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Meituan Leads Hong Kong Internet Rebound

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Key News

Asian equities were mixed as the Hang Seng outperformed, gaining +1.31% led by internet stocks as the Hang Seng TECH Index gained +2.62%.

Meituan (3690 HK) jumped +11.56% after posting better-than-expected financial results after the Hong Kong close on Friday. Meituan’s unsponsored ADR with the ticker MPNGY fell -0.35% during US trading on Friday as US-based investors drove the ADR down while Asian investors bought today based on the same information. Meituan, along with Tencent, saw some buying from Mainland investors via Southbound Stock Connect.

Widely-followed Mainland financial media publication China Securities Journal stated that the China Securities Regulatory Commission (CSRC), China’s SEC, held a video call with Chinese internet companies on resolving the Holding Foreign Companies Accountable Act (HFCAA). The details of the call have not been released, though they could be briefing the companies on the disclosures they may have to make.

On Friday, biotech company Beigene (BNE US, 6160 HK) announced that it would switching its auditor from Ernst & Young China to Ernst & Young US in order to be HFCAA compliant. We don’t know whether the PCAOB and SEC would agree that this resolves the issue, but we will monitor.

Vice Premier Liu He’s speech the week before last represented a significant policy change that underlying regulators and government bodies need to study. However, we need to have patience as a supertanker does not turn on a dime. Nonetheless, the captain has instructed the crew to do a 180.

Tencent got back into the buyback game on Friday, buying 838,000 shares and then another 818,000 shares today. Buybacks are a signal from the companies that China’s regulatory cycle is over.

Volumes in HK were -8.99% lower than Friday, which is 90% of the 1-year average as 215 stocks advanced and 268 declined. HK fell -1.75% following Tencent’s Friday share spin-off to shareholders, which may put pressure on JD shares based on investors who can’t/don’t want to hold Hong Kong shares. Energy was the best performing sector in Hong Kong, gaining +4.93%, while the sector gained +4.32% on the Mainland, led by coal stocks while staples were the worst in Hong Kong, falling -0.81% in Hong Kong and -1.87% on the Mainland.

The Mainland markets bounced around the room in a choppy session as Shanghai pulled a James Bond, gaining +0.07%. Shenzhen fell -0.82% and the STAR Board fell -1.46% on volume that was -5.33% lower than Friday, which is 82% of the 1-year average. There were 1,812 advancers and 2,473 decliners.

The recent covid outbreak in China is leading to mass testing in Shanghai. At this juncture, it doesn’t appear that a Q1 2020 type lockdown is coming, though the outbreak is clearly being taken very seriously.

Lithium and battery stocks such as CATL, which fell -3%, and Tianqi Lithium, which fell -5.69%, were broadly lower on supply chain concerns about raw materials sourced from Russia. The PBOC provided liquidity though likely due to the coming quarter end needs. Foreign investors bought $789 million worth of Mainland stocks today via Northbound Stock Connect after five consecutive days of selling last week. Chinese bonds were flat, CNY was flat versus the US dollar, and copper fell -0.72%.

There has been a lot of talk about Singapore-based e-commerce/gaming company Sea pulling its “Shoppee” e-commerce unit out of India. India has protected domestic platforms at the expense of foreign players.

EV maker Xpeng (XPEV US, 9868 HK) reported earnings before the US open this morning. Topline revenue beat though the company reported a loss and issued weak Q1 guidance.

Last week, we mentioned that Alibaba replaced a retiring board member with alternative asset manager PAG’s executive chairman Wijian Shan. PAG just filed for a Hong Kong listing with a preliminary 521-page prospectus. The company has three business lines: Credit & Markets $21 billion AUM, Private Equity $17 billion AUM, and Real Assets $9 billion in AUM. AUM is up 6X in the last decade. While not necessarily a household name in the US, the company has a strong reputation. One to watch!

Kuaishou (1024 HK) reports tomorrow!

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.37 versus 6.37 Friday
  • CNY/EUR 6.98 versus 7.01 Friday
  • Yield on 1-Day Government Bond 1.61% versus 1.56% Friday
  • Yield on 10-Year Government Bond 2.79% versus 2.79% Friday
  • Yield on 10-Year China Development Bank Bond 3.04% versus 3.06% Friday
  • Copper Price -0.72% overnight