Key News

Asian equities were lower on light volumes as Indonesia outperformed and Pakistan was closed for a market holiday. 

Hong Kong’s morning gains faded in the afternoon on light volumes, though growth stocks held up better than most following yesterday’s gains. 

Like yesterday, the biggest market news occurred after the close as Guangzhou became the second Tier 1 city to ease home purchase restrictions like Shanghai did yesterday. Yesterday, Shanghai issued nine measures, including lowering the minimum down payment ratio to 20% and the minimum mortgage interest rate of Loan Prime Rate (LPR) minus 45 basis points for first-time home buyers. Shanghai also lowered the minimum down payment ratio to 35% with a minimum mortgage interest rate that is the loan prime rate (LPR) minus 5 basis points for second-time homebuyers. Local banks are implementing the new rates today. Guangzhou lowered the minimum down payment ratio to 15% for first-time home buyers and 25% for second-home buyers.

Real Estate was the worst performer in Mainland China, where it fell -1.96% and Hong Kong, where it fell -1.12%. Technology also struggled, though semiconductor stocks managed gains following yesterday's news of the third state-backed semiconductor-focused investment fund, aptly called "Big Fund 3". The first semiconductor-focused investment fund was back in 2014.

Hong Kong’s most heavily traded stocks by value were Tencent, which gained +0.74%, Alibaba, which gained +0.38%, Meituan, which gained +0.25%, CNOOC, which gained +0.73%, and Xiaomi, which fell -1.63%. Mainland media is reporting that Tencent’s app store is partnering with Microsoft’s app store to allow the use of applications on each other’s ecosystems. Tencent was also in the news for allowing parents to allow limits on the amount of time spent on social media platform WeChat and the success of the recently launched Dungeon & Fighter mobile game. How do we know the success? The Apple China app store sells the download data, no different than other apps. Mainland China was off on light volumes, with foreign investors selling a healthy $711 million worth of Mainland stocks. Mainland media reported Apple’s April iPhone sales increased by +52%, though little details were provided. It was fairly quiet otherwise!

The Hang Seng and Hang Seng Tech indexes fell -0.03% and -0.26%, respectively, on volume that decreased -17.75% from yesterday, which is 96% of the 1-year average. 173 stocks advanced, while 291 declined. Main Board short turnover increased by +5.86% from yesterday, which is 85% 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. The top-performing sectors were Energy, which gained +1.39%, Industrials, which gained +0.57%, and Communication Services, which gained +0.50%. Meanwhile, Real Estate fell -1.12%, Technology fell -0.92%, and Utilities fell -0.23%. The top-performing subsectors were energy services, transportation, and business and professional services. Meanwhile, healthcare equipment, media, and diversified financials were among the worst-performing. Southbound Stock Connect volumes were light as Mainland investors bought a net $533 million worth of Hong Kong-listed stocks and ETFs, including CNOOC, Tencent, and PetroChina, which were small net buys. Meanwhile, the Hong Kong Tracker ETF was a large net sell, and ICBC and Sinopec small net sells.

Shanghai, Shenzhen, and the STAR Board fell -0.46%, -1.08%, and -0.52%, respectively, on volume that declined -4.24% from yesterday, which is 87% of the 1-year average. 1,035 stocks advanced, while 3,939 declined. All factors were negative, as large caps and value fell less. Energy and utilities were the only positive sectors, up +0.97%, and +0.83%. Meanwhile, the worst-performing sectors were Real Estate, which fell -1.96%, Communication Services, which fell -1.94%, and Technology, which fell -1.41%. The top-performing subsectors were marine industry, the power industry, and motorcycles. Meanwhile, construction machinery, real estate, and internet were among the worst-performing. Northbound Stock Connect volumes were moderate, as Zhongli Innolight, Montage Technology, and Cypc were small net buys, while Eoptolink, COSCO Shipping, and HR were small net sells. CNY was off slightly versus the US dollar. Treasury bonds rallied. Steel and copper gained.

Last Night's Performance

Last Night’s Exchange Rate, Prices, & Yields

• CNY per USD 7.24 versus 7.24 yesterday
• CNY per EUR 7.88 versus 7.86 yesterday
• Yield on 10-Year Government Bond 2.29% versus 2.30% yesterday
• Yield on 10-Year China Development Bank Bond 2.40% versus 2.41% yesterday
• Copper Price +1.11%
• Steel Price +0.05%