Key News

What a difference a day can make!

Asian equities were strong overnight as Japan, Hong Kong, and India outperformed. Hong Kong-listed internet names took the baton from the US rebound yesterday and kept going overnight as Alibaba rebounded +12.24% in Hong Kong versus +10.4% in the US yesterday.

Brokers pointed to Alibaba’s decision to split the management teams of its domestic and international E-Commerce businesses as a catalyst for its shares. Despite the rally in shares, the CSRC’s Sunday statement in support of the VIE structure and US listings still has not garnered significant media attention. Helping sentiment was the PBOC bank reserve requirement cut and strong export/import data. China is moving proactively to support the economy, which investors will cheer. Hong Kong/US internet names are clearly a value play versus global technology peers. It is worth noting JD.com’s underperformance as the long JD.com/short Alibaba trade just reversed in size. The US’ political boycott of China did nothing to deter the market’s rally for the first time in nine months that the space overcame a negative news headline. A good sign!

The Hang Seng Tech rebounded +4.21%. Real estate gained +4.49% as the PBOC and policymakers look to guide Evergrande into a slow wind-down versus an outright default despite the constant (and consistently inaccurate) Western media narrative.  The broader Hang Seng Composite saw 8 to 1 advancers to decliners though volume was a little below the 1-year average.

Mainland investors were buyers of both Tencent and Meituan via the Southbound Stock Connect. The Mainland had a value bias as Shanghai gained +0.16%, Shenzhen fell -0.72%, and the STAR Board fell -1.16%. One culprit was weakness in the electric vehicle (EV) space as EV battery makers were down -4.3% despite news that they will build Ford’s EV batteries. The three largest sectors by the number of stocks, materials/industrials/tech, were off though all other sectors were positive. Foreign investors were active buyers in Mainland securities buying $1.248B via Northbound Stock Connect.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.37 versus 6.38 Yesterday
• CNY/EUR 7.17 versus 7.21 Yesterday
• Yield on 10-Year Government Bond 2.85% versus 2.82% Yesterday
• Yield on 10-Year China Development Bank Bond 3.09% versus 3.08% Yesterday
• Copper Price +0.27% overnight