Key News

Asian equities had a nice start to the week as Hong Kong outperformed to the upside.

Investors continue to read the tea leaves on China’s reopening as small, incremental positives unfold. Yes, this weekend’s National Health Commission (NHC) meeting reiterated zero COVID policies, though this isn’t where a policy change would be announced. The reopening will likely occur incrementally, which is happening. The feasibility of a reopening is driving forward-looking stock prices higher.

President Xi’s speech at the China International Import Expo spoke to the continued opening of China’s economy to foreign investors as the leader stated: “we should steadily advance economic globalization… provide all nations with greater and fairer access to the fruits of development.”

Hong Kong opened lower but rallied higher as Hong Kong’s most heavily traded stocks were Tencent, which gained +2.85%, Alibaba HK, which fell -0.29%, and Meituan, which gained +2.34%. We had $624 million worth of net buying in Hong Kong stocks from Mainland investors via Southbound Stock Connect overnight as Tencent saw another strong net buying day.

Short-selling volumes were moderate though individual stocks saw an increase, with 25% of Alibaba’s turnover short, 15% of Tencent’s, and 31% of JD.com’s. Remember that shorts did not double down last week, though today there was a pick-up.

Investors are also taking a positive view of the Public Company Accounting Oversight Board (PCAOB) auditors leaving Hong Kong after meeting with the “Big Four” auditors of Alibaba, JD.com, and Yum China.

Alibaba announced that its earnings will be reported on November 17^th, while Singles Day officially kicks off on Friday.

Technology had a good day as investors noted a Chinese government white paper on cybersecurity and Artificial Intelligence (AI). Mainland markets managed small gains while the STAR Board was off a touch. Mega/large caps and foreign favorites were mixed. China’s October exports and imports declined in US dollars by -0.3% and -0.7% year-over-year, respectively, though they increased +7% and +6.8%, respectively, in CNY terms. China’s foreign reserves increased in October to $3.052 trillion from September’s $3.028 trillion. The Asia dollar index was off versus the US dollar though CNY gained +0.6% versus the US dollar to close at 7.22. 

I don’t believe Apple’s iPhone issues have anything to do with China’s COVID policy, but rather weak demand. 

The Hang Seng and Hang Seng Tech indexes gained +2.69% and +4.06%, respectively, on volume that was down -21.23% from Friday, which is 120% of the 1-year average. 474 stocks advanced, while 36 stocks declined. Hong Kong short turnover declined -15.01% from Friday, which is 105% of the 1-year average, as 15% of turnover was short. Growth and value factors were mixed as small caps outpaced large caps. All sectors were positive as materials gained +5.96%, technology gained +5.34%, and healthcare gained +4.15%. Meanwhile, consumer staples lagged to gain only +1.35%. The top-performing subsectors included household products, materials, tech hardware, and semiconductors. Southbound Stock Connect volumes were very high as Mainland investors bought $624 million worth of Hong Kong stocks, as Tencent saw another day of net buying. Meituan and Kuaishou were also small net buys.

Shanghai, Shenzhen, and the STAR Board were mixed to close +0.23%, +0.38%, and -1.07%, respectively, on volume that declined -7.13% from Friday, which is 103% of the 1-year average. 2,936 stocks advanced, while 1,610 declined. Value factors outpaced growth factors, while small caps edged out large caps. The top-performing sectors were materials, which gained +2.33%, energy, which gained +2.27%, and real estate, which gained +1.1%. Meanwhile, technology and consumer discretionary fell by -0.05% and -0.11%, respectively. The top-performing subsectors included precious metals, oil & gas, forest & timber, and leisure products. Meanwhile, restaurants, airports, and defense were among the worst. Northbound Stock Connect volumes were moderate/high as foreign investors sold -$557 million worth of Mainland stocks. Treasury bonds rallied, CNY gained +0.6% versus the US dollar to 7.22, and copper gained +3.18%.

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.22 versus 7.19 Friday
• CNY per EUR 7.21 versus 7.11 Friday
• Yield on 1-Day Government Bond 1.25% versus 1.27% Friday
• Yield on 10-Year Government Bond 2.70% versus 2.70% Friday
• Yield on 10-Year China Development Bank Bond 2.82% versus 2.82% Friday
• Copper Price +3.18% overnight