Week in Review

• Asian equities opened the week mixed on Monday as China internet stocks listed in Hong Kong rebounded and China’s government announced measures to counteract the power shortage, including allowing energy prices to float more freely.
• Rising energy and commodity prices continued to weigh on broad Asian equities Tuesday while China’s President Xi Jinping reiterated China’s commitments to the renewable energy transition at a UN clean energy summit.
• Hong Kong’s market was closed unexpectedly on Wednesday due to Typhoon Kompasu. Meanwhile, China’s September import/export data came in, showing that exports had outpaced imports for the period.
• China released its September CPI, a measure of consumer price inflation, which showed that inflation was lower than expected, though still high. Meanwhile, the PPI, which measures what producers pay for inputs, expanded by over 10% year-over-year as energy prices rose. Solar stocks rebounded after seeing a correction due to the rising costs of the materials used in photovoltaic panels.

Friday’s Key News

Asian equities had a strong day following yesterday’s strong US equity market performance. Hong Kong was back open following Wednesday’s close due to a typhoon and yesterday’s market holiday. Today’s Hong Kong market action was accompanied by strong volume, which is a good sign for markets.

Hong Kong-listed internet stocks had a strong day as the Hang Seng Tech Index jumped +1.92% versus the Hang Seng Index, which gained +1.48%. Yes, there is chatter that online brokers operating in China and listed in the US might face increased regulatory oversight. However, these names tend not to be large enough for index inclusion.

We also had news that LinkedIn is shutting its app down in China though the headlines are a little misleading as they are eliminating the social media function while focusing on professional networking and hiring. Today’s move, despite those headlines, is a positive sign. It is also worth noting how this “news” weighed on US-listed Chinese stocks yesterday. Investors in Asia did not seem to care. Maybe we should not either?

Hong Kong-listed online education stocks jumped on reports that the companies will be able to offer vocational training. Apex Technical School in New York, a car mechanical vocational school, ran TV ads offering a free tool kit upon graduation. Perhaps these Chinese companies are presenting a similar hook.

It is interesting that Tencent was a small net sell in Southbound Stock Connect overnight though Meituan was a net buy, extending its inflow streak to seven straight trading days.

The other big movers today in both China and Hong Kong were in the semiconductor and clean technology spaces including electric vehicles (EVs), solar, and wind. Strong EV sales were a catalyst along with Mainland-listed battery maker CATL signing a deal with a US EV start-up.

Real estate stocks were off despite talk that banks will increase mortgage loans to support the space.

Foreign investors bought $418 million worth of Mainland stocks today via the Northbound Stock Connect trading platform.

H-Share Update

The Hang Seng opened higher and kept going to +1.48% as volume increased +31% from yesterday which is 105% of the 1-year average. The 210 Chinese companies listed in Hong Kong and within the MSCI China All Shares Index gained +1.5% led by communication +2.49%, discretionary +2.44%, materials +2.33% and tech +1%. Meanwhile, energy -1.2% and real estate -0.97%. Hong Kong’s most heavily traded stocks by value were Tencent, which gained +2.57%, Meituan, which gained +4.39%, Alibaba HK, which gained +0.31%, BYD, which gained +7.57%, Anta Sports, which fell -1.22%, AIA, which gained +0.34%, Geely Auto, which gained +7.96%, Wuxi Biologics, which gained +0.92%, Ping An Insurance, which gained +1.23%, and China Longyuan Power, which gained +7.34%. Southbound Stock Connect volumes were moderate/high as Mainland investors bought $26 million worth of Hong Kong stocks as Southbound Connect trading accounted for 12.5% of Hong Kong turnover.

A-Share Update

Shanghai, Shenzhen, and the STAR Board gained +0.4%, +0.05%, and +1.18%, respectively, as volume jumped +14.87%, which is 101% of the 1-year average. The 542 Mainland stocks within the MSCI China All Shares Index gained +0.56% led by energy +3.29%, tech +1.79%, industrials +1.06%, and materials +1%. Meanwhile, healthcare -0.92%, real estate -0.47%, and staples -0.28%. The Mainland’s most heavily traded stocks by value were CATL, which gained +6.89%, Longi Green Energy, which gained +3.6%, BYD, which gained +3.81%, Wuliangye Yibin, which fell -2.37%, Cosco Shipping, which fell -6.35%, Ganfeng Lithium, which fell -0.54%, Tianqi Lithium, which gained +3.39%, Zijin Mining, which gained +2.96%, Muyuan Foods, which gained +4.37%, and Tianjin Zhonghuan Semiconductor, which gained +0.57%. Northbound Stock Connect volumes were moderate/high as foreign investors bought $418 million worth of Mainland stocks as Northbound Connect trading accounted for 8.3% of Mainland turnover.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.44 versus 6.44 yesterday
• CNY/EUR 7.46 versus 7.46 yesterday
• Yield on 1-Day Government Bond 1.71% versus 1.70% yesterday
• Yield on 10-Year Government Bond 2.97% versus 2.96% yesterday
• Yield on 10-Year China Development Bank Bond 3.30% versus 3.26% yesterday
• Copper Price +2.31% today