Week in Review

• China released 2022 economic data this week. GDP grew by +3.0% while retail sales declined by -0.2%, less than expected.
• Chewy founder Ryan Cohen announced a stake in Alibaba and is advocating for more share buybacks based on the company’ low valuation.
• World economic leaders gathered at the WEF forum in Davos, Switzerland. China’s Vice Premier Liu He delivered an address to attendees, emphasizing that China is open for business again. Later, the leader met with US Treasury Secretary Janet Yellen in Zurich.
• Foreign investors have plunged nearly $15 billion into Mainland equities so far this year, already exceeding the total inflow form 2022.
• In this week's video, Xiabing provides an inside look at life in Shanghai following the end of Zero COVID restrictions and provides updates on the recovery of China's travel industry.

Friday’s Key News

Mainland China and Hong Kong equities ended the Year of the Tiger like Katy Perry’s song “Roar,” though, in 2021, we had to be a Survivor, singing “Eye of the Tiger.” 

The Hang Seng and Hang Seng Tech indexes gained +1.82% and +2.67%, respectively, as all sectors were positive as for the third day in a row. Hong Kong-listed internet stocks outperformed their US-listed counterparts overnight, which is contributing to the latter’s gains in today’s US market action. The Hang Seng Index closed above the 22,000 level, which is a big, meaningless, round number, but psychologically important! Hong Kong’s most heavily traded stocks by value were Alibaba, which gained +3.65% on sightings of Jack Ma in Hong Kong, Tencent, which gained +2.35%, and Meituan, which popped +4.93%.

Yesterday, we mentioned that Hong Kong Exchanges & Clearing (HKEX) announced the expansion of Southbound Stock Connect to include “international companies primary listed in Hong Kong,” which helped fuel the internet rally. Remember that not all dual listed companies count Hong Kong as a primary listing. The move by HKEX could prompt more companies to convert their secondary offerings in Hong Kong to a primary offering. Why? Tencent has nearly 9.32% of its market cap held by investors in Mainland China via Southbound Stock Connect. Meanwhile, nearly 30% of Hong Kong’s daily trading volume originates from Southbound Stock Connect. HKEX also announced the expansion of Northbound Stock Connect to include more stocks.

Foreign investors bought another $1.4 billion worth of Mainland stocks, which brings the year-to-date net buying to $14.6 billion, which is more than all of 2022.

Mega cap and large cap growth stocks favored by domestic and foreign investors had a strong day led by solar company Sungrow, which gained +7.04% after projecting +100% profit growth in 2023. Meanwhile, a famous local mutual fund manager disclosed their 2022 holdings, which showed a preference for clean technology and consumer discretionary stocks.

After the close in Hong Kong, Sinopharm reported that their mRNA vaccine has been approved for clinical trials in China.

US Treasury Secretary Janet Yellen’s team will travel to China next month in advance of her visit to China this year.  Remember that we also may have Secretary of State Blinken visiting China in the first week of February. The “180” in US-China relations really makes you wonder what Xi could have said to Biden at the G20.

China Last Night will take a break starting Monday and resume on Thursday, January 26^th. Stock and bond markets in Mainland China and Hong Kong will be closed for the Lunar New Year holiday during that period. “Gong Hei Fat Choy” in Cantonese (or gong xi fa cai, 恭喜发财 in Mandarin): May you prosper in the new year!

The Hang Seng and Hang Seng Tech indexes gained +1.82% and +2.67%, respectively, on volume that increased +2.74% from yesterday, which is 76% of the 1-year average. 415 stocks advanced while 71 stocks declined. Main Board short sale turnover declined -1.26% from yesterday, which is 72% of the 1-year average as 17% of the turnover was short turnover. Growth and value factors performed well as large caps outpaced small caps. All sectors were positive as consumer discretionary gained +3.2%, energy gained +3.14%, and materials gained +2.97%. The top-performing subsectors were energy, retail, and materials. Meanwhile, food, consumer staples, and household products were among the worst. Southbound Stock Connect was closed today.

Shanghai, Shenzhen, and the STAR Board gained +0.76%, +0.65%, and +0.54%, respectively, on volume that increased +9.51% from yesterday, which is 81% of the 1-year average. 3,614 stocks advanced while 1,056 stocks declined. Growth and value factors performed well while large caps outperformed small caps. The top-performing sectors were utilities, which gained +2.01%, communication service, which gained +1.67%, and materials, which gained +1.63%. Meanwhile, healthcare fell -0.41% and consumer staples fell -0.38%. The top-performing subsectors were telecom, precious metals, and education. Meanwhile, motorcycles, securities, and biotech were among the worst. Northbound Stock Connect volumes were moderate/light as foreign investors bought $1.4 billion worth of Mainland stocks. CNY gained +0.05% versus the US dollar, closing at 6.78 CNY per USD, Treasury bonds sold off, and Shanghai copper slipped -0.27%.

Major Chinese City Mobility Tracker

Mobility plummets as China goes on vacation.

Last Night's Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.78 versus 6.79 yesterday
• CNY per EUR 7.35 versus 7.34 yesterday
• Yield on 10-Year Government Bond 2.93% versus 2.92% yesterday
• Yield on 10-Year China Development Bank Bond 3.09% versus 3.08% yesterday
• Copper Price -0.27%