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Alibaba’s Singles Day Event Rings the Cash Register While Evergrande Gets Talked Down

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Key News

Asian equities were mixed overnight as Japan was off more than 1% while most markets posted small gains or losses. The Hang Seng Index erased morning gains to close -0.45% on volume that was down -5.51% from yesterday, which is only 86% of the 1-year average. Hong Kong’s most heavily traded stocks by value were internet stocks, which pulled back after the recent strong move as Meituan fell -1.85%, Tencent fell -0.79%, and Alibaba HK fell -1.08% though Kuaishou Technology bucked the trend, gaining +2.98%. Tencent was another small net sell from Mainland investors via Southbound Stock Connect though Meituan managed a small net buy and Kuaishou a decent net buy.

Alibaba’s E-Commerce extravaganza event "Singles Day" kicked off overnight as the first orders were allowed to be placed and several live streaming events were held. How well did it go? The system crashed for twenty minutes because there was so much demand! According to China blog Pandaily, the top live streamer sold RMB 10.653B ($1.664) worth of goods overnight! The #2 and #3 live streamers sold RMB 8.252B ($1.289B) and RMB 9.3B ($1.453B) with #4 dropping to RMB 1.59B ($248mm). Wow!

A Mainland media article noted that BlackRock’s position in BABA US fell by 74 million shares to only 9 million shares, based on the firm’s Q2 13F filing with the SEC. What the article missed was that MSCI moved their indexes to Alibaba’s Hong Kong share class during the June 1st Semi-Annual Index Review. They did not sell. Rather, they converted to the Hong Kong share. The media coverage might explain an element of overnight weakness.

Yesterday, BlackRock filed that they own 440 million shares of Alibaba HK (9988 HK). Based on Western media coverage, you would never guess that real estate was the best performing sector overnight, gaining +4.3% in Hong Kong and +3.21% in China. Why? Senior government officials are stating they will not allow Evergrande to take out the financial system. PBOC head Yi Gang stated: “Evergrande is a real estate developer. Right now, it probably cannot pay its debt…I think overall Evergrande risk is an isolated case. And first, we try to prevent the contagion to other real estate companies. Second, we try to prevent the contagion to other parts of the financial sector…the spillover of Evergrande’s risk to the financial sector is under control.” We also had Vice Premier Liu He chime in with similar comments.

Yes, Evergrande’s Hong Kong stock fell -12.54% after reopening but the total value of stock traded was only $99 million! Real estate company Sunac (1918 HK) gained +10.19% on volume worth $229 million. Mainland China had a value bias as leading growth sectors were hit with profit-taking following yesterday’s move. Foreign investors bought a healthy $1.59 billion worth of Mainland stocks today via Northbound Stock Connect. CNY eased versus the US dollar after yesterday’s mention of its strength.

The Wall Street Journal reported that Didi (DIDI US) and Full Truck Alliance (YMM US) will relist in Hong Kong based on “people familiar with the matter”. I do not expect either company to file to relist in Hong Kong until we have the Hong Kong Exchanges’ consultation on easing their listing requirements. That should be by year-end, at which point there is going to be a flurry of relistings.

Chatter is picking up from multiple sources on China’s important government meeting in early November. Many are speculating that China will announce significant economic policy support coming out of the meeting. We’ll be keeping our eye out for you!

There have been several reports of coal mining efforts going through the roof in advance of winter demand and to stave off China’s current coal shortage.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.40 versus 6.39 yesterday
  • CNY/EUR 7.45 versus 7.43 Yesterday
  • Yield on 10-Year Government Bond 2.97% versus 3.00% Yesterday
  • Yield on 10-Year China Development Bank Bond 3.31% versus 3.33% Yesterday
  • Copper Price +0.71% overnight