Key News

Asian equities were largely higher overnight, as Mainland China and Hong Kong outperformed while South Korea and Taiwan underperformed. Today’s rally, which got several China and Hong Kong indices flat/slightly positive year to date, was driven by several macro and micro catalysts today.

Mainland China had one of the strongest, if not the strongest, breadth days (advancers versus decliners) with 4,722 stocks advancing versus only 279 declining stocks!

AI & Technology stocks roared as the State-owned Assets Supervision and Administration Commission (SASAC) announced it would “accelerate the empowerment of new technologies such as artificial intelligence." Technology was the best-performing sector in Mainland China, where it gained +4.35%, and the third-best in Hong Kong, where it gained +2.28%. Meanwhile, the Mainland-based, tech-focused STAR Board was up +3.70%

Shanghai and Shenzhen closed above the 3,000 and 1,700 levels, respectively. Northbound Stock Connect inflows were very strong with $1.701 billion worth of net buying, including over $1.7 billion for the 3^rd time in the last three weeks.

Mainland media noted that UBS is reporting the National Team, long-term/institutional investors aligned with the government, such as the Social Security Fund and sovereign wealth fund Central Huijin, has invested $57 billion in China’s Mainland stock market so far this year. That is a big number, though, considering the size of the Mainland market, the objective remains to stabilize the market, similar to the summer of 2015.

Li Auto’s Hong Kong share class gained +25.45% versus the US share class’ +18.79% gain yesterday after the strong Q4 results, which lifted the EV ecosystem overnight. Hong Kong volumes were quite strong at 115% of the 1-year average led by Hong Kong’s most heavily traded stocks were Tencent, which fell -0.91% despite more game approvals, along with NetEase, which gained +0.84%, Li Auto, which ripped +25.45%, Meituan, which gained +0.62%, Alibaba, which gained +1.82% after investing $1 billion in an AI company, and BYD, which gained +5.32%. Alibaba had a handful of catalysts overnight, including co-founder Joe Tsai’s CNBC Asia TV interview from Monday and news that the company will be hosting several calls with analysts regarding their 2024 game plan. Trading desks reported that they were quiet despite the moves, which again makes me bullish. I guess everyone is focused on the Magnificent Seven. CNY is still remarkably stable versus the US dollar.

The Hang Seng and Hang Seng Tech indexes gained +0.94% and +3.24%, respectively, on volume that increased +22.81% from yesterday, which is 104% of the 1-year average. 300 stocks advanced, while 170 declined. Main Board short turnover increased +6.26% from yesterday, which is 104% of the 1-year average, as 18% of turnover was short turnover turnover (remember Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). All factors were positive, with growth and large caps outperforming value and small caps. The top-performing sectors were Health Care, which gained +2.91%, Consumer Discretionary, which gained +2.55%, and Technology, which gained +2.28%. Meanwhile, the worst-performing sectors were Real Estate, which fell -1.06%, Consumer Staples, which fell -0.80%, and Communication Services, which fell -0.52%. The top-performing subsectors were autos, semiconductors, and technical hardware. Meanwhile, food/staples, household/personal products, and software services were among the worst-performing. Southbound Stock Connect volumes were high as Mainland investors bought $169mm of Hong Kong stocks and ETFs with CNOOC, Li Auto, and SMIC moderate/light buys while Tencent was a moderate sell, Meituan and China Mobile small net sells.

Shanghai, Shenzhen, and the STAR Board gained +1.29%, +2.36%, and +3.70%, respectively, on volume that increased +0.22% from yesterday, which is 115% of the 1-year average. 4,722 stocks advanced, while 279 declined. All factors were positive, as growth and large caps outperformed value and small caps. All sectors were positive. The top-performing sectors were Tech, which gained +4.35%, Communication Services, which gained +3.33%, and Consumer Discretionary, which gained +2.47%. The top-performing subsectors were computer hardware, communication equipment, and internet. Meanwhile, only liquor and land transportation were negative. Northbound Stock Connect volumes were moderate as foreign investors bought a very healthy net $1.7 billion worth of Mainland stocks, including BYD, which was a moderate net buy, Gree and Zhongji Innolight, which were small net buys. Meanwhile, East Money was a very small net sell, along with Daqing Railway and LXJM, which were small net sells. CNY was off -0.01% versus the US dollar. Treasury bonds were sold. Copper fell while steel gained.

Last Night's Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.19 versus 7.19 yesterday
• CNY per EUR 7.80 versus 7.80 yesterday
• Yield on 10-Year Government Bond 2.38% versus 2.37% yesterday
• Yield on 10-Year China Development Bank Bond 2.50% versus 2.53% yesterday
• Copper Price -0.43% overnight
• Steel Price +0.56% overnight