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Investor Calls For More Buybacks From Alibaba, GDP & Retail Sales Beat Expectations

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Key News

Asian equity markets were largely lower as Pakistan was off nearly -3.5% following a largely positive day in the region on Monday. Hong Kong was mixed on Monday as internet stocks underperformed while Mainland China had a strong day.

As we move closer to Chinese New Year and China’s weeklong holiday, which is often referred to as the world’s largest human migration, things are slowing, as evidenced by Hong Kong and Mainland China stock market volumes, Southbound Connect volumes, and slowing metro and traffic conditions, as chronicled by our Major Chinese City Mobility Tracker. We should not overthink the market’s move this week, as we should expect some volatility as volumes get thin.

China’s December/Q4/2022 economic data release occurred at 10 am local time, largely beating expectations per the below though the release did not seem to have an impact on the market. China’s census is getting a lot of foreign press, though the release was not a big factor in the market last night. Highly urbanized countries, including China, have seen population declines as having kids in apartment buildings is difficult and expensive. We haven’t seen clues on how the government plans to reverse the trend, though it is coming!

Vice Premier Liu He’s speech in Davos was very positive and addressed many foreign investors’ concerns regarding common prosperity, real estate, and whether “the country is open to global cooperation after three years of COVID isolation,” per the Wall Street Journal. Real estate was off on news that PWC resigned as Evergrande’s auditor, though, in China, the Vice Premier’s mention of real estate support is garnering lots of attention. The Vice Premier is scheduled to meet with US Treasury Secretary Janet Yellen in Davos, while there remains chatter that Secretary of State Blinken will visit China in February.

Alibaba gained +1.19% in Hong Kong on Monday following news that they are taking a stake in home decoration/furniture store Red Star Macalline (1528 HK), which gained +30% Monday. Alibaba HK gained another +1.36% Tuesday on news Chewy founder Ryan Cohen took a stake in Alibaba and is advocating for more buybacks based on the company’s cheap valuation. In Alibaba’s defense, they have been aggressive buyers of their stock.

Healthcare was off on news that Wuxi Biologics (2269 HK) fell -6.09% after selling shares at a discount. Tencent managed a gain of +0.97% as their buyback is starting to garner attention.

The Mainland market was off though semiconductors and the STAR Board both had a good day as foreign investors bought $1.4 billion worth of Mainland stocks via Northbound Stock Connect. CNY declined slightly in value versus the US dollar overnight.

The Hang Seng and Hang Seng Tech indexes fell -0.78% and -0.14%, respectively, on volume that fell -9.98% from yesterday, which was 100% of the 1-year average. 115 stocks advanced, while 366 stocks declined. Main Board short sale turnover decreased -2.68% from yesterday, which is 88% of the 1-year average as 15% of turnover was short. Value factors outperformed growth factors as large caps “outperformed” small caps. Communication was the only positive sector, gaining +0.37%, while healthcare fell -3.42%, materials fell -1.98%, and consumer staples fell -1.91%. The top-performing subsectors were semiconductors, software, and retail, while pharmaceuticals, insurance, and food were among the worst-performing. Southbound Stock Connect flows were light as Mainland investors bought $341 million worth of Hong Kong stocks as Wuxi Biologics was the most heavily traded stock overnight, with a small net buy along with Kuaishou, Tencent, and Meituan, which were both net sells.

Shanghai, Shenzhen, and the STAR Board diverged to close -0.1%, -0.03%, and +1.11%, respectively, on volume that was down -23.1% from yesterday, which is 77% of the 1-year average. 1,819 stocks advanced, while 2,751 stocks declined. Growth factors outperformed value factors as small caps outpaced large caps. Tech was the only positive sector, gaining +0.64%, while communication fell -2.21%, healthcare fell -1.6%, and utilities fell -1.52%. The top-performing subsectors were education, which gained +3%, semiconductors, which gained +1.77%, and motorcycles. Meanwhile, the forest industry, precious metals, and pharmaceuticals were among the worst. Northbound Stock Connect volumes were light as Mainland investors bought a healthy $1.4 billion worth of Mainland stocks.  CNY fell -0.55% versus the US dollar to 6.77 CNY per USD, Treasury bonds sold off, and copper fell -0.06%.

Major Chinese City Mobility Tracker

Both traffic and metro usage are falling as people head out for the Chinese New Year holiday. Don’t overthink the declines, as they will continue to fall over the next two weeks.

Last Night's Performance

Last Night’s Exchange Rates, Prices, & Yields

  • CNY per USD 6.78 versus 6.72 yesterday
  • CNY per EUR 7.35 versus 7.27 yesterday
  • Yield on 10-Year Government Bond 2.90% versus 2.90% yesterday
  • Yield on 10-Year China Development Bank Bond 3.06% versus 3.03% yesterday
  • Copper Price -0.06% overnight