Key News

Asia had a mixed night as Pakistan underperformed following MSCI’s announcement last week that the country would be downgraded out of its emerging markets index. Meanwhile, Hong Kong’s morning session was canceled due to a storm though afternoon volumes were robust. Both Mainland China and Hong Kong saw growth, including internet stocks and healthcare, outperform value as healthcare stocks rallied on the Delta variant news. The STAR Board was the best performer regionally after  gaining +1.83%

The PBOC’s quarterly meeting notes were positive on China’s economic recovery post-pandemic. Meanwhile, the bank injected liquidity into the financial system for the third day in a row. Over the weekend, it was reported that China’s industrial profits increased by +36.4% year-over-year, though the report was not a market-moving event.

Didi’s IPO books will close today at 5 pm, the stock will price on Tuesday, and the company’s US IPO is likely to occur on Wednesday. Once the books close today, we will receive final details on the size of the offering, which is expected to be worth nearly $4 billion. Investor interest is quite strong and the offering mat price at $14 per share, the top of its range. Several brokers noted strong investor demand. Didi is a highly regarded company.

It is interesting that Missfresh’s US IPO saw shares decline -$3.34/-25% Friday. An institutional broker noted last week that it would be selling a block of US-listed Chinese stock as mutual funds need to disclose their holdings at quarter-end. China internet regulation has been front page news, making it easier for a manager to kick a holding out of their top ten, rather than spending their day defending it. This is exactly why I believe US-listed China internet stocks will rally. Overnight, Hong Kong-listed internet stocks rallied overnight following a strong rebound last week.  

H-Share Update

The Hang Seng Index and Hang Seng TECH Index diverged -0.07% and +0.5%, respectively, as turnover slumped -35% in the shortened session, which is just 62% of the 1-year average. The 209 Chinese stocks listed in Hong Kong and within the MSCI China All Shares Index gained +0.65% led by discretionary +2.39%, healthcare +1.79%, and tech +0.31%. Meanwhile, materials -1.92%, energy -1.51%, and financials -0.86%. Hong Kong’s most heavily traded stocks by value were Tencent, which fell -0.5%, Alibaba HK, which gained +2.97%, Meituan, which fell -0.42%, sports apparel maker Li Ning, which gained +13.62% following Nike’s strong results, Geely Auto, which fell -2.11%, Anta Sports, which gained +5.45%, also after Nike’s strong results, Wuxi Biologics, which gained +2.32%, AIA, which fell -1.39%, Ping An Insurance. Which fell -0.76%, and JD.com HK, which gained +1.79%. Southbound Stock Connect volumes were moderate despite the shortened session as Mainland investors sold $76 million worth of Hong Kong stocks as Southbound trading accounted for 16.3% of Hong Kong turnover.

A-Share Update

Shanghai, Shenzhen, and the STAR Board also diverged -0.03%, +0.88%, and +1.83%, respectively, as volume declined -3.22% from Friday, which is still 107% of the 1-year average. The 532 Mainland stocks within the MSCI China All Shares Index gained +0.34% led by healthcare +1.7%, staples +1.31%, communication +1.22%, and industrials +0.92%. Meanwhile, energy -2.76%, financials -1.62%, and real estate -1.52%. The Mainland’s most heavily traded stocks by value were China Three Gorges, which fell -7.84%, BYD, which gained +3.53%, broker East Money, which gained +0.24%, Longi Green Energy, which fell -0.53%, COSCO Shipping, which gained +2%, Jiangsu Hoperun Software, which gained +0.02%, CATL, which gained +3.71% after locking in a Tesla agreement, Fosun Pharma, which gained +10%, Tongwei, which gained +5.91%, and Luxhshare Precision, which gained +0.57%. Northbound Stock Connect volumes were moderate/light as foreign investors sold -$627 million worth of Mainland stocks as Northbound Connect trading accounted for 3% of Mainland turnover.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.46 versus 6.46 Friday
• CNY/EUR 7.70 versus 7.71 Friday
• Yield on 1-Day Government Bond 1.51% versus 1.50% Friday
• Yield on 10-Year Government Bond 3.09% versus 3.08% Friday
• Yield on 10-Year China Development Bank Bond 3.50% versus 3.50% Friday
• Copper Price -0.64% overnight