Daily Posts

CATL & Tesla In Talks, Tencent Buyback Booms

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Key News

Asian equities were largely higher, except for India following yesterday’s market holiday in celebration of Holi.

In his speech at the China Development Forum, PBOC head Pan Gongsheng focused on China's economic recovery, noting supportive monetary policy and “positive signals in the real estate market." His statements lifted the real estate sector in Hong Kong, where it gained +0.40% and Mainland China, where it gained +0.47%. The PBOC has kept the Renminbi from weakening versus the US dollar.

There was chatter that global CEOs are staying in Beijing for a special meeting with President Xi, which could be very interesting.

Both Hong Kong and Mainland China bounced around the room, swinging from gains to losses as an afternoon rally pushed indexes into the green and various earnings releases drove market action. Sports apparel maker Anta Sports gained +3.15% after releasing its 2023 net income during the lunch break, which beat estimates. Meanwhile, PetroChina announced all-time high net income, which sent the stock higher by +0.62% in Hong Kong, though it lost -0.75% in Mainland China. China Merchants Bank gained +4.33% in Hong Kong and +3.35% in Mainland China, as net income beat estimates, along with a dividend hike. Hong Kong-based developer China Resources Land Group gained +2.26%; its results were a miss, but not a disaster.

Hong Kong’s most heavily traded stocks by value were Tencent, which gained +3.74%, as the stock buyback program goes into overdrive with 3.4 million shares bought today following yesterday’s 3.47 million and Friday’s 3.49 million, AIA, which fell -1%, Meituan, which gained +0.11%, Alibaba, which was flat, and Xiaomi, which gained +3.24%.

After the close, Alibaba pulled its logistics arm Cainiao’s Hong Kong IPO, announcing they would buy out minority shareholders. Ultimately, companies are hesitant to IPO at these valuation levels.

Baidu finally got some artificial intelligence (AI) TLC, gaining +2.37% after the Apple collaboration.

Mainland investors bought a decent $578 million worth of Hong Kong-listed stocks and ETFs overnight via Southbound Stock Connect, including Tencent saw another day of net buying; 13 out of the last 15 days saw net buying in the stock.  Mainland China had an "old school" (i.e. old economy) day as value stocks outperformed.

The world's largest battery maker CATL gained+3.79% on the CEO’s comments on working on a better battery for Tesla, which they would license for sale in the US.

Foreign investors bought a decent $654 million worth of Mainland stocks via Northbound Stock Connect. 

Despite the Western media’s unrelenting negative media narrative and Washington DC’s China obsession (i.e. “Look over there and not at the US budget deficit, border crisis, homelessness, drug addiction, crime etc.”), the markets continue to hang in there, which is a positive sign (knock on wood).

The Wall Street Journal’s Jacky Wong wrote an article titled “Are Chinese Tech Stocks Value Plays Now?” that is a worthwhile read. The article points out that, yes, revenue growth rates have slowed, but companies are still cash flow machines and are using that cash to buy back stock and pay dividends. I will share some buyback yields in the next day or two. It is always good to see our views reiterated!  While China lacks a government policy like Japan and South Korea, one could argue many companies are engaging in shareholder-friendly measures.

The Hang Seng and Hang Seng Tech indexes gained +0.88% and +1.00%, respectively, on volume that decreased -3.6% from yesterday, which is 111% of the 1-year average. 186 stocks declined while 297 advanced.  Main Board short turnover fell -10.36% from yesterday, which is 101% of the 1-year average as 16% of turnover was short turnover (remember Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging).  The value factor and large caps outperformed the growth factor and small caps. The top-performing sectors were Communication Services, which gained +2.9%, Technology, which gained +1.23%, and Financials, which gained +1.16%. Meanwhile, Utilities fell -2.36%, Materials fell -1.83%, and Energy fell -0.83%. The top-performing subsectors were software, autos, and banks. Meanwhile, business/professional services, materials, and utilities were among the worst-performing.  Southbound Stock Connect volumes were moderate as mainland investors bought a net $578 million worth of Hong Kong-listed stocks, including Xiaomi, which was a small net buy, and the Hang Seng Tech ETF and Tencent, which were moderate net buys.

Shanghai, Shenzhen, and the STAR Board diverged to close +0.17%, +0.18%, and -1.22%, respectively, on volume that decreased -8.22% from yesterday, which is 110% of the 1-year average. 1,988 stocks advanced while 2,876 declined. The value factor and large caps outperformed the growth factor and small caps. The top-performing sectors were Consumer Staples, which gained +1.2%, Financials, which gained +0.92%, and Industrials, which gained +0.81%. Meanwhile, Energy fell -1.74%, Communication Services, which fell -1.66%, and Technology, which fell -1.1%. The top-performing subsectors were building materials, chemicals, and office supplies. Meanwhile, computer hardware, software, and internet were among the worst-performing. Northbound Stock Connect volumes were moderate/high as foreign investors bought $654 million worth of Mainland stocks, including China Merchants Bank (CMB), Kweichow Moutai, and Midea Group. Meanwhile, foreign investors were net sellers of LXJM, Wuxi AppTec, and Mindray. CNY and the Asia Dollar Index gained versus the US dollar. Treasury bonds were basically flat. Copper and steel were down.

Last Night's Performance

Last Night’s Exchange Rates, Prices, & Yields

  • CNY per USD 7.83 versus 7.81 yesterday
  • CNY per EUR 7.21 versus 7.21 yesterday
  • Yield on 10-Year Government Bond 2.31% versus 2.32% yesterday
  • Yield on 10-Year China Development Bank Bond 2.45% versus 2.45% yesterday
  • Copper Price -0.40%
  • Steel Price -1.36%