Week in Review

• Asian equities were mostly higher this week as some markets came back online from the Lunar New Year, though Mainland China remained closed and will reopen on Monday.
• Hong Kong had a 3-day winning streak after reopening on Wednesday on positive policy developments leading to increased confidence that China will stimulate its economy and markets.
• New Year holiday travel increased significantly from last year, and the China Tourism Research Institute issued a forecast of +22% year-over-year growth in tourism spending in 2024.
• Taiwan returned from the Lunar New Year holiday in good spirits following an analyst upgrade of Taiwan Semiconductor Manufacturing Company (TSMC).

Friday’s Key News

Asian equities ended a strong week with a nice upward move led by growth and technology stocks following Applied Materials’ financial results, released after the close in the US yesterday.

Hong Kong had a strong day with 490 advancers and just 17 decliners, led by the most heavily traded stocks by value: Tencent, which gained +2.24%, Alibaba, which gained +2.38% on hedge funds’ Q4 reporting, Meituan, which gained +4.63% following yesterday’s strong sales release, AIA, which gained +1.58%, and BYD, which gained +3.88% on reports they will build a factory in Mexico. Remember that BYD is a giant in hybrid electric vehicles and much more than an EV play.

Wuxi Biologics gained +12.06%, and WuXi AppTec gained +4.48% even though US Congress members accused the companies of working with the Chinese military. The companies filed with the Hong Kong Stock Exchange that the allegations are false.

Union Pay, China’s only homegrown credit card payment processor, reported online payment transactions during the first six days of the Lunar (Chinese) New Year holiday. Transactions increased +15.8% year-over-year (YoY) to $15.38 billion, with a value of RMB 7.74 trillion, which is a +10.1% YoY increase. The payments company reported that areas of consumption, including restaurants, accommodation, tourism, and retail, all saw an increase of +20% or more YoY.

The Hong Kong government reported 4 million inbound trips from 750,000 visitors, of which 650,000 were from China, during the first four days of the New Year holiday. Hong Kong had a nice uptick in volume, which increased +50% from yesterday, though was just 71% of the 1-year average.

Real estate was the top-performing sector due to the news yesterday that the big Chinese banks will support projects with financing. Meanwhile, the Wall Street Journal had an article stating that the government will buy apartments from distressed property developers to use for subsidized housing. We will see, though I would recommend giving the apartments to families who agree to have more than 2 children. Also helping real estate was Longfor Group’s +10.22% gain after a court granted it more time to work on its restructuring.

After the close, Hang Seng Indices, which is committee-driven as opposed to purely quantitatively-driven, added no new constituents to the Hang Seng Index, which could curb Xpeng, which gained +5.93%, and Prada, which gained +3.62%. Many thought these names would be added to the benchmark.

There was a fair amount of chatter overnight about hedge funds and several well-respected institutions buying Chinese stocks. This is true, but remember, hedge funds can hedge their long positions, which may have protected them from January’s downdraft, which was driven by the forced liquidation of contracts in China against the backdrop of a lack of buyers. With the forced liquidation behind us, have become more constructive on China’s markets, considering the uptick in real estate policy support.

There was also chatter overnight that the People’s Bank of China, China’s central bank, might reduce the medium-term lending facility (MLF) rate on Sunday night.

The Financial Times had another article on the AUM growth of a particular EM ex-China ETF. Do you think investors are positioned for a rally? Me neither!

The Hang Seng and Hang Seng Tech indexes gained +2.48% and +3.71%, respectively, on volume that increased +50.28% from yesterday, which is 71% of the 1-year average. 490 stocks advanced, while 17 declined. Main Board short turnover increased by +37% from yesterday, which is 62% of the 1-year average, as 15% of turnover 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. All sectors were positive, led by Real Estate, which gained +7.23%, Health Care, which gained +5.53%, and Consumer Staples, which gained +4.90%. All subsectors were positive too, led by media, foodstuffs, retail, and pharmaceuticals. Southbound Stock Connect was closed.

Shanghai, Shenzhen, and the STAR Board were closed overnight.

Last Night's Performance

Last Night’s Exchange Rates, Prices, & Yields

Mainland China’s currency, fixed income, and commodity markets were closed overnight and will reopen on Monday.