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Markets Take A Breather Before Lunar New Year Holiday

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Key News

Asian equities were mixed but mostly lower overnight as Mainland China outperformed.

China released its CPI overnight, coming in at -0.80% year-over-year versus an estimate of -0.50%. However, the producer price index (PPI) beat estimates slightly, coming in at -2.5% versus an estimated -2.6%. China’s deflation is heavily linked to pork prices, which have come down over the past year. Other factors influencing China’s inflation data are trade conditions and energy prices, which have also fallen from last year. The low inflation numbers are a positive though, as they give policymakers more confidence to pursue stimulus.

Yum China also reported Q4 results yesterday. The company operates KFC among other American fast food chains in China. The company reported a revenue increase of +21% year-over-year. It also said that it opened over 500 new stores in Q4 alone! Its operating profit was up a whopping +179%. Believing its stock is cheap, the company increased its dividend by +23% and its 2024 share buybacks to over $1 billion.

Alibaba followed its US listing sharply lower in Hong Kong overnight. There was a top line miss despite the company’s beat on the bottom line. But, the main culprit was media reports that the company is scrapping IPO plans. However, in speaking with company representatives, we learned that they are simply waiting until market conditions improve to go ahead with new listings.

Real estate was a top-performing sector in both Mainland China and Hong Kong on policy support and the Evergrande liquidation order as a sign that the industry’s troubles could be coming to a conclusion.

The Lunar (Chinese) New Year holiday begins tomorrow. Mainland markets will be fully closed starting tomorrow and remain closed for all of next week. Hong Kong will have a half day tomorrow and be fully closed on Monday and Tuesday.

The Hang Seng and Hang Seng Tech indexes closed lower by -1.26% and -0.69%, respectively, on volume declined -32% from yesterday. Mainland investors purchased a net $588 million worth of Hong Kong-listed stocks and ETFs via Southbound Stock Connect. The top-performing sectors were Real Estate, which gained +1.55%, Information Technology, which gained +0.63%, and Materials, which gained +0.23%. Meanwhile, the worst-performing sectors were Consumer Discretionary, which fell -2.55%, Health Care, which fell -2.25%, and Energy, which fell -1.18%.

Shanghai, Shenzhen, and the STAR Board all closed higher by +1.28%, +3.17%, and +1.09%, respectively, on volume that was flat from yesterday. Foreign investors purchased a net $75 million worth of Mainland-listed stocks. The top-performing sectors were Real Estate, which gained +4.44%, Information Technology, which gained +2.13%, and Communication Services, which gained +1.27%. Meanwhile, the worst-performing sectors were Health Care, which fell -0.52%, Energy, which fell -0.42%, and Consumer Staples, which fell -0.32%.

Last Night's Performance

Last Night’s Exchange Rates, Prices, & Yields

  • CNY per USD 7.20 versus 7.19 yesterday
  • CNY per EUR 7.75 versus 7.75 yesterday
  • Yield on 1-Day Government Bond 1.62% versus 1.69% yesterday
  • Yield on 10-Year Government Bond 2.44% versus 2.42% yesterday
  • Yield on 10-Year China Development Bank Bond 2.62% versus 2.60% yesterday
  • Copper Price -0.16%
  • Steel Price +0.71%