August Trade Data in Renminbi (CNY) Year over Year % Change

August Trade Data in US dollars Year over Year % Change

Takeaway: The nattering nabobs of negativity are going to have to go back to the drawing board as today’s release beat estimates significantly. This is a good sign for not only China’s economy but the global economy. It also provides an opportunity to see how well businesspeople are getting along. Imports from the US went up 33.3%, Taiwan +22.5%, EU +12.4%, and Australia +105.8%. Exports from China to the US +15.5%, Taiwain +24.9%, EU +29.4% and Australia +30.8%. The value of commodity imports increased due to their higher prices which will likely weigh on the upcoming PPI. I believe there will be a global effort from governments to reduce commodity prices due to their effect on inflation. I’m not saying it will be successful, but I think it will happen.

Key News

Asian equities were largely higher for the second day in a row as China’s import/export data was a strong catalyst as Hong Kong’s rise was led by internet stocks. Monday and Tuesday performance data are available below. A big effort to downplay the impact of China's internet regulation is taking place as it is clear that poor implementation is being recognized at a high level.  

1. Vice Premier Liu He spoke at the China International Digital Economic Expo yesterday on the importance of China’s private sector which contributes 50% of tax revenue, over 60% of GDP and 80% of urban employment.
2. China’s version of the SEC, the CSRC Chairman Yi Huiman spoke at the World Federation of Exchanges supporting private enterprises.
3. Senior folks from the PBOC (bank regulator), SAFE (foreign exchange regulator), and Ministry of Industry and Information Technology give a joint press conference that outlined how they would support small-medium enterprises (SMEs).
4. This all follows President Xi’s speech Friday which set the tone.

Mainland investors bought $523mm of Hong Kong stocks today as Southbound Connect trading accounted for 12.9% of Hong Kong turnover which is above the average of ~9%. This follows yesterday’s Southbound Connect buying of $269mm. Tencent and Meituan saw very large buying along with recent addition to the Southbound Connect, Kuiashou Technology. Why would they add Kuiashou to Southbound Connect, which allows Mainland investors to buy the stock if they were going to put it out of business? Tencent bought shares again last night continuing their streak. Why are they buying their stock if they are going out of business? Remember a rally would hurt global and EM active funds which are underweight and would “force” them back into the space.

Hong Kong and Mainland clean technology plays, EV ecosystem/solar/wind/rare-industrial metals, continue to run white-hot. BMW’s announcement on pivoting toward EV was a clear catalyst. Foreign investors bought a healthy $938mm of Mainland stocks today following yesterday’s $523mm purchase.

Research analysts are thus far confirming the new Beijing Stock Exchange will take the top companies from China’s over-the-counter (OTC) pink sheet equivalent called the National Equity Exchange and Quotations Board (NEEQ).  These are micro-cap stocks so they’re not a competitor to STAR Board. Many research reports noted that China’s “opening up” is alive and well following the MSCI equity index futures announcement two weeks ago.

Didi denied the rumor that the government was buying a stake in the company. I was a little doubtful as the source was Bloomberg News which would be an unlikely source for such news to be leaked to. August FX reserves were $3.232 trillion.

For our readers celebrating Rosh Hashanah, shana tova!

H-Shares Update

The Hang Seng opened higher and stayed there closing +0.73% on volume -1% lower from Monday. The 210 Chinese stocks listed in Hong Kong within the MSCI China All Shares gained +1.02% led by communication +2.06%, discretionary +1.93%, energy +1.78%, and financials +0.71% while real estate -1.73%, healthcare -0.75%, and industrials -0.52%. Hong Kong’s most heavily traded by value were Tencent +2.08%, Meituan +4.04%, Kuaishou Technology +9.33%, Alibaba HK +1.19%, Xiaomi +0.2%, BYD -1.24%, Geely +2.5%, Ping An +0.82%, Li Ning +7.27% and HK Exchanges +1%. Southbound Stock Connect volumes were light/moderate as Mainland investors bought $523mm of Hong Kong stocks today as Southbound trading accounted for 12.9% of Hong Kong turnover.

A-Shares Update

Shanghai, Shenzhen, and STAR  Board gained +1.51%, +1.11%, and -0.03% on volume off -1.85% from yesterday which is 148% of the 1-year average. The 542 Mainland stocks within the MSCI China All Shares gained +1.08% led by materials +3.38%, energy +2.76%, financials +1.87%, communication +1.58%, discretionary +1.28%, industrials +1.05% while healthcare was off -0.64%. The Mainland’s most heavily traded by value were broker East Money +3.67%, China Northern Rare Earth +8.66%, TBEA +3.41%, Tianqi Lithium +0.64%, Inner Mongolia BaoTou Steel +4.75%, Sichuan Yahua Industrial +7.31%, China Three Gorges Renewables +2.66%, Power Construction +10.07%, COSCO Shipping _4.55% and Orient Securities +9.98%. Northbound Stock Connect volumes were moderate as foreign investors bought $938mm of Mainland stocks today as Northbound Connect trading accounted for 4.9% of Mainland turnover.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.46 versus 6.45 yesterday
• CNY/EUR 7.67 versus 7.65 yesterday
• Yield on 10-Year Government Bond 2.86% versus 2.83% yesterday
• Yield on 10-Year China Development Bank Bond 3.19% versus 3.17% yesterday
• Copper Price -0.07%