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Rumor That SoftBank To Sell Alibaba Stake Weighs On China Internet

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Asian equities were mixed overnight as China, Singapore, and Indonesia outperformed while India and the Philippines underperformed.

Citi’s internet analyst is reporting that Alibaba’s registration of 1 billion new shares on Friday is due to SoftBank, which reports earnings tomorrow, preparing to sell shares. Alibaba HK fell -4.49% on the “news” as SoftBank was an early and continues to be a significant shareholder. I believe the registering of shares could also be due to ADR conversion. As more investors convert from US shares to Hong Kong shares, the company needs to convert shares from the Cayman holding entity to Hong Kong shares. That is only speculation on my part, though I am asking myself: why would Softbank sell at this level?

Alibaba weighed on China internet stocks as Tencent fell -0.21% and Meituan fell -0.44% after seeing net selling from Mainland investors though JD.com HK had a good day, gaining +2.6%. Hong Kong managed a small gain as volume increased +7.34% from Friday, which is only 78% of the 1-year average while breadth was decent as advancers outpaced decliners by 3 to 2. A slight value bias emerged overnight as top sectors included energy, which gained +2.66%, financials, which gained +0.99%, and materials gained +0.88%. Meanwhile, discretionary fell -1.78%, staples were down -1.74%, and tech was down -1.28%.

Healthcare had a good day as Wuxi Biologics gained +1.32% after announcing strong financial results. The Year of The Tiger started with a roar for the Mainland market as Shanghai gained +2.03%, Shenzhen gained +1.04%, and the STAR Board rose +0.36% on light volumes, which were only 78% of the 1-year average. Breadth was decent on the Mainland as well as advancers outpaced decliners by 3 to 1.

The weekend release of January’s Caixin Services PMI was a little light month over month, though the release was not viewed as a market mover.

Similar to Hong Kong, value sectors outperformed in Mainland China as energy gained +5.1%, materials gained +3.02%, financials gained +2.6%, and utilities gained +2.6%. Remember that professional investors in China have been overweight popular sectors. Several widely held foreign names were the most heavily traded and heavily off today as CATL fell -2.22%, Kweichow Moutai fell -1.01%, and Tianqi Lithium cratered -6.02%, though BYD jumped +7.76%. Foreign investors bought $872 million worth of Mainland stocks today while Treasury bonds were off, currency was flat, and copper was up a touch.

My weekend reading consisted of several research reports written by analysts in Asia. I witnessed an interesting divergence in their views of Asian equities, which appear inexpensive versus their US equivalents.  

A shoutout to our hometown hero Julia Marino who took silver this weekend. Way to go Julia!!!

Last Night's Exchange Rates, Prices, & Yields

  • CNY/USD 6.36 versus 6.36 on 1/28
  • CNY/EUR 7.28 versus 7.28 on Friday
  • Yield on 1-Day Government Bond 1.55% versus 1.73% on 1/30
  • Yield on 10-Year Government Bond 2.73% versus 2.70% on 1/30
  • Yield on 10-Year China Development Bank Bond 2.97% versus 2.97% on 1/30
  • Copper Price +0.48% overnight