Key News

Asian equities were mostly higher in a quiet session in advance of the meeting of central bankers in Jackson Hole and Powell's address Friday. US-listed China internet stocks roared back yesterday and that momentum was reflected in Hong Kong Listings overnight.

Momentum in the China internet space will “force” institutional investors to come back after having stepped to the sidelines due to the implementation of regulations. We know that global and emerging markets funds are underweight China, so a rally hurts their performance relative to global benchmarks. Underperformance is what gets you fired, so a rally is likely to feed on itself as it pulls more players back in.

Most Hong Kong-listed internet stocks were higher though Alibaba and Kuaishou ended the session lower. Tencent saw net buying from Mainland investors for the fourth day in a row via Southbound Stock Connect. The company bought shares for the fourth day in a row though today’s amount was 22,600 shares versus yesterday’s 230,000 repurchase.

Video platform Kuaishou reported Q2 earnings after the close in Hong Kong that beat analyst expectations, coming in at RMB 19.1 billion versus an estimated RMB 18.73 billion. However, the company continues to post a loss as it is still in the growth phase.

Online car dealer Autohome (ATMH US) posted strong results before the US open.

SEC Chairman Gary Gensler’s interview is getting some press as he mentioned the potential delisting of US-listed Chinese companies if they do not allow their audit papers to be reviewed by the Public Company Accounting Oversight Board (PCAOB). This is nothing new though last Friday’s statement from the China Securities Regulatory Commission (CSRC) makes a resolution of this issue more likely.

Clean technology had a strong day in both Hong Kong and Mainland China though, ironically, coal stocks had a strong day as well. Mainland-listed semiconductor and software stocks were weak, which led to the STAR Board posting a loss. Financials were weak in both markets.

H-Share Update

The Hang Seng opened higher but slid lower closing -0.13% as volume slipped -4.87%, which is 97% of the 1-year average. The 209 Chinese companies listed in Hong Kong and within the MSCI China All Shares Index gained +0.06% led by energy +1.66%, industrials +1.62%, real estate +1.61%, materials +1.43%, communication +0.57%, and tech +0.27%. Meanwhile, healthcare -0.65% and discretionary -0.51%. Hong Kong’s most heavily traded stocks by value were Tencent, which gained +0.55%, Meituan, which gained +2.34%, Alibaba HK, which fell -1.44%, JD.com HK, which gained +5%, Anta Sports, which fell -6.83%, Kuaishou Technology, which fell -3.55%, Kingsoft, which fell -21.03% on a broker downgrade, Li Ning, which fell -1.31%, and HK Exchanges, which gained +0.16%. Southbound Stock Connect volumes were moderate as Mainland investors sold -$91 million worth of Hong Kong stocks as Southbound Connect trading accounted for 12.3% of Hong Kong turnover.

A-Share Update

Shanghai, Shenzhen, and the STAR Board diverged closing +0.74%, +0.46%, and -2.23%, respectively, on volume that was -7.26% lower than yesterday though still 141% of the 1-year average. The 522 Mainland stocks within the MSCI China All Shares Index gained +0.51% led by energy +2.5%, staples +1.96%, communication +1.61%, industrials +1.4%, healthcare +1.19% and materials +0.835. Meanwhile, real estate -1.2% and financials -1.08%. The Mainland’s most heavily traded stocks by value were Longi Green Energy, which gained +4.74%, China Telecom, which fell -2.42%, Kweichow Moutai, which gained +2.45%, Qinghai Salt Lake Industry, which fell -2.66%, Wuliangye Yibin, which gained +3.57%, Tongwei, which gained +7.77%, China Northern Rare Earth, which fell -0.02%, Sany Heavy Industry, which fell -4.39%, Tianqi Lithium, which gained +1.26%, and Inner Mongolia Baotou Steel, which gained +2.34%. Northbound Stock Connect volumes were moderate as foreign investors bought +$527 million worth of Mainland stocks today as Northbound trading accounted for 4.8% of Mainland turnover.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.48 versus 6.47 yesterday
• CNY/EUR 7.61 versus 7.60 yesterday
• Yield on 1-Day Government Bond 1.49% versus 1.52% yesterday
• Yield on 10-Year Government Bond 2.85% versus 2.85% yesterday
• Yield on 10-Year China Development Bank Bond 3.18% versus 3.21% yesterday
• Copper Price +1.12% overnight