Key News

Asian equities were mostly higher overnight as China outperformed.

There were multiple drivers of last night’s rebound in both Hong Kong and Mainland China equity markets. Huijin Central Investment, an investment house that is associated with state-related entities, said definitively that it would be adding to its holdings of stocks and ETFs over the coming months. Meanwhile, President Xi is reported to be planning to meet with the China Securities Regulatory Commission (CSRC) to hear an update on market stabilization and structural support for the capital markets.

Meanwhile, the recent deep technical selloff in small and mid-cap stocks caught the attention of regulators. This led to the highest one-day increase today in both the CSI 500 (mid-caps) and the CSI 1,000 (small-caps).

The rebound was broad-based as all sectors were higher in Hong Kong and all sectors except Energy were higher on the Mainland. Information Technology was one of the top-performing sectors in both markets as China-based semiconductor manufacturers are now expected to be able to produce smartphone-quality chips on their own as soon as next year.

US and China officials are meeting this week in Beijing to discuss economic issues. I do not yet know who exactly will be there from the US side as there has been relatively little reporting on this.

Northbound Connect flows were positive with $1.6 billion coming into the Mainland market. This move makes the year-to-date net foreign flow positive and may be indicative of SOEs repatriating profits in Mainland-listed stocks and ETFs.

The Hang Seng and Hang Seng Tech indexes gained +4.04% and 6.75%, respectively, on volume that increased +35% from yesterday. Mainland investors sold a net -$883 million worth of Hong Kong-listed stocks and ETFs via Southbound Stock Connect. The top-performing sectors were Information Technology, which gained +6.64%, Consumer Discretionary, which gained +6.34%, and Health Care, which gained +5.93%. Meanwhile, the worst-performing sectors were Energy, which gained +0.75%, Utilities, which gained +2.86%, and Materials, which gained +3.09%.

Shanghai, Shenzhen, and the STAR Board gained +3.23%, +5.14%, and +6.50%, respectively, on volume that increased +6% form yesterday. Foreign investors bought a net $1.6 billion worth of Mainland stocks via Northbound Stock Connect. The top-performing sectors were Health Care, which gained 6.98%, Information Technology, which gained +6.92%, and Communication Services, which gained +6.03%. Meanwhile, the worst-performing sectors were Energy, which fell -0.24%, Utilities, which gained +0.89%, and Financials, which gained +3.05%.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.19 versus 7.20 yesterday
• CNY per EUR 7.72 versus 7.73 yesterday
• Yield on 1-Day Government Bond 1.69% versus 1.69% yesterday
• Yield on 10-Year Government Bond 2.45% versus 2.40% yesterday
• Yield on 10-Year China Development Bank Bond 2.64% versus 2.58% yesterday
• Copper Price +0.06%
• Steel Price +0.24%