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Charlie Munger Doubles Down on Alibaba

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Key News

Asian equities had a rough night as South Korea was hit especially hard. However, there were a few bright spots in Southeast Asia. It was a fairly quiet night with Hong Kong off, though volumes were only 61% of the 1-year average. There was some chatter that Mainland Chinese investors are apt to buy the Hong Kong dip once Southbound Stock Connect reopens on Friday. We’ll know soon enough!

Hong Kong stocks were lower overnight. However, it is worth noting that internet stocks were up except for Tencent and Meituan. Hong Kong energy stocks had another strong day, clean technology stocks were mixed with wind up but metals off. Healthcare and tech were weak. Real estate was off though Hong Kong Chief Executive Carrie Lam’s Policy Address post close on developing undeveloped land for affordable housing north of the city near the border with Shenzhen could be a catalyst tomorrow.

Charlie Munger doubled his Alibaba position in Q3 according to an SEC filing. Mr. Munger’s Daily Journal Corporation isn’t as well known as his other job as Vice Chairman of Berkshire Hathaway. Reuters noted that Fidelity’s global Chief Investment Officer said the firm is buying Chinese stocks after “indiscriminate” selling while their China PM said he is “putting more money to work there…risk-reward (for Chinese stocks) is stacking up quite well…the IT area is probably presenting the most opportunity right now.” A Mainland media source had noted a large European asset manager increased its China internet stake though SEC filings haven’t confirmed that. Remember our air pocket thesis on weak price action is driven by big investors stepping to the sidelines waiting for a green light to reenter the space as China is significantly underweight in global and EM funds.

Baidu spin-off iQiyi (IQ US) is rumored to be filing for a Hong Kong listing following similar chatter about online broker FOTU doing the same yesterday. Small steps to improving US-China political relations as Reuters is reporting Biden’s commitment to the Taiwan agreement in his conversation with Xi. We have several US-China political dialogues coming as USTR Katherine Tai and Vice Premier Liu He spoke this morning. We might see the US threaten more tariffs though that would be negotiating 101. The USTR is asking for public comments on 549 tariff exclusions that expired at year-end 2020 for potential reinstatement of the tariff waivers.

A Mainland media Yicai Global noted China’s fifty-one nuclear reactors are running at full capacity to make up for electricity shortages driven by coal shortages and low wind output. Nuclear electricity generation is only 4.9% of the country’s overall electrical generation though it is expected to rise to 8% by 2030. China is apt to ramp up coal mining and imports to address the current shortage which could lead to a thaw in China Australia relations. Most investors would be shocked at how little coverage Evergrande’s situation receives in Mainland media as everyone believes the situation will be properly handled.

H-Share Update

The Hang Seng opened higher but slid back into its funk closing -0.57% as volume increased +4.17% from yesterday though that is only 61% of the 1-year average. The 210 Chinese companies listed in HK within the MSCI China Alll Shares lost -0.92% with energy +2.67%, utilities +0.63% and industrials +0.12% while staples -2.7%, tech -2.52%, healthcare -2.28%, materials -1.52% and discretionary -1.02%. HK’s most heavily traded by value were Tencent -0.8%, Meituan -2.14%, Alibaba HK +1.48%, HSBC +3.28%, Ping An +3.14%, AIA -0.56%, Xiaomi -1.44%, Li Ning -7.12%, CNOOC +2.34% and PetroChina +4.28%. Southbound Stock Connect remains closed.Shanghai, Shenzhen, STAR Board and Northbound Stock Connect were closed.

A-Shares Update

Shanghai, Shenzhen, STAR Board, and Northbound Stock Connect were closed today until Friday.

Last Night’s Exchange Rates, Prices, & Yields

Mainland markets were closed overnight.