Key News

Asian equity markets were all down overnight. It was a light news day as Fed hike fears and the strong dollar weigh on local sentiment.

According to Bloomberg News, traders took profits in yesterday’s strong move in Hong Kong internet stocks despite the government meeting with internet companies next week. The meeting, announced two weeks ago, will include regulators and potentially Vice Premier Liu He, who had called for more clarity and transparency on regulation while also advocating the importance of the platform economy. The market is in a shoot-first/ask questions later mentality though I see more upside than downside in this meeting as China’s economy needs domestic consumption to pick up. 

It is worth noting that Tencent and Meituan saw another strong day of buying by Mainland investors via Southbound Stock Connect. Tencent reports Q2 financial results next Wednesday post the Hong Kong close. Rumors that Beijing is headed to lockdown weighed on sentiment intra-day though the rumor was denied post-close. CNY lost -1% versus the US $ closing at 6.79.

Distressed real estate developer Sunac defaulted on a $108 million bond, which weighed on the real estate sector. Mainland China had a choppy session, swinging between gains and losses on little news aside from wind power support policy talk. The Hong Kong Monetary Authority supported the Hong Kong $ due to US $ strength overnight.

The Hang Seng Index and Hang Seng Tech fell -2.24% and -3.84% on volume -8.34% from yesterday, which is just 80% of the 1-year average. There were just 67 advancing stocks today and 428 falling stocks. Short sale turnover fell by -8.49% from yesterday, 103% of the 1-year average. Value outperformed growth in Hong Kong today though profitability was the best performing factor. All sectors were negative today, with utilities down at least -0.72%, while discretionary and tech were off -4.61% and -4.23%. Liquor stocks were the worst-performing sub-sector today. Mainland investors were net buyers of Hong Kong stocks via Southbound Stock Connect, with Meituan and Tencent seeing net buying.

Shanghai, Shenzhen, and STAR Board diverged -0.12%, +0.16, and +1.06% on volume -23.99% from yesterday, which is 76% of the 1-year average. There were 2,410 advancing stocks and 1,281 declining stocks. Growth factors outperformed value as small caps outperformed large caps. In US $, healthcare was the only positive sector +0.16% while real estate -2.56%, energy -1.97% and materials -1.57%. Today, foreign investors sold -$398mm of Mainland stocks via Northbound Stock Connect. Chinese Treasury bonds rallied, CNY was off -1.03% versus the US $ and copper -0.1%.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.79 versus 6.72 yesterday
• CNY/EUR 7.07 versus 7.09 yesterday
• Yield on 10-Year Government Bond 2.81% versus 2.82% yesterday
• Yield on 10-Year China Development Bank Bond 2.99% versus 3.02% yesterday
• Copper Price -0.10% overnight