Key News

Asian equities had a strong session overnight as all markets were in the green and Hong Kong and India outperformed.

Hong Kong internet stocks had a strong day following Vice Premier Liu He’s attendance at the CPPCC’s meeting with internet companies titled “Promoting the Sustainable and Healthy Development of the Digital Economy.” His attendance at the meeting could indicate that China’s internet regulatory cycle is officially over. Hong Kong’s top ten most heavily traded stocks included Tencent, which gained +5.26%, Meituan, which gained +6.24%, Alibaba HK, which gained +7.03%, JD.com HK, which gained +7.4%, and Kuaishou, which gained +4.97%.

Yesterday, JP Morgan upgraded its price targets and outlook for China's internet stocks.

After the US close, Tencent Music Entertainment (TME US) reported decent/mixed results.

In contrast, JD.com (JD US, 9618 HK) reported results after the Hong Kong close/pre-US market open that beat expectations. The first quarter was a fantastic quarter for the e-commerce company. Both Tencent Music Entertainment (TME) and JD have seen short interest that is 3X the one-year average daily volume, which should provide a healthy dose of short covering.

We would like to have seen Hong Kong and Mainland volumes stronger on an up day like today though we’ll take it. Remember, China and internet names are significantly under-owned by investors. Hopefully, we see the active emerging market and global managers come back into the names.

It is also worth noting the strong performance of solar and the electric vehicle (EV) ecosystem stocks in China as the highest volume stocks were BYD +5.76%, Tianqi Lithium +5.01%, EV battery maker CATL +3.82%, and Gangfeng Lithium +8.98%.

The Hang Seng and Hang Seng Tech gained +3.27% and +5.78% on volume that increased +33% from yesterday, 86% of the 1-year average. 407 stocks advanced while 79 closed lower. Hong Kong short sale volume increased 21% from yesterday, which is 94% of the 1-year average. Growth factors outperformed value factors significantly overnight.  All sectors were green, led by growth sectors such as tech +6.27%, discretionary +6.14%, and communication +5.37%.  Apple suppliers and the cleantech ecosystem, such as EV and battery makers, and the internet stocks had a strong day. Southbound Stock volumes were elevated as Mainland investors were net buyers of Hong Kong stocks as Meituan saw a strong inflow while, interestingly, Tencent was a small net sell.

Shanghai, Shenzhen, and STAR Board gained +0.65%, +0.73%, and +1.39% on volume +0.39% from yesterday, which is 73% of the 1-year average.  Interesting that 1,512 stocks advanced while 2,739 stocks declined. Large caps and growth factors outperformed value and dividend factors. All sectors were green as tech +3.82%, discretionary +3.34%, and materials +3.17%. EV ecosystem and solar stocks had a strong day. Today, foreign investors bought $885mm of Mainland stocks via Northbound Stock Connect. Treasury bonds sold off, CNY gained +0.91% versus the US dollar, and copper rallied +0.75%.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.73 versus 6.79 yesterday
• CNY/EUR 7.09 versus 7.08 yesterday
• Yield on 10-Year Government Bond 2.82% versus 2.82% yesterday
• Yield on 10-Year China Development Bank Bond 3.00% versus 3.01% yesterday
• Copper Price +0.75% overnight