Clean Technology Policy Support Lifts Sector As Didi’s Downdraft Weighs on Sentiment
Asian equities were mixed as China, Australia and India outperformed while Japan, Hong Kong, Taiwan and SE Asia were off. Mainland markets saw growth outperform led by clean energy related stocks such has lithium, rare earth, solar, EV and STAR Board securities after the National Development and Reform Commission said more policy and financial support is needed for China to meet its carbon and environmental goals.
Hong Kong Exchanges, on a new streamlined IPO process for companies, and Wui Biologics, after yesterday’s downdraft, had strong days which helped the Hang Seng Index. China Construction Bank was off -7% after going ex-dividend today. Xpeng ( XPEV and 9868 HK) relisted on the Hong Kong Exchange closing flat.
Hong Kong listed Chinese internet stocks were off following yesterday’s US downdraft on Didi. Foreign listings will need regulatory approval going forward as Didi was able to list without such approval. I do not believe this is the end of US listings as US private equity in China will always prefer a US listing. There is talk that Didi will cause more scrutiny of US listed Chinese companies but these issues are not interconnected.
I caught up with our friend and colleague Kevin Liu of CICC last night. He does not believe China’s regulation of internet companies is meant to hurt the companies nor to put them out of business. Simply the regulator needs to catch up with how quickly the population has adopted these technologies. He said many Chinese institutional investors are very interested in the China internet space due to the compelling valuation of the US and Hong Kong listed companies. No one knows exactly when the regulatory scrutiny will end so investors are apt to incrementally toe dip on weakness such as yesterday.
Kevin believes monetary policy is apt to come at year’s end, as year-over-year economic data comparisons will become harder. Reuters reported after the market close that cutting bank reserve requirement ratios, the amount of cash required to be held by banks, could be loosened to support smaller companies.
The Hang Seng Index and Hang Seng TECH Index opened lower though came back to close -0.4% and -0.56% as turnover increased 8% from yesterday which his 95% of the 1-year average. The 209 Chinese companies listed in Hong Kong within the MSCI China All Shares declined -0.32% led by healthcare +3.51%, materials +1.5% and tech +0.74% while communication -1.85%, real estate -0.91%, energy -0.9% and discretionary -0.68%. Hong Kong’s most heavily traded by value were Tencent -1.88%, Hong Kong Exchanges +5.32%, Meituan -1.31%, Alibaba HK -1.72%, Wuxi Biologics +6.41%, BYD +0.63%, Xiaomi -0.77%, Geely Auto -0.82%, Chaoju Eye Care +33.02% and JD.com HK -2.11%. Southbound Stock Connect volumes were moderate/high as mainland investors bought $229mm of Hong Kong stock today as Southbound Connect accounted for 14.1% of Hong Kong turnover.
Shanghai, Shenzhen and STAR Board gained +0.66%, +1.68% and +2.43% as turnover declined -6% from yesterday though still 112% of the 1-year average. The 532 mainland stocks within the MSCI China All Shares gained +1.31% led by industrials +3.24%, healthcare +2.63%, tech +2.18%, materials +1.83% and discretionary +1.08% while energy -1.63% and real estate -1.02%. The mainland’s most heavily traded were Long Green Energy +8.59%, BYD +1.83%, China Three Gorges Renewables -0.62%, CATL +5.29%, COSCO Shipping +5.37%, China Northern Rare Earth +7.67%, Eve Energy +13.3%, Tianqi Lithium +1.02%, broker East Money +1.43% and Ganfeng Lithium +4.65%. Northbound Stock Connect volumes moderate as foreign investors bought +$676mm of mainland stocks as Northbound Connect trading accounted for 5.7% of mainland turnover. CNY and bonds rallied while copper was off.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.47 versus 6.48 yesterday
- CNY/EUR 7.63 versus 7.66 yesterday
- Yield on 1-Day Government Bond 1.71% versus 1.61% yesterday
- Yield on 10-Year Government Bond 3.06% versus 3.09% yesterday
- Yield on 10-Year China Development Bank Bond 3.46% versus 3.48% yesterday