Key News

Asian equities opened lower but managed to climb throughout the trading day to close in the green except for Hong Kong’s small loss while Taiwan and Indonesia were on holiday. Volumes were notably higher, driven by today’s MSCI Quarterly Index Review rebalance, which requires MSCI-benchmarked index funds and ETFs to trade at the market’s close.

The stock to watch amid MSCI’s rebalance is Singapore-based e-commerce/gaming company Sea Ltd (SE US) as today marks the largest and final inclusion into the MSCI Singapore Index and the company’s developed market indexes. I cannot predict whether it will go up or down, but it will trade significantly at 3:59 EST.

European markets opened significantly lower this morning and US equities are broadly lower as well. The Ukraine/Russia situation is the topic du jour as energy and material stocks outperformed regionally, highlighting Russia’s role in the global economy. I was reminded of this at the gas station yesterday. This explains the predicament as hitting Russia in oil, where it would hurt, would only exacerbate inflation through higher oil prices. We can contrast Russia’s limited role in the global economy with China, which is highly integrated into the global economy. This explains, in part, why China is apt to stay on the sidelines on this issue as two Chinese banks limited financing for Russian commodity imports.

Chinese EV maker Nio announced that it will file for a Hong Kong listing though I don’t see the filing on the HKEX website yet. The company is not issuing new shares, but US ADR investors can convert their US share class to the new Hong Kong share class. The Hong Kong ticker will be 9866.

The Hang Seng Index was off -1.59% but closed lower by -0.24% as energy and materials stocks outperformed while technology was off. Hong Kong-listed internet stocks were off as Tencent fell -0.66% and Alibaba HK fell -1.04% though both names were only small sells on today’s MSCI rebalance. The Hang Seng TECH Index gained +0.11%. Volumes were +7.55% higher than Friday as decliners outpaced advancers by 2 to 1. It is interesting to note that many research analysts believe that Hong Kong’s low valuation should buttress it from declines in broader emerging markets though we did not see this today.

Shanghai, Shenzhen, and the STAR Board gained +0.32%, +0.35%, and +0.7%, respectively, on light volume, which was off -7.31% from Friday while decliners outpaced advancers by 3 to 2. In addition to energy and material stocks outperforming, clean energy stocks had a good day as Russia’s grip on natural resources highlighted the benefits of going green. Foreign investors bought $324 million worth of Mainland stocks today via Northbound Stock Connect. The Renminbi continues to hold up very well considering the risk-off sentiment as it closed at 6.31 versus the dollar today. Copper was off a touch while Chinese government bonds were flat.  

Baidu, IQ, and Full Truck Alliance will report earnings after the Hong Kong close tomorrow morning.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.31 versus 6.32 Friday
• CNY/EUR 7.08 versus 7.10 Friday
• Yield on 1-Day Government Bond 1.80% versus 1.73% Friday
• Yield on 10-Year Government Bond 2.78% versus 2.78% Friday
• Yield on 10-Year China Development Bank Bond 3.04% versus 3.05%
• Copper Price -0.27% overnight