Key News

Asian equities were largely higher though Japan, China, and Hong Kong were off. 

Both Hong Kong and China opened strong but came off the morning highs across the trading day. CNY eased versus the US dollar after yesterday’s massive rally, as the Asia dollar index was weaker overnight. There was little news overnight though an announced cigarette tax did weigh on "vice" stocks, including liquor stocks Kweichow Moutai, which fell -4.31%, and Wuliangye Yibin, which fell -4.39%, both of which are onshore China index heavyweights.

Hong Kong’s most heavily traded stocks were Tencent, which gained +0.76%, Alibaba HK, which gained +4.09%, Meituan, which gained +1.62%, Hong Kong Exchanges, which fell -3.34%, and JD.com HK, which gained +5.86%. Hong Kong-listed internet stocks had a good day but not nearly as great as their US-listed counterparts, which led to the pullback in US-listed shares of China internet companies this morning. I have no doubt that an element of yesterday’s strong move in US-listed China stocks (ADRs) was short covering. 

This morning it is being reported that President Xi stated that China is willing to work with the United States, along with President Biden’s comment that the US does not seek conflict with China. The positive comments pave the way for a meeting in Indonesia at the G-20. The heads of both Germany and France will visit China next month. General Motors’ earnings yesterday provide a great example of why the US and China need to get along as the company generated $10.4 billion of revenue in China during Q3. Fremont CA based semiconductor company KLA provides an example of outcome if the US and China can’t get along as the company anticipates a $900 million decline in 2023 revenue due to US chip export restrictions. CNBC interviewed the Congressman who represents Silicon Valley and KLA yesterday. Worth watching!  

The Hang Seng and Hang Seng Tech gained +0.72% and +1.11%, respectively, on volume that decreased -5.98% from yesterday, which is 100% of the 1-year average. 279 stocks advanced while 198 declined. Main Board short turnover decreased -1.49% from yesterday which is 96% of the 1-year average as 16% of total turnover was short turnover. Value and growth factors were mixed while large caps outpaced small caps. Top sectors were materials up +2.64%, discretionary gaining +2.61%, and tech finishing higher+1.06% while utilities fell -2.77%, real estate was down -2.26% and healthcare finished -0.92%. Top sub-sectors were retailers, insurance, and semiconductors, while auto, capital goods, and utilities were among the worst. Southbound Stock Connect volumes were high as Mainland investors bought $709 million of Hong Kong stocks with Tencent another strong net buy, Meituan a moderate net buy, and Kuaishou a small net buy.

Shanghai, Shenzhen, and STAR Board were mixed -0.55%, -0.64%, and +0.17% on volume +1.17% from yesterday which is 94% of the 1-year average. 2,464 stocks advanced while 2,048 stocks declined. Value factors outperformed growth factors as small caps outpaced large caps. Communication and real estate were the only positive sectors gaining +0.64% and +0.02%, while staples fell -4.14%, utilities was down -4.1%, and industrials finished -1.89%. Top subsectors included precious metals, software, and internet while liquor, power generation, and healthcare/biotech were among the worst. Northbound Stock Connect volumes were high/moderate as foreign investors bought $132 million of Mainland stocks. Bonds rallied with the 10 Year Treasury bond yield at 2%. CNY fell -0.77% versus the US $ to 7.22 and copper gained +1.1%.

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.23 versus 7.17 yesterday
• CNY per EUR 7.26 versus 7.19 yesterday
• Yield on 10-Year Government Bond 2.70% versus 2.70% yesterday
• Yield on 10-Year China Development Bank Bond 2.86% versus 2.86% yesterday
• Copper Price +1.10% overnight