Ministry Of Finance Hints At NPC Fiscal Policy, Reiterates 2024 GDP Goal
6 Min. Read Time
Key News
Asian equities were largely higher on light volumes as Japan and South Korea outperformed, despite the US dollar strengthening overnight.
Both Hong Kong and Mainland China bounced around the room in a choppy morning session before grinding higher, led by growth stocks and sectors and small caps in afternoon trading on light volumes and good breadth.
Ministry of Finance Deputy Minister Liao Min made very constructive comments while attending the 110th World Bank meeting Washington DC concerning the upcoming National People’s Congress (NPC) meeting that starts on November 4th in Beijing. He stated (bold and underline are mine):
“Apart from monetary policy, China will also increase its countercyclical adjustment efforts in fiscal policy. It will implement a series of strong measures in resolving local government debt, stabilizing the real estate market, increasing income for key groups, safeguarding people’s livelihoods, promoting equipment updates, and exchanging old for new consumer goods. Through government spending, we will leverage social investment and stimulate consumption to increase effective demand. China is confident in achieving its annual economic growth target of around 5%...”
That should raise the bar for NPC expectations, in my opinion. I was told that fiscal measures are not included in the NPC agenda, thus I shouldn’t be concerned about preschool education being the first agenda item. The statement did not seem to be a big factor in local trading, as the upcoming US election weighs on foreign investors’ capital commitments. However, that is not the case for Mainland investors, who bought $808 million worth of Hong Kong-listed stocks via Southbound Stock Connect today.
The People’s Bank of China (PBOC), China’s central bank, introduced outright reverse repos as a new liquidity tool, which are used today by developed market central banks, in addition to 7-day reverse repos and one-year medium-term lending facility (MLF).
Real estate was the top-performing sector in Hong Kong, where it gained +2.99%, and Mainland China, where it gained +1.83% on strong sales transaction data coming from both Hong Kong and Mainland China. While the real estate journey out of the woods is still ongoing, there are early positive indications as transaction volumes pick up.
Alibaba gained +1.36% after settling a shareholder lawsuit for $433 million while also announcing the 590,320 ADRs purchased on October 17th, 22nd, 23rd, and 24th were cancelled (i.e. non-diluted), leading to fewer shares in circulation, in addition to buying 204,400 US ADRs on Friday.
Financials and energy lagged in both markets today, as the latter fell on the tempered Israeli retaliation in Iran.
Innovent Biologics fell -12.54% after selling 20.39% of a subsidiary to the CEO.
The State Council raised the deduction for having a child under the age of three to RMB 2,000 per month from RMB 1,000.
September Industrial Profits missed expectations and deteriorated from August, which only reinforces the need for policy support. EU and China continue to talk EVs. While foreign investors sit on the sidelines due to the US election, I suspect mainland investors will be less concerned. The HK and mainland markets are working off their overbought technicals which continue to improve from extreme overbought levels now approaching the historical averages.
The Hang Seng and Hang Seng Tech indexes gained +0.09% and +0.79%, respectively, on volume that decreased -15.46% from Friday, which is 112% of the 1-year average. 308 stocks advanced while 168 stocks declined. Main Board short turnover declined -18.84% from Friday, which is 80% of the 1-year average, as 11% of turnover was short turnover (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 Real Estate, which gained +2.99%, Consumer Staples, which gained +1.64%, and Consumer Discretionary, which gained +0.93%. Meanwhile, Health Care fell -1.51%, Technology fell -0.88%, and Financials fell -0.55%, making up the worst-performing sectors. The top-performing subsectors were food & beverage, consumer services, and real estate services. Meanwhile, insurance, pharmaceuticals, and telecom were among the worst-performing subsectors. Southbound Stock Connect volumes were high, at almost 1.5X the average, as Mainland investors bought a healthy $808 million worth of Hong Kong-listed stocks and ETFs, including Alibaba, which was a large net buy, Xiaomi, which was a moderate net buy, Innovent, Semiconductor Manufacturing (SMIC), and Tencent, which were small net buys. Meanwhile, China Mobile was a moderate net sell and CNOOC and Sunac were small net sells.
Shanghai, Shenzhen, and the STAR Board diverged to close +0.68%, +1.41%, and -0.47%, on volume that increased +5.14% from Friday, which is 215% of the 1-year average. 3,850 stocks advanced while 1,236 stocks declined. The growth factor and small caps outperformed the value factor and large caps. The top-performing sectors were Real Estate, which gained +1.83%, Communication Services, which gained +1.46%, and Consumer Staples, which gained +1.45%. Meanwhile, Technology fell -0.27% and Financials fell -0.61%, making up the worst-performing sectors. The top-performing subsectors were education, steel, and comprehensive industry, while banking, soft drinks, and insurance were among the worst-performing subsectors. Northbound Stock Connect volumes were high, at just over 2X the average. CNY and the Asia Dollar Index fell versus the US dollar. Copper and steel rose.
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0% |
| Hang Seng Tech | HSTECH Index | 0.8% |
| Hong Kong Turnover | HKTurn Index | -15.5% |
| HK Short Sale Turnover | HKSST Index | -18.8% |
| Short Turnover as a % of HK Turnovr | N/A | 11.4% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 791.3 |
| China (Shanghai) | SHCOMP Index | 0.7% |
| China (Shenzhen) | SZCOMP Index | 1.4% |
| China (STAR Board) | Star50 Index | -0.5% |
| Mainland Turnover | .chturn Index | 5.1% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 0.8% |
| Japan | NKY Index | 1.8% |
| India | SENSEX Index | 0.8% |
| Indonesia | JCI Index | -0.8% |
| Malaysia | FBMKLCI Index | -0.5% |
| Pakistan | KSE100 Index | 0.3% |
| Philippines | PCOMP Index | 0.4% |
| South Korea | KOSPI Index | 1.1% |
| Taiwan | TWSE Index | -0.6% |
| Thailand | SET Index | -0.7% |
| Singapore | STI Index | -0.3% |
| Australia | AS51 Index | 0.1% |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 154 | 0.08 |
| Communication Services | 9 | -0.45 |
| Consumer Discretionary | 29 | 0.93 |
| Consumer Staples | 13 | 1.64 |
| Energy | 7 | -0.32 |
| Financials | 24 | -0.55 |
| Health Care | 14 | -1.51 |
| Industrials | 18 | 0.44 |
| Information Technology | 11 | -0.89 |
| Materials | 11 | -0.24 |
| Real Estate | 6 | 2.99 |
| Utilities | 12 | -0.09 |
| Mainland China Listed | 487 | 0.32 |
| Communication Services | 13 | 1.48 |
| Consumer Discretionary | 41 | 0.31 |
| Consumer Staples | 32 | 1.47 |
| Energy | 17 | 0.6 |
| Financials | 68 | -0.59 |
| Health Care | 45 | 0.79 |
| Industrials | 74 | 0.33 |
| Information Technology | 93 | -0.25 |
| Materials | 80 | 1.03 |
| Real Estate | 7 | 1.85 |
| Utilities | 17 | 0.52 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -0.9 |
| Alibaba HK | 9988 HK Equity | 1.4 |
| JD.com HK | 9618 HK Equity | 1.3 |
| NetEase HK | 9999 HK Equity | 0.1 |
| Yum China HK | 9987 HK Equity | 2.1 |
| Baozun HK | 9991 HK Equity | -4.9 |
| Baidu HK | 9888 HK Equity | 1.7 |
| Autohome HK | 2518 HK Equity | -0.6 |
| Bilibili HK | 9626 HK Equity | 5.2 |
| Trip.com HK | 9961 HK Equity | 1 |
| EDU HK | 9901 HK Equity | 2.3 |
| Xpeng HK | 9868 HK Equity | 7.2 |
| Weibo HK | 9898 HK Equity | -0.3 |
| Li Auto HK | 2015 HK Equity | 0.9 |
| Nio Auto HK | 9866 HK Equity | 5.6 |
| Zhihu HK | 2390 HK Equity | 2.5 |
| KE HK | 2423 HK Equity | 0.9 |
| Tencent Music Entertainment HK | 1698 HK Equity | 1.6 |
| Meituan HK | 3690 HK Equity | 0.2 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | 1.4 |
| TENCENT HOLDINGS LTD | -0.9 |
| XIAOMI CORP-CLASS B | -1.7 |
| MEITUAN-CLASS B | 0.2 |
| SEMICONDUCTOR MANUFACTURING | 0 |
| CHINA MOBILE LTD | -0.6 |
| BYD CO LTD-H | 0.7 |
| CHINA CONSTRUCTION BANK-H | -0.2 |
| PING AN INSURANCE GROUP CO-H | -0.2 |
| CNOOC LTD | -1.2 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| EAST MONEY INFORMATION CO-A | -0.2 |
| OFILM GROUP CO LTD-A | 0.8 |
| LONGI GREEN ENERGY TECHNOL-A | -1.9 |
| SERES GROUP CO L-A | 6.3 |
| TONGWEI CO LTD-A | 4.1 |
| KUANG-CHI TECHNOLOGIES CO-A | 9.7 |
| CONTEMPORARY AMPEREX TECHN-A | -1 |
| WULIANGYE YIBIN CO LTD-A | 4 |
| ZHONGJI INNOLIGHT CO LTD-A | -3.7 |
| KWEICHOW MOUTAI CO LTD-A | 0.4 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.13 versus 7.12 yesterday
- CNY per EUR 7.71 versus 7.71 yesterday
- Yield on 10-Year Government Bond 2.16% versus 2.15% yesterday
- Yield on 10-Year China Development Bank Bond 2.24% versus 2.24% yesterday
- Copper Price +0.22%
- Steel Price +2.23%
