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Buyback Bonanza Lifts Stocks

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Asian equities had a strong day as Japan outperformed, and Hong Kong posted its first positive day since I arrived in the region over a week ago.

I have plenty to report following more than a week in Asia, with time spent in Hong Kong and Shenzhen.

Hong Kong's short turnover was off day over day, though at 92% of the 1-year average following yesterday’s high volume decline with Moody’s China downgrade. Moody’s move reminds me of the line from the terrible movie Harley Davidson and Marlboro Man: “Always kick a man when he is down because you’ll never get a better chance.”  

Hong Kong and Mainland China benefited from multiple companies announcing buybacks as management believed their shares were undervalued and worth buying. Hong Kong’s most heavily traded stocks were Alibaba, which fell -0.5% despite announcing the dates for the December dividend, Tencent, which gained +0.91%, Meituan, which gained +2.07% after previously announcing a $1 billion buyback following their share decline, AIA, which fell -0.55%, BYD, which gained +2.6% after announcing a buyback. Having visited BYD’s massive Shenzhen factory and headquarters, it is incredible that the stock is at the same level as in 2020 despite revenue increasing six fold!

Hong Kong-listed real estate developer and conglomerate Swire Pacific jumped +17% after announcing a $6 billion ($767 million) share repurchase plan. NIO’s Hong Kong shares jumped +4.87% after yesterday’s financial results versus the US ADR, which gained +3% yesterday.

Mainland investors bought a net $718 million worth of Hong Kong ETFs and stocks, with the Hong Kong Tracker ETF seeing a strong inflow. China’s Social Security Fund was in the news for increasing its stake in 11 stocks.

Mainland China was mixed after yesterday’s fall that pushed the Shanghai Composite below the 3,000 level and the Shenzhen Composite below 1,900. However, popular stocks Tianqi Lithium and CATL jumped +9.49% and +2.56%, respectively. CNY and the Asia Dollar Index were off slightly versus the US dollar overnight.

Secretary of State Blinken and Foreign Minister Wang Yi spoke by phone about “promoting healthy, stable and sustainable China-US relations,” according to Reuters.

One quick takeaway on my trip: life in Hong Kong and Shenzhen seemed normal. Streets, restaurants, and malls were crowded. I will have plenty of photos and videos to share!

The Hang Seng and Hang Seng Tech indexes gained +0.83% and +1.76%, respectively, on volume that declined -16% from yesterday, which is 92% of the 1-year average. 339 stocks advanced, while 141 declined. Main Board short turnover declined -22% from yesterday, which is 107% of the 1-year average as 20% of the volume was short turnover (remember Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The growth factor and small caps outperformed the value factor and large caps. The top-performing sectors were technology, which gained +2.64%, communication services, which gained +1.71%, and utilities, which gained +1.22%. Meanwhile, energy and consumer staples were off -0.33% and -0.42%, respectively. The top-performing subsectors were media, technical hardware, and semiconductors. Meanwhile, healthcare and energy were the worst-performing. Southbound Stock Connect volumes were light as Mainland investors bought a net $718 million worth of Hong Kong-listed stocks and ETFs, including the Hong Kong Tracker ETF, which saw a moderate inflow while Tencent had a small net sell.

Shanghai, Shenzhen, and the STAR Board diverged to close -0.11%, +0.55%, and +0.35%, respectively, on volume that decreased -0.52% from yesterday, which is 94% of the 1-year average. 3,138 stocks advanced, while 1,636 stocks declined. The growth factor and small caps outperformed the value factor and large caps. The top-performing sectors were communication services, which gained +0.92%, Materials, which gained +0.88%, and real estate, which gained +0.84%. Meanwhile, the worst-performing sectors were Energy, which fell -0.91%, Utilities, which fell -0.64%, and financials, which fell -0.61%. The top-performing subsectors were agriculture, internet, and cultural media. Meanwhile, telecom, marine industry, and soft drinks were among the worst-performing. Northbound Stock Connect volumes were light/moderate as foreign investors bought a net $327 million worth of Mainland stocks, including Tianqi Lithium, Mindray, and CATL. Meanwhile, Kunlun, Wuliangye and Cypc were small net sells. CNY and the Asia Dollar Index were off slightly versus the US dollar. Copper fell and steel gained.

Last Night's Performance

Last Night’s Exchange Rates, Prices, & Yields

  • CNY per USD 7.15 versus 7.14 yesterday
  • CNY per EUR 7.72 versus 7.73 yesterday
  • Yield on 10-Year Government Bond 2.67% versus 2.67% yesterday
  • Yield on 10-Year China Development Bank Bond 2.78% versus 2.78% yesterday
  • Copper Price -0.70%
  • Steel Price +0.23%