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Asia Shrugs Off Omicron & Fed Tapering, China Internet Rebounds

Key News

Asian equities were mostly higher overnight as markets recognized that Omicron might not be the end of the world and were not concerned with the faster pace of tapering indicated by Fed Chairman Powell yesterday. Shanghai, Shenzhen, and the STAR Board closed +0.36%, +0.19%, and -1.30%, respectively. Meanwhile, the Hang Seng gained +0.78% and the Hang Seng Tech Index gained +0.50%.

Hong Kong-listed China internet companies were mostly up, apart from Alibaba, reversing yesterday’s declines. A performance dispersion between internet names is developing as investors are increasingly wary of Alibaba. We believe sentiment on the stock will turn around as the company continues to grow and pivots to business services, but it may take a while. Meituan shares jumped +2.77% overnight after a deep drawdown following a disappointing Q3 earnings release.

The Markit/Caixin Manufacturing PMI for November was released last night, coming in at 49.9 versus an estimated 50.2 and October’s 50.6. The privately surveyed figure that focuses on smaller, non-SOE companies indicated a slight contraction by coming in at below 50 and contrasts with the official PMI for November, which came in above 50. The official release was benefitted by stabilizing energy prices, while the respondents surveyed by Markit/Caixin clearly did not benefit as much from price stabilization. Supporting small businesses is a priority for policymakers and the dispersion between the PMIs for last month highlights the importance of this focus. The Beijing Stock Exchange (BSE), which launched this year, is meant to help small and medium-sized enterprises attract investment capital.

Renewable energy companies came under pressure on the Mainland as LONGi Green Energy announced price cuts for its solar panels. The price cuts come as China is already one of the most efficient producers of solar panels and their components. LONGi is well-positioned to capture global demand for panels, which is expected to surge following lofty commitments by global governments at the recently concluded UN climate conference: COP26. Meanwhile, banks and liquor companies outperformed on the Mainland.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.37 versus 6.36 yesterday
  • CNY/EUR 7.22 versus 7.24 yesterday
  • Yield on 1-Day Government Bond 1.60% versus 1.75% yesterday
  • Yield on 10-Year Government Bond 2.84% versus 2.83% yesterday
  • Yield on 10-Year China Development Bank Bond 3.12% versus 3.11% yesterday
  • Copper Price -0.26% overnight