Key News

Asian equities had a strong night as all markets gained, led by Japan as the Yen hit a low versus the US dollar not seen since 2002.  Hong Kong had a strong day led by internet stocks. Catalysts include Premier Li’s State Council meeting on boosting employment and logistics, where they stated: “Healthy development of the platform economy will be advanced to boost job creation.” Remember platform economy refers to internet companies. 

Baidu (9888 HK), up +4.13%, announced it has received permission to operate driverless/fully autonomous driving cabs in Beijing.  How cool is that!  We’ll have to get our colleague Xiabing to visit Beijing and take a ride.  We also had Alibaba (9988 HK), up +4.13%, announce the continued expansion of its Lazada e-commerce unit in SE Asia.  

Hong Kong had a broad rally as value/growth sectors and factors rose though volumes weren’t as high as we’d like to see while shorts pressed their bets.  With Southbound Stock Connect closed today and tomorrow in advance of Monday’s Hong Kong and China holiday, it could be simply a recognition that Mainland buying is absent.  

The Mainland had a mixed day as large caps outperformed small caps while value factors outperformed growth, with the exception of momentum names that did well.  CNY was off -0.84% versus the US $ to close at 6.61.  Good thing I am not an FX/currency trader as my 6.50 level being a line in the sand was breached like a hot knife through butter.  A Mainland media source noted that more than 80% of manufacturers are back at work.  Clearly, the outbreak numbers are declining in Shanghai though there are flare-ups in Beijing with 56 new cases, 8 new cases in Zhejiang Province, 11 new cases in Manchuria, and several in  Hangzhou.  This only reiterates the necessity of a strong mRNA vaccine in China, which would unleash domestic consumption and travel in a significant way.

The Hang Seng Index and Hang Seng Tech Index closed +1.65% and +2.15% on volume -15.5% from yesterday, which is 72% of the 1-year average.  There were 384 advancing stocks and 102 declining stocks.  Hong Kong short sale volume increased 13% from yesterday, which is 108% of the 1-year average.  Interesting day as both value and growth sectors and factors did well today.  A fairly broad rally, which explains the move though interesting to see coal and internet stocks do well.  Staples was the only declining sector.  

Shanghai, Shenzhen, and STAR Board diverged closing +0.58%, -0.71%, and -0.37% on volume -8.66% from yesterday which is 77% of the 1-year average.  There were 1,023 advancing stocks and 3,380 declining stocks.  Energy and real estate had a strong day, up +4.6% and +2.57% while discretionary, healthcare, and communication were off -1.23%, -1.37%, and -1.8%.  The clean energy technology sector had a good day less CATL -4.8% and BYD -1.29% though they both had strong days yesterday.  Foreign investors sold -$96mm of mainland stocks today via Northbound Stock Connect.  Treasury bonds eased, CNY depreciated versus the US $ -0.84%, and copper slid -0.15%.  

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.61 versus 6.55 yesterday
• CNY/EUR 6.95 versus 6.95 yesterday
• Yield on 10-Year Government Bond 2.85% versus 2.84% yesterday
• Yield on 10-Year China Development Bank Bond 3.07% versus 3.07% yesterday
• Copper Price -0.15%