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AIIB Suspends Russia Activity, EV Ecosystem Falls On Supply Chain Concerns, Week in Review

Week in Review

  • Asian equities had another difficult, volatile week. Despite decent Q4 earnings reports so far for the sector, growth and internet stocks continued to decline along with their US peers and the broader market, as materials and energy surged.
  • Chinese electric vehicle manufacturer NIO announced its pursuit of a Hong Kong listing on Monday.
  • Search engine Baidu, video platform iQiyi, and rival video platform Bilibili all reported earnings this week. Baidu beat estimates while Bilibili’s Q4 was mostly in line with estimates, and iQiyi showed that it is still struggling with high content costs.
  • Job search platform 51 Job this week announced that it would be going private.

Key News

Asian equities were mostly lower overnight after a down day in the US market on Thursday. Internet and growth stocks took a hit last night to lead declines as energy and materials were up again on Russia/Ukraine. Internet stocks have been falling regardless of earnings, which have been decent, representing a potential opportunity for investors that still consider fundamentals, which appear to be few and far between these days.

China may announce its lowest economic growth target in decades when political leaders convene for an important meeting on Saturday. While headlines will scream bloody murder, we must recall that GDP growth should be expected to slow significantly given the level of development that the world’s second-largest economy has reached. China has made the switch to an economic growth model based on consumption and services instead of a manufacturing/export-based economy, at the expense of sky-high GDP growth. This is precisely why one would want to be exposed to technology, internet, and services when investing in China for the long term.

Automakers generally and the electric vehicles (EV) ecosystem were significantly lower overnight after the sector’s poor performance in the US yesterday on supply chain issues stemming from the conflict in Ukraine. Shares of EV maker Xpeng fell -12.99% in Hong Kong overnight.

Chinese social media platform Weibo reported Q4 results overnight that were mostly in line with analyst estimates. The company grew revenues by +20% year-over-year as its advertising business has been more resilient than its peers following the implementation of China’s new Personal Information Protection Law (PIPL).

The China-backed Asia Infrastructure Investment Bank (AIIB), a “World Bank” type organization focused on Asian development, has put lending to Russia and Belarus on hold, in a sign that China could be tacitly disapproving of Russia’s invasion of Ukraine. The AIIB says that it is still assessing the situation, though, so it may resume lending to those countries at some point.

The Hang Seng Index fell -2.50% overnight on volumes that were +45.52% higher than yesterday. Growth and internet stocks listed in Hong Kong led declines as the Hang Seng TECH Index fell -4.43% overnight.

Shanghai, Shenzhen, and the STAR Board fell by -0.96%, -1.28%, and -0.56%, respectively, on volumes that were -0.48% lower than yesterday.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.32 versus 6.32 yesterday
  • CNY/EUR 6.89 versus 6.99 yesterday
  • Yield on 1-Day Government Bond 1.67% versus 1.70% yesterday
  • Yield on 10-Year Government Bond 2.81% versus 2.83% yesterday
  • Yield on 10-Year China Development Bank Bond 3.09% versus 3.09% yesterday
  • Copper Price +2.46% overnight