Key News

Asian equity markets were broadly higher as Taiwan and South Korea outperformed. 

The European Central Bank (ECB), and the Bank of England (BOE), followed the Fed’s +25bps interest rate hike with a higher, +50bps rate hike, while the Hong Kong Monetary Authority (HKMA) mirrored the US with a +25bps rate hike. Meanwhile, CNY, China’s currency that trades during local market hours, gained +0.27% versus the US dollar to close at 6.72 CNY per USD, while the Asia Dollar Index fell -0.09% versus the US dollar.

Shanghai, Shenzhen, and Hong Kong opened higher but slid to close down slightly/mixed on little news. 

Hong Kong-listed internet stocks were mixed as the Hang Seng Tech Index managed a small gain as Hong Kong’s most heavily traded stocks were Tencent, which fell -0.52%, Meituan, which fell -1.94%, Alibaba, which fell -0.91%, and Baidu, which gained +4.99%, riding the ChatGPT-like AI search announcement and the world’s largest asset manager increasing its stake in the company. Mainland investors were small net sellers of Hong Kong stocks today via Southbound Stock Connect, while short-selling activity fell. Q4 earnings season for the internet companies will kick off this month, which could provide an excellent catalyst, followed by March’s Dual Sessions, during which we should receive further clarity on economic policies for 2023.

The fact that yesterday's speech by President Xi focused on domestic consumption is a spoiler alert. The Ministry of Commerce (MOC) noted auto and household appliances would be an area of focus though auto and electric vehicle stocks were mixed. Healthcare was the top-performing sector in Hong Kong, gaining + 1.13%, and #2 in the Mainland, gaining +0.92% on no news except for the fact that COVID cases, see chart below, appear to be sticking around. The China Securities Regulatory Commission (CSRC) announced IPO rule changes that could facilitate more Mainland listings. More supply might be a headwind in theory though not a factor overnight. In meeting with a significant global bank’s China economist three weeks ago here in NYC, he noted that just 1% of household wealth is invested in stocks! In a groundhog day event, foreign investors bought $400 million worth of Mainland stocks overnight.

The Hang Seng and Hang Seng Tech indexes diverged to close -0.52% and +0.02%, respectively, on volume that fell -9.98% from yesterday, which is 112% of the 1-year average. 225 stocks advanced, while 267 stocks declined. Main Board short sale turnover fell -30.41% from yesterday, which is 99% of the 1-year average, as 15% of total turnover was short turnover. Growth slightly edged out value factors while small caps “outperformed” large caps. The top-performing sectors were healthcare, which gained +1.13%, tech +0.6%, and staples +0.15%, while real estate -3.05%, industrials -1.35%, and financials -1.15%. The top sub-sectors were household products, pharma/biotech, and technical hardware, while insurance, food/staples, and consumer services were at the bottom. Southbound Stock Connect volumes were moderate/high as Mainland investors sold -$207mm with Tencent a small net sell, Meituan a moderate sell, Li Auto a small net buy, and Kuaishou a very small net sell.

Shanghai, Shenzhen, and STAR Board also split +0.02%, -0.05%, and +0.51% on volume +1.64% from yesterday, which is 113% of the 1-year average. 2,224 stocks advanced, while 2,373 stocks declined. Growth and value factors were mixed as small caps outpaced large caps. The top sectors were energy +1.08%, healthcare +0.93%, and communication +0.79%, while financials -0.88% and industrials -0.52%. The top sub-sectors were soft drinks, leisure products, and computer hardware, while the diversified financials, education, and securities industries were at the bottom. Northbound Stock Connect volumes were moderate/high as foreign investors bought $400mm of Mainland stocks with mega/large caps benefitting, such as Kweichow Moutai, Ping An, and Longi. CNY appreciated +0.27% versus the US $ closing at 6.72. Treasury bonds were bought while both copper and steel were off. 

Major Chinese City Mobility Tracker

Vacation is over as traffic and subway usage rebound higher. Interesting to note the persistence of COVID cases.

Last Night's Performance

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 6.72 versus 6.74 yesterday
• CNY per EUR 7.40 versus 7.34 yesterday
• Yield on 10-Year Government Bond 2.90% versus 2.91% yesterday
• Yield on 10-Year China Development Bank Bond 3.06% versus 3.07% yesterday
• Shanghai Copper Price -0.55% overnight
• Shanghai Steel Price -0.85% overnight