound Stock Connect volumes were moderate/high as Mainland investors bought $173mm of Mainland stocks as Southbound Connect trading accounted for 14.6% of HK turnover.

A-Share Update

Shanghai, Shenzhen, and STAR Board had a choppy session diverging +0.01%, -0.5%, and -1.92% respectively as volume declined -8.22% from yesterday, which is 105% of the 1-year average. The 531 Mainland stocks within the MSCI China All Shares Index rose +0.2%, led by staples +1.02%, utilities +0.9%, financials +0.69%, energy +0..45%, and materials +0.41%, while communication fell -1.38%, healthcare -1.31%, and discretionary -0.21%. The Mainland’s most heavily traded by value were recently listed Three Gorges Renewables, which fell -8.39%, Longi Green Energy, which rose +5.48%, BYD, which rose +0.65%, Tongwei Co, which rose +9.89%, COSCO Shipping, which fell -1.15%, Luxhsare Precision, which rose +4.06%, Kweichow Moutai, which rose +1.47%, Tianqi Lithium, which rose +0.62%, Chongqing Changan Auto, which fell -1.17%, and Jiangsu Hengrui Medicine, which fell -4.43%. Northbound Stock Connect volumes were moderate as foreign investors bought $478mm of mainland stocks as Northbound Connect trading accounted for 5.2% of mainland turnover. CNY appreciated a touch versus the US $ to 6.47, bonds rallied a touch, and copper +1.14%.