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Biden & Xi Meet, Gensler Signals Progress On Audit Deal

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Asian equities were mostly higher overnight except for Hong Kong and Taiwan.

Biden and China’s President Xi spoke this morning. The two leaders are apt to focus on areas of potential cooperation, according to analysts. Biden would like to ensure that lines of communication with Beijing remain open. A major topic of discussion was likely trade tariffs, which the US President is likely to reduce to help tame inflation.

SEC Chair Gary Gensler addressed the Center for Audit Quality yesterday to celebrate the 20th anniversary of the Sarbanes-Oxley Act with prepared remarks. His speech included a reference to inspections by the Public Company Accounting Oversight Board (PCAOB) of Chinese companies. He said that he is working with his counterparts in China to produce a “Statement of Protocol,” ensuring that PCAOB inspectors would have access to audit books upon their arrival in China. Without such an agreement, they cannot move forward with inspections in China. This document would need to be signed “very soon” for the inspections to be completed by the end of this year.

The People's Bank of China (PBOC) will initially issue about 200 billion yuan of low-interest loans, charging about 1.75% per year, to state commercial banks, according to the Financial Times, the latest targeted stimulus measure undertaken by the central bank. The new loan program will be geared towards distressed real estate developers to help ensure that pre-sales are completed. Country Garden was slightly higher today after falling -15% yesterday. Infrastructure and materials also rose on the new bank lending program.

Internet names were higher overnight just before earnings season kicks off next week with Alibaba. A Wall Street Journal article noted that Jack Ma may relinquish control of Ant, another sign that the fintech giant may be preparing for an IPO once again.

Consumer stocks were mixed overnight as lockdowns continue to weigh on the sector. Budweiser Asia gained +1.7% overnight after reporting earnings in-line with estimates.

The Hang Seng and Hang Seng Tech Indexes closed at -0.23% and +0.35%, respectively, on volume that increased +3% from yesterday, which is approximately 75% of the 1-year average. Hong Kong short sale turnover decreased -14% from yesterday. Mainland investors sold a net $7 million worth of Hong Kong stocks overnight via Southbound Stock Connect. Growth factors slightly outperformed value factors.

Shanghai, Shenzhen, and the STAR Board gained +0.21%, +0.40%, and +1.19%, respectively, on volume that increased +6% from yesterday. Foreign investors bought a net $405 million worth of Mainland stocks via Northbound Stock Connect

Government bond yields rose slightly, CNY was somewhat stronger versus the US dollar, and copper gained +0.79%.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.75 versus 6.76 yesterday
  • CNY/EUR 6.84 versus 6.85 yesterday
  • Yield on 1-Day Government Bond 1.05% versus 1.04% yesterday
  • Yield on 10-Year Government Bond 2.79% versus 2.77% yesterday
  • Yield on 10-Year China Development Bank Bond 2.95% versus 2.95% yesterday
  • Copper Price +0.79% overnight