Week in Review

• Asian equities were mostly higher after a turbulent week that included a cooler inflation print in the US and key economic positive economic data coming out of China, including growth in exports and a very low inflation print.
• Prosus’ selling of its stake in Tencent and SoftBank’s sale of Alibaba shares weighed on the companies’ share prices this week, though it is a positive that investors who could move in size are now out of the names.
• Solar giant Longi Green Energy reported Monday that 2022 operating revenue jumped +60% year-over-year (YoY) and net profit increased +62.66% YoY.
• In this week's video update, Xiabing Su visits Baidu's Apollo Park to explore the innovative advances in autonomous driving and take a test ride in the company's latest model of its self-driving taxi. 

Friday's Key News

Asian equities gained today to end a roller coaster week though several markets were closed for holidays including India (in honor of politician and social reformer Dr. Ambedkar Jayanti), Pakistan (Juma Tul Vida, which is the last Friday of the month of Ramadhan before Eid-al-Fitr), and Thailand (Songkran Festival which is the Thai New Year’s national holiday). It is hard to believe that most Asian equity markets closed the week up.

Local China media coverage overnight was focused on President Xi’s visit to Guangdong Province in southern China, which borders Hong Kong and includes Shenzhen. Yesterday, we mentioned his visit to GAC Aion New Energy Automobile Co’s factory, though local media highlighted his visit to LG Display’s factory in Guangdong. He was quoted as stating that “China’s policy of reform and opening up will remain unchanged over the long term.” He also pointed out that “China’s market strengths will become more apparent… amidst the backdrop of sluggish global economic growth.” Premier Li also touted China’s pro-business stance by visiting Beijing Hyper Strong Technology Co. in Beijing in addition to a “satellite maker, an energy-storage company, and a smart-driving technology company”.

The drive for technological self-sufficiency lifted many local stocks including Semiconductor Manufacturing (981 HK, 688981 CH), which gained +7.17% as the second most heavily traded stock by value overnight, and +7.34% in Mainland China, where it was the most heavily traded stock.

Mainland and Hong Kong stocks must be listening to our buddy Keith, who has been pounding the table on gold stocks as precious metals lifted the materials sector, which gained +1.99% in Mainland China and +2.96% in Hong Kong and was the top-performing sector in both markets.

Clean technology and technology generally had a good day as well, as the STAR Board jumped +3.28%.  Check out Mainland China’s most heavily traded stocks below as Exhibit A of tech buying.

Mainland volumes remained high/strong, which feels like a global anomaly. Foreign investors went overweight onshore (Mainland, A Share) China versus offshore China with $937 million worth of net buying focused on growth names.

Meanwhile, Hong Kong-listed internet stocks were mixed as Tencent gained +0.61%, Meituan fell -1.07%, Alibaba gained +0.37%, JD.com fell -1.47%, Baidu fell -3.06%, Kuaishou Technology fell -1.28%, and NetEase gained +3.05%. I am surprised that we have not seen a more significant gain in the space as Softbank’s sale removed a significant overhang on Alibaba. In China, Mainland media had an article titled the “Top 10 Chinese Firms of The New Economy,” which included #1 Tencent, #2 Alibaba, and #9 JD.com. Short volumes were low, though we would have liked to see stronger volumes overall on a positive day.

Fed Chair Jay Powell and PBOC Governor Yi Gang met at the G20 meetings in Washington, DC. Our Beijing based friend Evelyn of CNBC was one of the few journalists who wrote about the meeting.  This hopefully marks a start of more communication between the two!

Monday’s economic data dump will include Q1 GDP, which is estimated at 3.9%, March industrial production, which is estimated at 4.7%, March retail sales, which is estimated at +8% year-over-year (...wow, 8%!), March fixed asset investment, which is estimated at 5.8%, and property investment, which is estimated at -4.7%.

Within yesterday’s trade data, one highlight was that China’s exports to the US, which declined by -7.7%. Do lower exports mean lower demand because the US economy is slowing? Maybe. How was the overall data so strong? ASEAN exports increased by +35.4%, exports to India increased by +15.3%, exports to Russia increased by +136%, exports to South Africa increased by +11.5%, Brazil up +16%, and Australia up +23%.

New Zealand-based Copley Fund Research studies the positions of active emerging mutual funds. A recent post by them looked at the over/underweights of funds by country. Mexico was the largest overweight relative to the benchmark, which is not surprising considering the “reshoring” narrative. Meanwhile, Saudi Arabia, China/Hong Kong, and Taiwan were the biggest underweights. What surprised me is that the third largest overweight in active EM funds is the USA! Talk about buying out of benchmark! I get fired up about funds buying AIA, Hong Kong Exchanges, and Macau casinos, which are part of MSCI Hong Kong and not MSCI China, and are therefore not part of MSCI Emerging Markets. Are US stocks in an EM fund an indicator of EM bottoming? We shall see!

The China Securities Regulatory Commission (CSRC), China’s SEC, is doing a deep dive on independent board members for Mainland Chinese companies. Another sign of corporate governance’s trajectory in China though, I need to dive in. That will be my weekend homework!

The Hang Seng and Hang Seng Tech indexes gained +0.46% and +0.10%, respectively, on volume that declined -1.48% from yesterday, which is 90% of the 1-year average. 286 stocks advanced, while 194 stocks declined. Main Board short turnover declined -10.41% from yesterday, which is 68% of the 1-year average as 13% of turnover was short turnover. Value factors outpaced growth factors as large caps outpaced small caps. All sectors were positive as materials gained +2.96%, utilities gained +1.83%, and energy gained +1.24%. The top-performing subsectors were materials, semiconductors, and diversified financial services, while business services, food, and consumer services were the worst-performing.  Southbound Stock Connect volumes were moderate as Mainland investors bought $427 million worth of Hong Kong-listed stocks with SMIC a moderate buy and the most heavily traded Southbound Stock Connect name, Meituan was a small net buy, and Tencent a small net sell.

Shanghai, Shenzhen, and the STAR Board gained +0.6%, +0.44%, and +3.28%, respectively, on volume that decreased -1.96% from yesterday, which is 125% of the 1-year average. 2,503 stocks advanced while 2,105 stocks declined. Growth factors outperformed value factors while small caps outperformed large caps. The top-performing sectors were materials, which gained +2.01%, technology, which gained +1.7%, and utilities, which gained +1.55%. Meanwhile, communication fell -0.8%, consumer staples fell -0.63%, and real estate fell -0.44%. The top-performing subsectors were precious metals, semiconductors, and base metals, while cultural media, restaurants, and leisure products were among the worst-performing. Northbound Stock Connect volumes were moderate/high as foreign investors bought a healthy $937 million worth of Mainland stocks. CNY had a strong day versus the US dollar, gaining +0.25% to close at 6.85, while the 5-year Treasury yield rose and the 10-year yield was flat.  Shanghai copper and steel both rallied.

Major Chinese City Mobility Tracker

Last Night's Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.86 versus 6.87 yesterday
• CNY per EUR 7.57 versus 7.59 yesterday
• Yield on 1-Day Government Bond 1.65% versus 1.55% yesterday
• Yield on 10-Year Government Bond 2.83% versus 2.83% yesterday
• Yield on 10-Year China Development Bank Bond 3.01% versus 3.01% yesterday
• Shanghai Copper Price +1.32% overnight
• Shanghai Steel Price +0.90% overnight