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US Inflation Casts a Long Shadow in Asia

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Key News

Yesterday’s US CPI print shivered the timbers of Asian investors as the region was a sea of red less India, Australia and the Philippines. Healthcare was a strong outperformer after Wuxi Biologics announced they expect net income to gain +135%, which lifted both Hong Kong and Mainland listed healthcare stocks.

The PBOC announced that policies will remain stable after yesterday’s bank reserve requirement ratio cut announcement and tomorrow’s expiration of medium-term lending facility notes to financial institutions. The market will be very curious if the maturing MLF will be rolled over by the same amount.

The Financial Times noted that foreign investments into Chinese equities have risen 49% from last year to $35.3B while foreign investment into Chinese Treasury bonds increased 50% to $75B. The FT’s timing was off as foreign investors sold a healthy $1.673B of Mainland stocks today. Foreign direct investment in China rose 28.7% to $90.6B year to date through June.

There has been increased chatter on China’s carbon emission market starting to trade this month, with an announcement expected on Friday.

Chinese internet stocks in Hong Kong rebounded today with both Tencent and Meituan seeing net buying from Mainland investors via Southbound Stock Connect.  Meituan sold 11.3m shares to Tencent which raises their stake to 17.25 according to Bloomberg. Another sign that companies can abide by regulation. The WSJ has an article on Alibaba and Tencent opening their “walled gardens” to one another. This is already happening as we’ve noted numerous times this year.

Lithium stocks were quite weak today weighing on the broader EV ecosystem space and clean technology. Energy had a strong day as high summer temperatures are expected to increase demand for electricity.

H-Share Update

The Hang Seng Index and Hang Seng TECH Index diverged -0.63% and +0.1% as volume declined -7.77% which is 88% of the 1-year average. The 209 Chinese stocks listed in HK within the MSCI China All Shares -0.16% as healthcare +4.19%, staples +1.46%, utilities +0.62% and energy +0.55% while materials -2.01%, industrials -1.93%, real estate -1.59%, financials -1.51% and financials -0.7%. HK’s most heavily traded by value were Tencent +0.18%, Meituan -1.69%, Alibaba HK +0.58%, Wuxi Biologics +6.47%, BYD -5.64%, Ping -2.08%, HK Exchanges +0.2%, Xiaomi +0.56%, JD HK +1.65%, and China Construction Bank -1.62%. Southbound Stock Volumes were light/moderate as mainland investors sold -$28mm of HK stocks as Southbound trading accounted for 13.5% of HK turnover.

A-Share Update

Shanghai, Shenzhen and STAR Board were off -1.07%, -0.88% and -2.15% as volume increased +0.2% from yesterday which is 133% of the 1-year average. The 532 mainland stocks within the MSCI China All Shares were off -0.98% with healthcare +1.1% and energy +0.64% while discretionary -2.65%, materials -1.79%, real estate -1.75%, financials -1.57%, communication -1.23%, tech -1.19% and industrials -1.12%. The mainland’s most heavily traded by value were BYD -7.47%, BOE Tech +2.19%, GotionHigh-tech +5.95%, Tianqi Lithium -9.02%, China Northern Rare Earth -2.33%, China Three Gorges Renewables -2.58%, Hoperun Software +0.99%, Longi Green Energy -2.08%, CATL -2.07% and Ganfeng Lithium -5.715. Northbound Stock Connect volumes were elevated/average as foreign investors sold -$1.673B of mainland stocks today. CNY appreciated +0.04% versus the US $, bonds were flat and copper was off.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.47 versus 6.47 yesterday
  • CNY/EUR 7.63 versus 7.66 yesterday
  • Yield on 1-Day Government Bond 1.70% versus 1.73% yesterday
  • Yield on 10-Year Government Bond 2.94% versus 2.93% yesterday
  • Yield on 10-Year China Development Bank Bond 3.34% versus 3.32% yesterday
  • Copper Price -0.65% overnight