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Apple Suppliers Off as Tencent Denies Divestment Article

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Key News

Asia was risk off on light volumes before today’s Fed rate hike and more saber-rattling from Putin, which led to China calling for a ceasefire.

Hong Kong-listed internet stocks were off despite Tencent -2.52% denying the WSJ divestment article. Short sellers pressed their bets as Tencent had 18% of its volume sold short today versus 19% yesterday, Meituan was -2.95% on 30% short volume versus 36% yesterday, Alibaba HK finished -3.65% on 20% short volume versus 20% yesterday, and JD.com HK -2.93% on 37% short volume versus 34% yesterday. 21% of all shares traded on Hong Kong’s Main Board were sold short. This is becoming a little absurd with the potential to be embarrassing for the Hong Kong Exchange in my opinion. It also sets up for a massive short covering as we saw back in mid-March as the Hang Seng Index retouches that low which is -6% from the Covid 2020 low.

Mainland investors were large buyers of Hong Kong listed stocks today via Southbound Stock Connect with a very healthy net buy +$563 million. Someone is buying low! Tencent Music Entertainment (TME US, 1698 HK) relisted in Hong Kong today. There is chatter another smaller US China ADR is going to go private. Many Apple suppliers were down today though not seeing a reason as Sunny Optical -10.51% (they have exposure to auto makers so the Ford announcement could be a factor), AAC Technologies -3.07%, and BYD Electronic -3.05%. The Asia currency index hit another 52-week low for the third day in a row as CNY fell -0.38% versus the US $ to 7.04. The Mainland markets were off but not nearly as much as Hong Kong in the onshore versus offshore disparity. Widely held foreign stocks were off today on a quiet day from a news perspective. Foreign investors were net sellers of Mainland stocks via Northbound Stock Connect selling -$434 million. Chinese Treasury bonds had a strong day with the Government Ten Year Treasury hitting a yield of 2.64%.

The Hang Seng and Hang Seng Tech fell –1.79% and -3.03% respectively on volume +11.36% from yesterday which is 64% of the 1-year average. 56 stocks advanced while 440 stocks declined. Main Board short selling turnover increased +35% from yesterday which is 80% of the 1-year average as short trading accounted for 21% of Main Board turnover.  Growth and value factors were mixed as large caps “outperformed”/fell less than small caps. The only sector in the green was energy +0.66% while tech -4.16%, discretionary -3.22%, and real estate -2.68%. Top sub-sectors included ports and energy related such as petrochemical, oil, shale, coal, and air pollution while Apple related stocks, retailing, auto, solar, and cement were among the worst. Southbound Stock Connect volumes were light as Mainland investors bought a healthy $563 million of Hong Kong stocks today with Tencent seeing moderate/light net buying, Meituan light net buying, and Sunny Optical small net selling.

Shanghai, Shenzhen, and STAR Board fell -0.17%, -0.37%, and -1.5% on volume -2.37% from yesterday which is 63% of the 1-year average. 2,782 stocks advanced while 1,744 stocks declined. Value factors outperformed growth while small caps outpaced large caps by a small amount. Top sectors were energy +1.19%, utilities +0.57%, and real estate +0.22% while closing negative were healthcare -2.99%, staples -2.05%, and discretionary -1.92%. Top sub-sectors were shipping/marine industry, rare earth, thermal, natural gas, and iron ore while semis, CROs, medical services, and medical devices were among the worst. Northbound Stock Connect volumes were moderate/light as foreign investors sold -$434 million of Mainland stocks. Treasury bonds rallied, CNY was off -0.38% versus the US $ to 7.04, and copper +0.11%.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 7.05 versus 7.01 yesterday
  • CNY/EUR 6.99 versus 7.02 yesterday
  • Yield on 10-Year Government Bond 2.65% versus 2.66% yesterday
  • Yield on 10-Year China Development Bank Bond 2.79% versus 2.81% yesterday
  • Copper Price +0.11% overnight