Key News

Asian equity markets were mainly off overnight following the US’ weak trading day on Friday, which was driven by Powell’s taper talk. Hong Kong and China opened lower, but both managed small gains despite several headline headwinds going into today’s session. The Hang Seng Index managed a +0.02% gain on light volumes while Shanghai, Shenzhen, and the STAR Board gained +0.76%, +0.85%, and +0.89%, respectively, also on light volumes.

Real estate was down -2% in both China and Hong Kong following the implementation of a property tax pilot program. A property tax would be a good way to cool enthusiasm for real estate investing, though it will likely be implemented gradually. Just the talk of a tax is apt to divert funds into non-real estate assets.

We also heard talk of increased delta lockdowns to stem outbreaks. For more information on the state of COVID in China, please watch our latest video update with KraneShares cultural analyst, Xiabing Su.

The China Banking and Insurance Regulatory Commission (CBIRC) stated that “Evergrande Group’s problems are the problems of an individual enterprise and will not have a major impact on the credibility of the sector…”. Evidently, Evergrande is being closely monitored by authorities as the company ramps up work on projects.

The State Council provided new non-fossil fuel energy consumption targets. Renewable energy is expected to reach 20% of energy production by 2025, 25% by 2030, and 80% by 2060. This news lifted the clean technology ecosystem as electric vehicles (EV), solar, wind, and nuclear-related stocks had a very strong day. Nonetheless, there has been a fair amount of chatter on efforts to raise coal output in the short term to address energy shortages.

China internet stocks were mostly off though Kuaishou Technology HK bucked the trend by gaining +5.68% with very strong buying from Mainland investors via Southbound Stock Connect, the program that allows Mainland investors to buy Hong Kong stocks.

Southbound Connect trading volumes were light as Tencent, which fell -0.88% overnight, was a small net sell via Southbound Stock Connect while Meituan, which fell -0.83% overnight, was a small net buy. Foreign investors bought $139 million worth of Mainland stocks today via Northbound Stock Connect as liquor stock Kweichow Moutai was a net sell while battery maker CATL managed a small net buy.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.39 versus 6.39 Friday
• CNY/EUR 7.42 versus 7.43 Friday
• Yield on 1-Day Government Bond 1.59% versus 1.50% Friday
• Yield on 10-Year Government Bond 2.99% versus 3.00% Friday
• Yield on 10-Year China Development Bank Bond 3.33% versus 3.33% Friday
• Copper Price -0.58% overnight