President Xi Endorses Internet Conference, Liquor Giants Rebound
Asian equities were mixed overnight in advance of China’s Golden Week, the national holiday, that runs from Friday to next Thursday. Hong Kong will be closed on Friday. The Evergrande news has faded into the background as US debt ceiling worries take center stage with the new infrastructure bill.
Huawei CFO and the founder’s daughter Meng Wanzhou was released from house arrest in a small thaw in US-China political relations.
The Mainland market was largely off despite another significant cash injection from the PBOC though the upcoming big holiday week was a factor. The Mainland market was off driven by small caps’ underperformance while liquor giants Kweichow Moutai and Wuliangye Yibin surged +9.5% and +10%, respectively, after the former’s new CEO announced plans to kickstart sales. Mainland weakness was driven by profit taking in several recently outperforming sectors including clean technology, rare earths, and metals, such as lithium, semiconductors, and brokers. Energy shortages were likely also a factor as moves to reduce coal in electrical transmission might have been too fast.
Hong Kong came off its intra-day highs though closed positive with internet plays mixed. This is despite the 2021 World Internet Conference Wuzhen Summit, which kicked off over the weekend with positive remarks from President Xi and a keynote speech from Vice Premier Liu He. Liu He stressed the digital economy’s importance along with addresses from Alibaba, Xiaomi, Elon Musk, and Intel’s CEO.
However, I would have expected a stronger day for the space due to key policy makers’ positive comments. Nonetheless, Tencent has seen overall net inflows for 10 of the past 11 and net buying via Southbound Stock Connect for the past 10 day. The company bought back 220,000 shares overnight. Meituan was a net buy overnight as well.
Energy stocks had a strong day in Hong Kong along with healthcare as Macau imposes stricter Delta restrictions. However, clean technology was off, mirroring the Mainland market.
TAL Education’s CFO resigned “to pursue other career opportunities” according to a Friday post-close announcement as their head of strategy takes over the role. There is chatter that New Oriental Education may lay off 40,000 employees as they shut down their physical tutor centers.
The Wall Street Journal has done a series of good articles on congestion at the ports of Los Angeles and Long Beach, California, which have been driven by a multitude of issues. Unlike many foreign ports, the west coast ports do not operate 24 hours/7 days a week. The ports are contributing to supply chains issues, which runs counter to the narrative that Asian production is the issue.
The Hang Seng had a choppy day though managed to pull off a James Bond closing +0.07% on volume that was +0.94% higher than Friday and 87% of the 1-year average. The 210 Chinese stocks listed in Hong Kong and within the MSCI China All Shares Index were off -0.29% led by healthcare +1.62%, staples +1.26%, energy +1.06% and communication +0.88%. Meanwhile, materials -3.31%, real estate -2.56%, industrials -2.46%, tech -1.35%, and discretionary -0.95%%. Hong Kong’s most heavily traded stocks by value were Tencent, which gained +0.96%, Meituan, which gained +1.55%, Alibaba HK, which fell -1.66%, Xiaomi, which fell -1.58%, Ping An Insurance, which gained +1.38%, Geely Auto, which fell -4.57%, energy giant CNOOC, which gained +5.08%, ANTA Sports, which fell -2.25%, Kuaishou Technology, which fell -6.28%, and AIA, which gained +0.35%. Southbound Stock Connect volumes were moderate/high as Mainland investors bought $344 million worth of Hong Kong stocks today as Southbound trading accounted for 14.8% of Hong Kong turnover.
Shanghai, Shenzhen, and the STAR Board opened higher but slumped in the afternoon to close -0.84%, -1.14%, and -0.46%, respectively, on volume that was +6.48% higher than on Friday and 141% of the 1-year average. The 541 Mainland stocks within the MSCI China All Shares Index gained +0.14% led by staples +6.58%, healthcare +1.3%, and discretionary +0.73%. Meanwhile, materials -4.83%, real estate -2.96%, industrials -1.41% and utilities -1.11%. The Mainland’s most heavily traded stocks by value were liquor company Kweichow Moutai, which gained +9.5%, liquor company Wuliangye Yibin, which gained +10%, China Northern Rare Earth, which cratered -10%, broker East Money, which fell -3.99%, Tianqi Lithium, which fell -7.68%, COSCO Shpping, which fell -10%, CATL, which gained +2.7%, China Three Gorges Renewables, which fell -3.23%, Longi Green Energy, which gained +1.43%, and Ganfeng Lithium, which fell -2.98%. Northbound Stock Connect volumes were moderate/high as foreign investors bought $228 million worth of Mainland stocks as Northbound trading accounted for 6% of Mainland turnover.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.46 versus 6.47 Friday
- CNY/EUR 7.56 versus 7.57 Friday
- Yield on 1-Day Government Bond 1.50% versus 1.50% Friday
- Yield on 10-Year Government Bond 2.88% versus 2.88% Friday
- Yield on 10-Year China Development Bank Bond 3.19% versus 3.19% Friday
- Copper Price +0.67% overnight