Chinese versus Foreign Perception of China Diverges
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Asian equities were a sea of red though the Philippines, Indonesia, and Pakistan missed the “fun” due to market holidays. Mainland China lived up to its reputation as a non-correlated asset though A shares indexes will diverge today due to their sector weights. Financials and real estate underperformed as indebted real estate giant Evergrande bonds and stock sold off. Technology outperformed led by semiconductors and elements of the EV ecosystem such as metals and batteries. China’s loan prime rate was left unchanged as expected, though a cut later in 2nd half of the year is likely. Foreign investors were active in the Mainland market, buying $472mm of stocks via the Northbound Stock Connect trading program. Hong Kong stocks reflected global pessimism in a broad decline with 4 to 1 decliners versus gainers.
Hong Kong listed internet stocks were mixed, which is a victory considering the market action of late. Alibaba Hong Kong managed a small gain along with Meituan, NetEase Hong Kong, and Bilibili Hong Kong, though Tencent was off. Tencent continues to see Mainland investors lighten their positions via Southbound Stock Connect. Healthcare was off in an indication of the indiscriminate selling today. Volumes were light for a summer trading day.
BABA and EDU will report quarterly financial results on August 3rd, followed by TAL on August 5th.
The Hang Seng Index and Hang Seng TECH Index were positive for a nano-second before rolling over, closing off -0.84% and -1.27% respectively as volume declined -2.38% from yesterday, which is 85% of the 1-year average. The 208 Chinese companies listed in Hong Kong within the MSCI China All Shares Index were off -1.03%, with staples up +0.93% while real estate fell -2.73%, energy -2.61%, materials -2.45%, healthcare -2.06%, tech -1.67% industrials -1.57%, communication -1.33%, and financials -1.21%. Hong Kong’s most heavily traded by value were Tencent, which fell -1.27%, Meituan, which fell -0.36%, Alibaba Hong Kong, which was flat, Geely Auto, which fell -3.38%, Xiaomi, which fell -1.78%, HK Exchanges, which fell -0.19%, China Evergrande, which fell -10.23%, CNOOC, which fell -1.75%, Sunac China, which fell -6.26%, and Weimob, which fell -8.53%. Southbound Stock Connect volumes were moderate as Mainland investors sold -$603mm of Hong Kong stocks as Southbound trading accounted for 14.4% of Hong Kong turnover.
Shanghai, Shenzhen, and STAR Board had a choppy session rallying into the close -0.07%, +0.18%, and +0.56% respectively as volumes declined -13.61%, which is 107% of the 1-year average. The 532 Mainland stocks within the MSCI China All Shares gained +0.05%, led by tech +0.79%, industrials +0.66%, discretionary +0.42%, healthcare +0.29% and staples +0.23% while financials -1%, real estate -0.87%, utilities -0.83%, communication -0.45%, and materials -0.36%. The Mainland’s most heavily traded by value were China Northern Rare Earth, which rose +3.72%, CATL, which rose +0.87%, Sany Heavy Industry, which rose +2.72%, Longi Green Energy, which rose +1.62%, BYD, which rose +1.58%, Ganfeng Lithium, which rose +1.43%, COSCO Shipping, which fell -2.97%, Jiangsu Hengrui Medicine, which rose +3.64%, Tianqi Lithium, which rose +1.74%, and GuangYuYuan Chinese Herb, which rose +0.55%. Northern Bound Stock Connect volumes were moderate/light as foreign investors bought $472mm of Mainland stocks as Northbound trading accounted for 5.1% of Mainland turnover. CNY appreciated slightly versus the US $, bonds rallied, and copper was off -1.51%.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.48 versus 6.49 Yesterday
- CNY/EUR 7.64 versus 7.64 Yesterday
- Yield on 10-Year Government Bond 2.93% versus 2.95% Yesterday
- Yield on 10-Year China Development Bank Bond 3.32% versus 3.34% Yesterday
- Copper Price -1.51% overnight