Key News

Asian equities were led higher by growth stocks as Hong Kong outperformed, with investors returning from yesterday’s market holiday in good spirits.

Hong Kong was closed Monday and Tuesday while Mainland China was open both days. Hong Kong gaming stocks rebounded after Friday’s disaster due to the National Press and Publication Administration’s (NPPA) vague release that included Article 17’s implied ban of online game “battles” and Article 18’s language on limiting gaming companies' ability to charge gamers. On Saturday, the NPPA backtracked by stating the proposed regulations “… are based on ensuring and promoting the prosperity and healthy development of the online game industry.” Specific to Articles 17 and 18, the NPPA “….will study carefully and further revise and improve on the basis of continuing to listen to opinions from relevant departments, enterprises users and other parties.”  

Since President Xi’s APEC speech to US business executives, there has been a walking back of certain policies as the US and China look to stabilize relationships and China looks to attract foreign investment, once again. The NPPA’s move shows that the Chinese government is a big bureaucracy: The one hand does not always know what the other is doing. The NPPA clearly did not get the message not to rock the boat, especially related to foreign corporations and investors. The NPPA also hurt Mainland investors due to Tencent’s large Mainland investor base.

Growth stocks led Hong Kong higher today, with Hong Kong’s most heavily traded stocks by value were Tencent, which gained +4.01%, NetEase, which gained +11.89%, Alibaba, which gained +2.71%, Meituan, which gained +2.22%, and Xiaomi, which gained +4.08%. Tencent’s volume was massive, at 3X the 1-year average, as the company bought 3.51 million shares today in a very shareholder-friendly move. Unfortunately, today’s move still does not offset Friday’s decline. A Wall Street Journal article yesterday noted the two most popular hedge fund trades are long the Magnificent 7/US tech and short Hong Kong/China stocks.

NIO gained +12.19% after announcing the ET9 sedan, which will sell for RMB 800,000 ($111,000) at NIO Day. 

Mainland China rebounded from morning losses to close on small gains similar to yesterday’s small gain, with rumors of the National Team buying stocks in the afternoon.

China also released upbeat November industrial profits, which increased +29.5% year-over-year versus October’s +2.7%. Foreign investors bought a net $794 million of Mainland stocks.

The Hang Seng and Hang Seng Tech indexes gained +1.74% and +2.58%, respectively, on volume that decreased -30% from Friday, which is 94% of the 1-year average. 330 stocks advanced, while 149 declined. Main Board short turnover declined -24% from Friday, which is 78% of the 1-year average as 14% was short turnover (remember Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The growth factor and large caps outpaced the value factor and small caps. The top-performing sectors were Communication Services, which gained +4.22%, Health Care, which gained +2.59%, and Energy, which gained +2.46%. Meanwhile, Real Estate was declined -0.83%. The top-performing subsectors were software, energy, and telecom. Meanwhile, food, semiconductors, and consumer services were among the worst-performing. Southbound Stock Connect volumes were high as Mainland investors sold a net -$113 million worth of Hong Kong-listed stocks and ETFs, including China Mobile, which was a large net buy, the Hang Seng Tech ETF and CNOOC, which were moderate net buys.

Shanghai, Shenzhen, and the STAR Board gained +0.54%, +0.56%, and +0.58%, respectively, on volume that increased +4% from yesterday, which is 73% of the 1-year average. 3,609 stocks advanced, while 1,250 declined. The value factor and large caps outpaced the growth factor and small caps. The top-performing sectors were Energy, which gained +1.36%, Technology, which gained +0.72%, and Utilities, which gained +0.62%. Meanwhile Communication Services and industrials fell -0.21% and -0.28%, respectively. The top-performing subsectors were telecom, energy equipment, and agricultural products. Meanwhile airports, building materials, and cultural media were among the worst-performing subsectors. Northbound Stock Connect volumes were light/moderate as foreign investors bought a net $794 million worth of Mainland stocks including Sevenstar, Cypc, and Wuxi AppTec. However, Changan Auto, 360, and O-Film were net sold by foreign investors. CNY was off slightly while the Asia Dollar Index gained versus the US dollar. Copper and steel were up small.  

Last Night's Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.14 versus 7.14 yesterday
• CNY per EUR 7.91 versus 7.88 yesterday
• Yield on 10-Year Government Bond 2.55% versus 2.58% yesterday
• Yield on 10-Year China Development Bank Bond 2.70% versus 2.71% yesterday
• Copper Price +0.25%
• Steel Price +0.27%