Key News

Asian equities were largely lower on light volumes and news, though India, Singapore, Thailand, and the Philippines managed gains despite the US dollar’s strength versus regional currencies.

Indian investors must have missed the Wall Street Journal’s “Heard on the Street” article on the effect of Indian retail investors on the market, which is a theme we’ve mentioned.

Hong Kong reopened with a thud, playing catch up to the downside after Friday’s impromptu and likely last-ever Typhoon market close due to the new exchange rules.

Alibaba was added to Southbound Stock Connect well after the Hong Kong market’s close, as we had anticipated. Remember that 10% of Tencent’s shares outstanding are held by Mainland investors via Southbound Stock Connect. Within a year, I believe $20 billion worth of its stock could be held by mainland investors. Remember that Mainland investors have had no access to one of the most popular companies in China until tomorrow.

The National Development and Reform Commission (NDRC) and the Ministry of Commerce reduced the rules overseeing foreign investment in the manufacturing industry, beginning on November 1, but there was no effect on markets.

Yes, August’s producer price index (PPI) declined -1.8%, missing expectations of -1.5% versus July’s -0.8%, though falling commodity prices were a factor. CPI was 0.6% missed expectations of 0.7% versus July’s 0.5%. Domestic consumption and confidence remain weak, though M2 continues to rise, indicating households have money, but do not want to spend it.

It was an ugly session in Hong Kong overnight, as decliners outpaced advancers by 4 to 1 as the market was led lower by vale stocks and sectors. Hong Kong’s most heavily traded stocks by value were Tencent, which fell -0.59% despite buying back 2.72 million shares today, Alibaba, which fell -1.88% despite buying back 734,800 US-listed shares on Friday, representing a whopping 6.2% of total volume, Meituan, which fell -0.59%, CNOOC, which fell -3.83%, and Xiaomi, which gained +0.43%. Mainland investors bought a jumbo jet-sized $747 million worth of Hong Kong-listed stocks and ETFs, including the Hong Kong Tracker ETF, which saw a very large net inflow, though Tencent and Meituan were sold.

NIO jumped +13.05% after announcing a smaller-than-anticipated loss.

Real estate was off on Vanke’s poor August sales year-over-year, in a surprise to no one.

Mainland China was led lower by value stocks and sectors. The chart on the Shanghai Composite is not looking good as National Team ETFs had mixed volumes today.

According to Reuters, “the top House Democrat on the Congressional-Executive Commission on China” said that he will not vote for the Biosecure Act because it is “a lousy bill”. The Biosecure Act would have restricted US pharmaceutical companies that receive federal dollars from working with contract research providers that have facilities in China, such as WuXi Biologics and WuXi AppTec. Finally! I believe Congress acting as judge, jury, and executioner without providing any evidence should be a much larger issue than the media is giving attention to.

The Hang Seng and Hang Seng Tech indexes fell -1.42% and -1.46%, respectively, on volume that increased +57.34% from Thursday, which is 129% of the 1-year average. 89 stocks advanced while 395 stocks declined. Main Board short turnover increased +84.9% from Thursday, which is 124% of the 1-year average, as 16% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Growth, value, large, and small caps were all off. All sectors were negative, including Energy, which fell -5.4%, Materials, which fell -3.41%, and Real Estate, which fell -3.21%. Household and personal products represented the only positive subsector while energy services, basic materials, and capital goods were among the worst-performing subsectors. Southbound Stock Connect volumes were high as Mainland investors bought a net $747 million worth of Hong Kong-listed stocks and ETFs, including the Hong Kong Tracker ETF and Kuaishou, which were both large net buys. Meanwhile, Tencent and Meituan were moderate net sells.

Shanghai, Shenzhen, and the STAR Board fell -1.06%, -0.59%, and -1.12%, respectively, on volume that decreased -4.38% from Friday, which is 66% of the 1-year average. 1,443 stocks advanced while 3,375 declined. The growth factor and small caps fell less than the value factor and large caps. All sectors were negative, including Energy, which fell -3.15%, Consumer Discretionary, which fell -1.94%, and Materials, which fell -1.9%. The top-performing subsectors were motorcycles, retail, and diversified financials. Meanwhile, construction machinery, precious metals, and oil & gas were among the worst-performing. Northbound Stock Connect volumes were moderate. CNY and the Asia Dollar Index fell versus the US dollar. Treasury bonds rallied. Copper and steel fell.

Last Night’s Performance

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 7.11 versus 7.08 Friday
• CNY per EUR 7.87 versus 7.87 Friday
• Yield on 10-Year Government Bond 1.91% versus 1.92% Friday
• Yield on 10-Year China Development Bank Bond 2.22% versus 2.23% Friday
• Copper Price -0.65%
• Steel Price -1.14%