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Mainland Flat On Trade Surplus, Real Estate Rocks Before Plenum, Week in Review

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Week in Review

  • Asian equities were higher this week on improved chances of a US rate cut towards the end of the year after Powell’s press conference on Monday. Hong Kong outperformed and Pakistan underperformed as one of the only markets lower for the week.
  • Baidu had a significant upswing this week as China’s government issued further policy support for autonomous vehicles and 11 new cities announced plans to adopt Baidu’s robo-taxis.
  • Semiconductor stocks had a good week in China as Will Semiconductor reported a net income increase of 754% in dollar terms in its first half 2024 results.
  • China’s inflation rate, measured by CPI, was reported this week, coming in at a lower-than-expected 0.2% in June, year-over-year.

Friday’s Key News

Asian equities were mixed but mostly higher overnight as Hong Kong outperformed and Taiwan underperformed.

Mainland China was flat on trade data that indicated a record surplus of nearly $100 billion in June on exports that increased nearly 9% year-over-year. This contrasts with the relatively lackluster manufacturing PMIs released earlier in the week.

Real estate was the top-performing sector in both Hong Kong and Mainland China. The main catalyst was the significant deceleration in sales declines for top developers in China. Also, some are expecting the famous motto “housing is for living, not for speculation” to be removed from official policy “decision” or “jue-ding” from next week’s Third Plenum, which will be in session starting Monday. There will be limited news from the central committee meetings in the first two days next week while leaders meet. Then, some press conferences will likely be held before the release of the full communique, which is called the “decision”.

The growth factor outpaced the value factor significantly in Hong Kong and somewhat in Mainland China. This is because internet stocks had a great day despite some analysts cutting their targets for Alibaba’s net profit in Q2. Baozun gained +5.5%, Alibaba gained +3.9%, and JD.com was up +4.9%.

A common misperception of the sell-side/stock analyst’s job is the belief that their job is to predict whether a company’s stock will rise or fall. Rather, their job is to maintain a relationship with the company to pass along insights and attempt to model a company’s income and balance sheet. There are innumerable inputs that make the modeling job difficult, such as the domestic economy, and monetary and fiscal policies that can create significant headwinds or tailwinds, in addition to the unexpected like natural disasters. While Q2 earnings season remains a few weeks away, companies clearly provide analysts guidance before their quiet period. Across the China E-Commerce space, the corporate feedback appears positive. Yes, China’s domestic consumption remains tepid as low consumer confidence due to real estate losses weighs on sentiment. The Western media coverage of the 6/18 (June 18th) E-Commerce sales festivals was largely negative despite evidence to the contrary. We can assume 6/18 discounts are apt to reduce margins, though strong buybacks should mitigate the impact on profitability. We shall know in a few weeks!

The Hang Seng and Hang Seng Tech indexes gained +2.59% and +2.32%, respectively, on volume that increased +19% from yesterday. Mainland investors bought a net $22 million worth of Hong Kong-listed stocks and ETFs via Southbound Stock Connect. The top-performing sectors were Real Estate, which gained +4.39%, Consumer Discretionary, which gained +3.44%, and Health Care, which gained +3.07%. Meanwhile, the worst-performing sectors were Utilities, which fell -0.78%, Materials, which fell -0.57%, and Energy, which fell -0.44%.

Shanghai, Shenzhen, and the STAR Board diverged to close +0.03%, -0.14%, and +0.05% overnight on volume that decreased -13% from yesterday. The top-performing sectors overnight were Real Estate, which gained +3.32%, Financials, which gained +1.70%, and Consumer Discretionary, which gained +1.48%. Meanwhile, the worst-performing sectors were Energy, which fell -1.23%, Utilities, which fell -1.00%, and Information Technology, which fell -0.75%.

Last Night's Performance

Country/IndexTicker1-Day Change
China (Hong Kong)HSI Index2.6%
Hang Seng TechHSTECH Index2.3%
Hong Kong TurnoverHKTurn Index19%
HK Short Sale TurnoverHKSST Index4.9%
Southbound Stock Connect Net Buy/Sell (US $ Millions)N/A21.9
China (Shanghai)SHCOMP Index0
China (Shenzhen)SZCOMP Index-1.5%
China (STAR Board)Star50 Index0.1%
Mainland Turnover.chturn Index-12.8
Nouthbound Stock Connect Net Buy/Sell (US $ Millions)N/ANot Available
Jing Daily China Global Luxury IndexCHINALUX Index0.7%
JapanNKY Index-2.5%
IndiaSENSEX Index0.8%
IndonesiaJCI Index0.4%
MalaysiaFBMKLCI Index-0.3%
PakistanKSE100 Index-0.1%
PhilippinesPCOMP Index0.6%
South KoreaKOSPI Index-1.2%
TaiwanTWSE Index-1.9%
ThailandSET Index0.2%
SingaporeSTI Index0.7%
AustraliaAS51 Index0.9%
MSCI China All Shares Index# of StocksAverage 1-Day Change (%)
Hong Kong Listed1542.5
Communication Services92.9
Consumer Discretionary293.5
Consumer Staples132
Energy7-0.4
Financials242.6
Health Care 143.1
Industrials 181.2
Information Technology 110.1
Materials 11-0.6
Real Estate64.4
Utilities12-0.8
China Listed4870.4
Communication Services130.7
Consumer Discretionary411.5
Consumer Staples320.8
Energy17-1.2
Financials681.7
Health Care 450.4
Industrials 740.2
Information Technology 93-0.7
Materials 80-0.6
Real Estate73.3
Utilities17-1
US & Hong Kong Dually ListedTicker1-Day Change (%)
Tencent HK700 HK Equity3.2
Alibaba HK9988 HK Equity3.9
JD.com HK9618 HK Equity4.9
NetEase HK9999 HK Equity1
Yum China HK9987 HK Equity4.2
Baozun HK9991 HK Equity5.5
Baidu HK9888 HK Equity2.4
Autohome HK2518 HK Equity0.3
Bilibili HK9626 HK Equity1.6
Trip.com HK9961 HK Equity0.8
EDU HK9901 HK Equity-2.4
Xpeng HK9868 HK Equity4.2
Weibo HK9898 HK Equity3.9
Li Auto HK2015 HK Equity1.1
Nio Auto HK9866 HK Equity0.5
Zhihu HK2390 HK Equity5.4
KE HK2423 HK Equity-1
Noah HK6686 HK Equity0
Tencent Music Entertainment HK1698 HK Equity-1.5
Meituan HK3690 HK Equity4.9
Hong Kong's Most Heavily Traded by Value 1-Day Change (%)
Tencent Holdings Ltd 3.2
Meituan4.9
Alibaba Group Holding Ltd3.9
China Construction Bank Corporation 2.4
Industrial and Commercial Bank of China2.8
BYD Ltd  2.2
AIA Group Ltd2.5
Hong Kong Exchanges and Clearings2.4
Ping Insurance Group3.2
JD.com Inc4.9
Shanghai and Shenzhen's Most Heavily Traded by Value 1-Day Change (%)
BAIC BluePark New Energy Technology8.2
Seres Group Ltd4.5
BYD Ltd3.8
Chongqing Changan Automobiles-0.2
Foxconm Industrial Internet -5.2
Contemporary Amperex Technology1.6
Kweichow Moutai Ltd1.1
China Merchants Bank3.3
COSCO Shipping Holdings -4.7
Zhejiang Crystal-Optech Ltd-5.2

Last Night’s Exchange Rates, Prices, & Yields

  • CNY per USD 7.25 versus 7.26 yesterday
  • CNY per EUR 7.90 versus 7.89 yesterday
  • Yield on 1-Day Government Bond 1.24% versus 1.24% yesterday
  • Yield on 10-Year Government Bond 2.26% versus 2.26% yesterday
  • Yield on 10-Year China Development Bank Bond 2.34% versus 2.35% yesterday
  • Copper Price +0.23%
  • Steel Price -0.26%