Key News

Asian equities followed the US equity market higher after the Fed’s announcement of three hikes in 2022 yesterday. Mainland news was positive as PBOC head Yi Gang spoke to policy support while the post CEWC policy meeting yesterday also gave an indication of top-down economic support with a particular emphasis on private companies. The Hang Seng was down for the majority of the trading day prior to rallying into the close +0.23% as volume increased 8% from yesterday though still just 81% of the 1-year volume.

The market sentiment seemed cautious ahead of the expected US Commerce Department announcement which included some speculation that biotech companies will be added to the technology export ban. Extending the tech ban to biotech is somewhat of a head-scratcher though I’ve given up trying to understand the rationale of politicians.

Wuxi Biologics rallied +11.31% after yesterday’s sell-off on the biotech ban as Hong Kong healthcare gained +5.53%. Hong Kong energy gained +4.9% while Mainland energy gained +4.46% after Hong Kong-listed Yankuang Energy +24.2% announced an increase in coal production. The clean energy ecosystem was largely higher in response to the rise of coal stocks. Hong Kong internet stocks were largely off though not nearly as much as they were yesterday in the US.

Tencent and Meituan were both small net buys from Mainland investors via Southbound Stock Connect. Shanghai, Shenzhen, and STAR Board gained +0.75%, +0.62%, and +0.07% on volume -1.46% from yesterday which is 106% of the 1-year average. Foreign investors bought another $924mm of Mainland stocks via Northbound Stock Connect which extends the number of consecutive days of inflows to 12 days. Bonds and currency were basically flat while copper was off a touch.

Tomorrow will be a big day due to S&P and FTSE rebalances in addition to Friday being Quad Witching Day. Big liquidity events such as Friday are opportunities for big fund families to move capital. It will be curious to see what happens!

I, unfortunately, didn’t listen to the TCOM earnings call as I’ve been logged into Alibaba’s Investor Day. I am exceedingly impressed by the business unit heads, the quality of the presentation and videos. Very high quality! There will be a lot to report from this event!

Trip.com (TCOM US) reported fiscal Q4 financial results prior to the US open today. I am a little surprised that costs increased though the analysts seemed to be impressed by the company’s result.

• Revenue declined -2% to RMB 5.346B ($831mm) versus analyst estimate of RMB 5.229B
• Total Operating Expenses increased to RMB 4.367B ($678mm) from RMB 3.643B
• Adjusted net income RMB 523mm versus analyst estimate of RMB 83mm
• Adjusted EPS RMB 0.81 versus analyst estimate RMB 0.09
• GAAP ESP RMB -1.32 versus analyst estimate of RMB -0.47
• Cash/cash equivalents RMB 67.6B ($10.5B)

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.37 versus 6.37 yesterday
• CNY/EUR 7.21 versus 7.17 yesterday
• Yield on 10-Year Government Bond 2.86% versus 2.85% yesterday
• Yield on 10-Year China Development Bank Bond 3.09% versus 3.09% yesterday
• Copper Price -1.05% overnight