YUM China’s Results Are “Finger Lickin’ Good”, NPC Kicks Off
7 Min. Read Time
Key News
Asian equities were higher on light volumes, as Mainland China and South Korea outperformed, India underperformed, and Japan was closed for Culture Day, a public holiday to promote culture, the arts, and academic endeavors.
The US Presidential election has investors sidelined, except for Mainland investors, who bought another $421 million worth of Hong Kong-listed stocks today while all sectors were positive on the Mainland overnight. Who will take control of the Senate and House, and the probability of a “Red Sweep”, has surprisingly garnered little media coverage, in my opinion.
Autos were the big winners in both Hong Kong and Mainland China following Friday’s strong October sales numbers. After the close, the China Passenger Car Association reported that passenger new energy vehicles (NEVs), which include both electric vehicles (EVs) and hybrids. October sales are estimated to have increased +58% to 1.4 million units and +14% from September, according to CNEV Post. The increases are being “driven” by the fact that “….all provinces in China have introduced and implemented car trade-in subsidy policies and launched some other policies to promote auto consumption, bringing a new wave of growth momentum to the auto market”. Trade-in subsidies have also been applied to home appliances.
Within the financial sector, brokers had a very strong day in both markets on the easing of foreign investment restrictions.
The National People’s Congress (NPC) released that the NPC will “increase the local government debt limit” as their meetings got underway today. They will conclude on Friday.
The Wall Street Journal had an article today saying that no policy bazooka is coming “according to people involved in policy discussions”. Didn’t we already have a monetary, housing and stock market bazooka unleashed? While the article focuses on Chinese government policy based on who wins the US election, the reality is that housing price declines have weighed on the domestic economy, consumer confidence, and consumption. The potential for tariff hikes puts an even greater emphasis on raising domestic consumption to offset potential weakness in export-driven manufacturing. As Jim Carville would say, it’s not the US election, it’s the economy, stupid!
Both Hong Kong and Mainland China remain in a narrow range since mid-October following the initial stimulus rally.
According to Nasdaq Dorsey Wright, the Mainland market is 13% overbought as of Friday’s close versus the 257% reading on October 4th versus the 10-year weekly distribution history. Offshore and Hong Kong-listed growth stocks are 19% overbought as of Friday overbought versus their October 4th reading of 194% overbought. We are simply working through this big initial rally, in my opinion. It is worth noting that the National Team ETFs had high volume spikes in afternoon trading despite the markets being high. Hong Kong was led higher by growth stocks, including Hong Kong’s most heavily traded stocks, which were Tencent, which fell -0.05%, Xiaomi, which was flat, Alibaba, which gained +1.11%, Meituan, which gained +0.05%, Semiconductor Manufacturing, which gained +0.39%.
Yum China reported Q3 financial results before the US open and after the Hong Kong close that beat analyst expectations. The company emphasized their shareholder friendly moves via buybacks and dividends. The KFC and Pizza Hut chain continues to open stores at an impressive rate though same-store growth declined -3% YoY. Otherwise, outstanding results!
- Revenue increased +5% year over year (YoY) to $3.071b from $2.914B versus analyst estimate of $3.05B
- Same-store growth declined -3% YoY
- Adjusted net income increased +22% YoY to $297mm from $244mm versus analyst estimate of $261mm
- Adjusted EPS increased +33% YoY to $0.77 versus analyst estimate of $0.62
- 15,861 as of September 30, 2024, including 11,283 KFC stores and 3,606 Pizza Hut stores.
- The Company opened 438 net new stores in the third quarter
- Total membership of KFC and Pizza Hut exceeded 510 million.
- Yum China returned $248 million to shareholders in the third quarter, through $187 million in share repurchases and $61 million in cash dividends.
- The Company plans to step up the capital returns to shareholders from $3 billion to $4.5 billion between 2024 and 2026, representing an increase of 50%.
- In the first nine months, the Company returned $1.24 billion to shareholders, nearly three times the amount returned in the same period last year.
- From 2017 to November 1, 2024, the Company repurchased approximately 71.8 million shares of common stock for $3.0 billion. Our remaining authorization is approximately $1.4 billion.
The Hang Seng and Hang Seng Tech indexes gained +0.30% and +1.08%, respectively, on volume that declined -17.85% from Friday, which is 94% of the 1-year average. 297 stocks advanced while 173 declined. Main Board short turnover decreased -23.18% from Friday which is 62% 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 gained more than the value factor and large caps. The top-performing sectors were Health Care, which gained +2.00%, Consumer Discretionary, which gained +1.28%, and Consumer Staples, which gained +1.20%. Meanwhile, Real Estate, which fell -1.07%, Industrials, which fell -0.71%, and Energy, which fell -0.08%. The top-performing subsectors were diversified financials, autos, and pharmaceuticals. Meanwhile, food & staples, energy, and materials were among the worst-performing subsectors. Southbound Stock Connect volumes were 1.25X the average as Mainland investors bought $421 million worth of Hong Kong-listed stocks and ETFs, including Xiaomi, which was a moderate net buy, and Tencent and Innovent, which were small net buys. Meanwhile, CNOOC was a moderate net sell and Semiconductor Manufacturing International (SMIC) was a small net sell.
Shanghai, Shenzhen, and the STAR Board gained +1.17%, +1.97%, +1.59%, respectively, on volume that declined -24.05% from Friday, which is 190% of the 1-year average. 4,260 stocks advanced while 754 stocks declined. The growth factor and small caps rose more than value factor and large caps. All sectors were positive, led higher by Consumer Discretionary, which gained +3.74%, Financials, which gained +2.38%, and Information Technology, which gained +2.10%. The top-performing subsectors were autos, diversified financials, and securities. Meanwhile, education, daily chemicals, and steel were among the worst-performing. Northbound Stock Connect volumes were high, at 2X the average. CNY and the Asia Dollar Index gained versus the US dollar. The Treasury yield curve flattened. Copper gained while steel fell.
Last Night's Performance
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.3% |
| Hang Seng Tech | HSTECH Index | 1.1% |
| Hong Kong Turnover | HKTurn Index | -17.8% |
| HK Short Sale Turnover | HKSST Index | -23.2% |
| Short Turnover as a % of HK Turnovr | N/A | 10.6% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 419.9 |
| China (Shanghai) | SHCOMP Index | 1.2% |
| China (Shenzhen) | SZCOMP Index | 2% |
| China (STAR Board) | Star50 Index | 1.6% |
| Mainland Turnover | .chturn Index | -24% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 0.4% |
| Japan | NKY Index | Closed |
| India | SENSEX Index | -1.2% |
| Indonesia | JCI Index | -0.3% |
| Malaysia | FBMKLCI Index | 0.8% |
| Pakistan | KSE100 Index | 1.1% |
| Philippines | PCOMP Index | -0.1% |
| South Korea | KOSPI Index | 1.8% |
| Taiwan | TWSE Index | 0.8% |
| Thailand | SET Index | -0.1% |
| Singapore | STI Index | 0.5% |
| Australia | AS51 Index | 0.6% |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 154 | 0.57 |
| Communication Services | 9 | 0.17 |
| Consumer Discretionary | 29 | 1.29 |
| Consumer Staples | 13 | 1.21 |
| Energy | 7 | -0.67 |
| Financials | 24 | 0.23 |
| Health Care | 14 | 2.01 |
| Industrials | 18 | -0.71 |
| Information Technology | 11 | 0.18 |
| Materials | 11 | -0.15 |
| Real Estate | 6 | -1.06 |
| Utilities | 12 | 1 |
| Mainland China Listed | 487 | 1.79 |
| Communication Services | 13 | 1.66 |
| Consumer Discretionary | 41 | 3.66 |
| Consumer Staples | 32 | 1.41 |
| Energy | 17 | 0.29 |
| Financials | 68 | 2.32 |
| Health Care | 45 | 1.3 |
| Industrials | 74 | 1.83 |
| Information Technology | 93 | 2.03 |
| Materials | 80 | 1.09 |
| Real Estate | 7 | 0.38 |
| Utilities | 17 | 0.28 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 0 |
| Alibaba HK | 9988 HK Equity | 1.1 |
| JD.com HK | 9618 HK Equity | -1.3 |
| NetEase HK | 9999 HK Equity | 0.6 |
| Yum China HK | 9987 HK Equity | 4.9 |
| Baozun HK | 9991 HK Equity | -3 |
| Baidu HK | 9888 HK Equity | -0.1 |
| Autohome HK | 2518 HK Equity | 0 |
| Bilibili HK | 9626 HK Equity | 0.8 |
| Trip.com HK | 9961 HK Equity | 4.8 |
| EDU HK | 9901 HK Equity | 1.6 |
| Xpeng HK | 9868 HK Equity | 7.7 |
| Weibo HK | 9898 HK Equity | 1.6 |
| Li Auto HK | 2015 HK Equity | 2.1 |
| Nio Auto HK | 9866 HK Equity | 0.9 |
| Zhihu HK | 2390 HK Equity | -2.3 |
| KE HK | 2423 HK Equity | 0.4 |
| Tencent Music Entertainment HK | 1698 HK Equity | 0 |
| Meituan HK | 3690 HK Equity | 0.1 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | 0 |
| XIAOMI CORP-CLASS B | 0 |
| SEMICONDUCTOR MANUFACTURING | 0.4 |
| MEITUAN-CLASS B | 0.1 |
| ALIBABA GROUP HOLDING LTD | 1.1 |
| CHINA CONSTRUCTION BANK-H | -1 |
| LI AUTO INC-CLASS A | 2.1 |
| BYD CO LTD-H | 3.5 |
| PING AN INSURANCE GROUP CO-H | 0 |
| IND & COMM BK OF CHINA-H | 0.8 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| EAST MONEY INFORMATION CO-A | -0.8 |
| TCL TECHNOLOGY GROUP CORP-A | -2.1 |
| OFILM GROUP CO LTD-A | -10 |
| CHINA GREATWALL TECHNOLOGY-A | 10 |
| ZHEJIANG WANFENG AUTO -A | 10 |
| SHANGHAI ELECTRIC GRP CO L-A | -10 |
| TONGFU MICROELECTRONIC CO-A | 10 |
| SHANGHAI ZHANGJIANG HIGH-A | 10 |
| SERES GROUP CO L-A | -2.4 |
| ANHUI JIANGHUAI AUTO GROUP-A | -8.2 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 7.10 versus 7.12 Friday
- CNY per EUR 7.74 versus 7.74 Friday
- Yield on 10-Year Government Bond 2.13% versus 2.14% yesterday
- Yield on 10-Year China Development Bank Bond 2.21% versus 2.22% yesterday
- Copper Price 0.65%
- Steel Price -0.32%
