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Travel Plays Fly on Hong Kong & Macau Reopening, PBOC Pumps Brakes on CNY Depreciation

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Key News

Asian equities were off with an emphasis on growth stocks except for Hong Kong, as internet stocks outperformed. Hong Kong finally saw some positive catalysts as investors cheered the incoming travel quarantine elimination, while Macau casino stocks outperformed as the gambling/tourist hub heads toward reopening.

Macau gaming stocks, Hong Kong property stocks, and insurance giant AIA are not considered Chinese companies due to their Hong Kong domicile, which places them in developed market indices rather than emerging market indices. Trip.com gained +5.32% on the news as the company reported massive outbound flights from Hong Kong to Asian tourist destinations.

After the close, it was reiterated that China’s electric vehicle (EV) sales tax waiver extension would continue through 2023. Xpeng HK (XPEV US, 9868 HK) jumped +8.74% as its CEO and founder bought 2.2 million shares for $30 million. Preliminary reports indicate that China’s September EV sales could rise more than 70% year over year. Li Auto HK (LI US, 2015 HK) gained +4.2%, though, after the close, the automaker cut its Q3 sales target on chip shortages.

The Hang Seng Tech gained +1.61% versus the Hang Seng Index’s loss of -0.44%, as Hong Kong’s most heavily traded stocks by value were Tencent, which gained +2.98%, Alibaba HK, which gained +0.38%, and Meituan, which gained +4.49% as JD.com HK gained +2.44%, making the E-Commerce giant the 11th most heavily traded stock overnight. Short covering was likely a factor though shorts pressed their bets once again, representing 24% of Tencent’s volume, 33% of Meituan’s volume, 21% of Alibaba’s volume, and 33% of JD.com’s volume. Meanwhile, Bloomberg reported that nearly 45% of Bilibili’s US ADR volume outstanding is short.

Mainland China was off though the STAR Board was able to manage a small gain. Travel plays and consumer plays outperformed as we near China’s weeklong holiday next week.

The People’s Bank of China (PBOC), China’s central bank, raised the margin requirement on CNY trading in a move to stem the renminbi’s slide versus the US dollar. 7.20 is seen as a key level for the PBOC. Foreign investors bought $597 million worth of Mainland stocks today via Northbound Stock Connect.

Yes, I saw the weekend China coup rumors that first popped up Friday during US trading hours. I didn’t mention it on Friday because I found the rumors ridiculous. Rather, we believe the rumors highlight the state of media toward China and justify our data-driven approach here on ChinaLastNight.com.

The Wall Street Journal had a very good article on the strategy of short sellers related to farm real estate play Farmland Partners. It is a worthwhile read.

If you are a golfer and a sports fan, I just finished Mark Frost’s great book The Match. I highly recommend it!     

The Hang Seng and Hang Seng Tech indexes diverged to close -0.44% and +1.61%, respectively, on volume that increased +29.13% from Friday, which is 83% of the 1-year average. 167 stocks advanced, while 326 declined. Main Board short turnover increased +28% from Friday, which is 94% of the 1-year average as 19% of total trading was short trading. Growth and value factors were both off today as large caps underperformed small caps. The top performing sectors were communication, which gained +2.27%, discretionary, which gained +1.83%, and healthcare, which gained +1.78%. Meanwhile, materials fell -3.91%, energy fell -3.68%, and industrials fell -2.85%. The top performing sub-sectors included Macau casino stocks, online education, and travel-related stocks, while mining, precious metals, and oil & gas-related stocks were among the worst. Southbound Stock Connect volumes were light as Mainland investors sold -$16 million worth of Hong Kong stocks today as Wuxi Biologics was a small net buy, Tencent, Kuaishou, Meituan, and Li Auto were also very small net buys, while Sands China was a small net sell.

Shanghai, Shenzhen, and the STAR Board also diverged to close -1.2%, -0.75%, and +0.09% on volume that increased +0.16% from Friday, which is 67% of the 1-year average. 969 stocks advanced while 3,659 stocks declined. Growth factors outperformed value factors today as large caps outpaced small caps. Discretionary and staples were the only positive sectors, gaining +0.99% and +0.3%, respectively, while energy fell -3.76%, financials fell -2.44% and materials fell -2.43%. The top performing subsectors included solar and travel-related stocks such as airlines and restaurants. Northbound Stock Connect volumes were moderate/light as foreign investors bought a net $597 million worth of Mainland stocks today. Treasury bonds sold off today as CNY fell -0.47% versus the US dollar to 7.15 CNY/USD while copper was hit -2.32%.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 7.15 versus 7.13 yesterday
  • CNY/EUR 6.91 versus 6.93 yesterday
  • Yield on 1-Day Government Bond 1.13% versus 1.03% yesterday
  • Yield on 10-Year Government Bond 2.72% versus 2.68% yesterday
  • Yield on 10-Year China Development Bank Bond 2.85% versus 2.83% yesterday
  • Copper Price -2.32% overnight