Key News

Asian equities were mostly lower overnight following a flat session on Wall Street that saw “Magnificent 7” names hit with profit taking. This was despite a pullback in the US dollar’s strength versus local currencies. Potential Russia-Ukraine escalation also weighed on markets overnight.

Mainland China held up better than Hong Kong, as the technology-oriented STAR Board outperformed. However, according to traders, markets in China lacked direction.

We are seeing diverging signals about the consumer from different stakeholders, which is interesting. Shares in short video platform Kuaishou was significantly lower overnight as management issued a weak outlook for its E-Commerce business. However, competition in short video, social-oriented E-Commerce industry, which Kuaishou has entered, has become extremely stiff. Douyin, China’s “TikTok,” is the leader in this space, and it can be difficult for others to effectively penetrate; even larger E-Commerce incumbents have struggled to compete.

Meanwhile, a major bank did a survey of foreign brands in China on their growth, and many said that they are seeing slowing sales. But, many of the brands they highlighted are, similarly to Kuaishou, facing increased competition. Most of their competition is coming from local players, especially in apparel and smartphones.

Fintech lenders are showing a healthier consumer. China consumer fintech company Qifu Technology reported third-quarter results that beat analyst estimates for both revenue and net income. The consumer lender’s successful quarter is a positive sign for China’s consumers. The company reported adjusted net revenue of RMB 4.4 billion and net income of RMB 1.8 billion, which is up +55% year-over-year. The company is focused on consumer loans and has a penchant for innovation in credit assessment techniques. Qifu provides mostly small loans to consumers looking to finance large purchases outside of residences, operating mostly in the subprime market. The company has done a good job of remaining profitable in what has been a difficult environment for China’s fintech firms in recent years since the indefinite postponement of Ant Group’s public offering.

Internet earnings rolled on with PDD's Q3 earnings release this morning before the market opened in the US, which was the first significant miss for the third quarter. The company's revenue increase of +44% to RMB 99.4 billion was 3% short of what was expected for the global E-Commerce giant. Net profit was also 6% less than expected. Unfortunately, the company does not break out its revenue by region, so we do not know whether the weakness is in China or elsewhere.

The electric vehicle ecosystem was mixed but mostly lower overnight. NIO fell slightly as shipment guidance was lower than expected, and Xpeng fell -6 % on price cut concerns.

According to the South China Morning Post, China’s Ministry of Industry and Information Technology (MIIT) has urged solar companies to avoid pursuing needless scale. This comes after the Ministry of Finance (MOF) lowered the tax rebate for solar panel exports to 9% from 13% just last week. This is a welcome policy direction as we head into a Trump Administration in the United States. China’s leaders could be gearing up to make a significant deal with the US, and others, and this could represent a preemptive show of good faith for trade negotiations. Brazil, another key trade partner, just hiked tariffs on solar panels, too, so the negotiation will likely go beyond the US.

The Hang Seng and Hang Seng Tech indexes fell -0.53% and -1.24%, respectively. The top-performing sectors were Utilities and Energy. Meanwhile, the worst-performing sectors were Consumer Staples, Consumer Discretionary, and Real Estate.

Shanghai, Shenzhen, and the STAR Board diverged to close +0.07%, -0.07%, and +0.89%, respectively.

Last Night's Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.23 versus 7.25 yesterday
• CNY per EUR 7.62 versus 7.63 yesterday
• Yield on 10-Year Government Bond 2.08% versus 2.10% yesterday
• Yield on 10-Year China Development Bank Bond 2.15% versus 2.16% yesterday
• Copper Price -0.47%