Daily Posts

A Quiet Night for China Equities, Bilibili Announces Strategic Investment in China Telecom

Key News 

Asian equities were mixed overnight as Mainland China and Hong Kong ended the session slightly higher. Volumes were somewhat lower in both Hong Kong and Mainland China following the outsized volumes seen yesterday in both markets. Growth stocks saw some selling following yesterday’s strong comeback. 

SoftBank’s net profit fell by -40% year-over-year in the second quarter due, in part, to the selloff in China internet stocks and its impact on the group’s Vision Fund. However, some underperforming investments for the company this quarter included the Korean Coupang and the German Auto1 Group. The company is not currently pursuing new China investments but has not exited its hefty positions in firms including Alibaba and Didi. Masayoshi Son and Softbank are adopting a “wait and see” approach. 

According to a Reuters report, certain China internet firms have begun to take “self-correcting” measures in advance of what they believe may draw the attention of regulators. Recent examples include Tencent’s efforts to encode limits on the amount of time children can spend playing certain games and real estate company KE Holdings’ decision to end its VIP Services product, which encouraged sellers to remain exclusive to the platform. The government has looked favorably upon such efforts in the past. 

Yesterday, the Senate passed Biden’s $1 trillion infrastructure package — one of the most significant federal investments in roads, bridges and rails in decades.  According to the National Bureau of Statistics, China’s fixed asset investments amounted roughly $8 trillion in 2020.  By comparison, the U.S. spent a fraction of that, at $146 billion in federal funds over that same period.   

Video sharing company, Bilibili, announced that it’s Shanghai Bilibili has invested 500 million yuan in China Telecom’s newly issued A-Shares.  The subsidiary has signed a strategic partnership with China Telecom, which may provide further opportunities in boosting areas such as user growth, brand promotion, Internet data centers and cloud services. 

Later this year, China’s aircraft maker Comac will unveil its first narrow-body jet that will compete with Boeing and Airbus airplanes in the Chinese market. 

M2 Data Update

M2 growth missed estimates slightly as China’s economy cools off somewhat after running hot in its recovery from the COVID-19 pandemic. New restrictions following outbreaks of the delta variant of COVID -19 may also be lending themselves to a slight, temporary slowdown in economic growth. Also, M2 is a measure of credit in the economy and regulators have been reining in lending somewhat through the restructuring of fintech platforms that provide credit services. 

H-Share Update 

The Hang Seng index gained +0.2% while the Hang Seng Tech index lost –0.14%, following the US Senate’s passing of a $1 trillion infrastructure bill. The 208 Chinese companies listed in Hong Kong within the MSCI China All Shares declined -0.05% with gains in materials +0.37%, real estate +5.17%, and energy +2.30% while tech -0.83%, healthcare -3.01% communication -0.45%, and discretionary -0.77%. Southbound investors bought a net HK$5.6bn of Hong Kong stocks today. 

A-Share Update 

The Shanghai, Shenzhen, and STAR board gained +0.08%, +0.13%, and +0.59% respectively. The 522 mainland stocks within the MSCI China All Shares declined –0.29% led by real estate +4.50%, energy +2.54%, materials +1.09% and industrials +0.99%, while healthcare –2.13%, consumer –1.98% and tech –0.99%. Northbound investors sold a net RMB2.8bn of domestic stocks. 

Last Night’s Exchange Rates, Prices, & Yields 

  • CNY/USD 6.48 versus 6.49 yesterday 
  • CNY/EUR 7.59 versus 7.60 yesterday 
  • Yield on 1-Day Government Bond 1.60% versus 1.50% yesterday 
  • Yield on 10-Year Government Bond 2.88% versus 2.86% yesterday 
  • Yield on 10-Year China Development Bank Bond 3.24% versus 3.25% yesterday 
  • Copper Price +0.94% overnight