Didi IPO Wednesday, Foreign Investors Buy China in Size, Week in Review
Week in Review
- The results for the 618 shopping festival came in Monday. JD.com and Alibaba sold a combined 136.5 billion worth of goods during the promotional period, which lasted from June 1st to June 18th.
- Full Truck Alliance (YMM US) went public in the US on Tuesday. Full Truck’s business can be summed up as China’s Uber for truck drivers as it connects shippers with truckers. Shares in the company were up +13% on Tuesday but have clawed back initial gains.
- Online delivery company Missfresh updated its IPO prospectus on Wednesday, adding further details. The company plans to raise as much as $366 million, valuing the company at up to $3.9 billion, in its Friday IPO.
- It was announced Thursday that China’s government will embark on a push to install solar panels on rooftops. Though details remain limited. Mainland-listed solar stocks gained on the news.
Didi will list on the New York Stock Exchange (NYSE) next Wednesday after the company’s shares are priced on Tuesday. The company will sell 288 million shares (331.2 million if the “greenshoe” is filled – extra shares available if demand exists named after Stride Rite which first used this option back when it was called the Green Shoe Manufacturing Company) at a price between $13 to $14, which places the offering size, i.e. the amount of money the company will raise, between $3.7 and $4 billion ($4.3 to $4.6 if the greenshoe is allocated). This would value the company at around $73 billion, according to Bloomberg, which is lower than many expected. There has been a great deal of fanfare surrounding this deal.
Asian equities ended the week on a high note as investors cheered the US infrastructure deal. The materials sector was the best performer, driven by metals and mining-related stocks in China and Hong Kong. Results from the stress tests run on US banks also helped financials.
Hong Kong and Mainland China were the best-performing markets regionally as investors also cheered yesterday’s PBOC liquidity injection, which helped dispel tightening concerns. It is worth noting that PBOC has been telling investors no tightening for months.
Hong Kong saw growth stocks outperform as internet stocks were the market leaders.
Foreign investors were extremely active overnight. Northbound Stock Connect, the Hong Kong-based trading platform allowing foreign investors access to Shanghai and Shenzhen-listed stocks, saw $2.19 billion worth of net buying, which brings the weekly inflow total to a healthy $3.25 billion. That is almost 10% of year-to-date inflows and 10% of 2020 inflows in a week.
CNY appreciated versus the US dollar, which helped foreign investors in Mainland stocks. Several brokers noted the technical setup of the Shanghai, Shenzhen, and Hang Seng, which could make a run towards their all-time highs.
S&P Global Ratings reaffirmed China’s sovereign credit rating at A+ with a stable outlook, driven by S&P’s GDP outlook of 8.3% in 2021
Kuaisou Tech (1024 HK) ripped +7.99% after reaching 1 billion monthly active users and winning sponsorship of the upcoming summer and winter Olympics.
MSCI announced its Global Market Accessibility Review last night. Neither China A nor South Korea had a consultation announced. For China A and South Korea, along with Brazil, India, and Turkey, the lack of MSCI futures was cited. To know China A inclusion is being stopped due to the lack of MSCI futures is frustrating. That being said, there remain other issues such as the 30% foreign ownership limit and China’s settlement on trade date (as opposed to trading date plus 2 here). We may need to cry for Argentina as it will be downgraded out of the MSCI Emerging Markets Index.
The Hang Seng Index and Hang Seng TECH Index ripped higher +1.4% and +2.44%, respectively, as volume increased +17% from yesterday, though remained just below 95% of the 1-year average. The 209 Chinese companies listed in Hong Kong and within the MSCI China All Shares Index gained +1.65% led by materials +3.29%, communication +2.49%,discretionary 2.49%, staples +1.6%, energy +1.47%, financials +1.24%, and tech +099%. Meanwhile, real estate -0.18%. Hong Kong’s most heavily traded stocks by value were Tencent, which gained +2.66%, Meituan, which gained +4.76%, Alibaba HK, which gained +2.57%, Hong Kong Exchanges, which gained +3.05%, Kuaishou Tech, which gained +7.99%, Xiaomi, which gained +1.28%, Geely Auto, which fell -0.19%, China Mobile, which gained +2.48%, 3SBio, which fell -16.61%, and JD.com, which gained +3.07%. Southbound Stock Connect volumes were moderate/high as Mainland investors bought $460 million worth of Hong Kong stocks as Southbound Connect trading accounted for 13.4% of Hong Kong turnover.
Shanghai, Shenzhen, and the STAR Board gained +1.15%, +1.11%, and +2% on volume that was +5% higher than yesterday, which is 111% of the 1-year average. The 532 Mainland stocks within the MSCI China All Shares Index gained +1.87% led by materials +3.24%, healthcare +2.56%, staples +2.31%, financials +2.11%, energy +2.11%, industrials +1.82%, and tech +1.12%. Meanwhile, utilities -0.19%. The Mainland’s most heavily traded stocks by value were broker East Money, which gained +7.21%, China Three Gorges, which fell -5.87%, Jiangsu Hoperun Software, which fell -5.53%, COSCO Shipping, which gained +8.47%, Longi Green Energy, which gained +2.39%, Luxshare Precision, which gained +2.55%, Kweichow Moutai, which gained +2.11%, BYD, which gained +0.04%, Wuliangye Yibin, which gained +2.47%, and Luzhou Laojiao, which gained +1.7%.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.45 versus 6.47 yesterday
- CNY/EUR 7.71 versus 7.72 yesterday
- Yield on 1-Day Government Bond 1.50% versus 1.53% yesterday
- Yield on 10-Year Government Bond 3.08% versus 3.08% yesterday
- Yield on 10-Year China Development Bank Bond 3.50% versus 3.50% yesterday
- Copper Price -0.65% overnight