Stimulus Rumors As Insurance Companies Told To Buy Stocks
7 Min. Read Time
Key News
Asian equities were mixed overnight as Mainland China, Hong Kong, and Pakistan outperformed, Taiwan and the Philippines underperformed, and Indonesia was closed for regional local elections.
A Mainland media headline summed up today’s market action nicely, calling it a “Wonderful Day!” as both Mainland China and Hong Kong opened lower but grinded higher despite several early headwinds. President Trump’s 10% China tariff tweet was widely disseminated in today’s trading along with the appointment of former US Trade Representative Robert Lighthizer protégé Jamison Greer.
The mid-morning October industrial profits year to date indicate an October contraction of -10% year over year at -4.3% versus September’s -3.5%. Unlike Western media, in China, the -10% contraction was seen as an improvement from September’s -27% year-over-year (YoY) contraction. Western media is also blasting a purported leaked memo that BYD is pressuring its suppliers to lower prices, which they then insinuate is a sign of a price war. What if it is just at their scale, they stick it to their suppliers? None of this mattered as stocks grinded higher and then ripped higher in afternoon trading on high volumes and strong breadth.
The chatter is that the China Economic Work Council, which usually takes place in mid-December, will occur in early December, with further speculation that the fiscal deficit will be expanded from 2024’s 3% to 4.5%. Hopefully, the rumors are true. One factor that likely contributed significantly was a release from Li Yunze of the State Administration for Financial Regulation stating the insurance industry should “increase investment in key areas such as strategic emerging industries, advanced manufacturing, and new infrastructure.” As an FYI, you will only read about this here. This would explain why the Mainland’s pure technology play, the STAR Board, gained +3.61% versus the partial technology Shenzhen’s gain of +2.07% and the technology light Shanghai's gain of +1.53%.
Insurance companies putting money to work would help stem the stock market’s recent slide after ripping post-stimulus announcement. Remember, El Jefe said the stock market is higher, though Mainland margin balances have fallen slightly recently. Insurance companies being told to buy the stock market would help. Interestingly, the National Team’s favored ETFs had below-average volumes again.
Growth stocks also outperformed in Hong Kong, led by the most heavily traded by volume, including Meituan, which gained +7.24% in advance of earnings Friday (Friday after the Hong Kong close earning releases always makes me a little nervous), Tencent, which gained +2.29% with their buyback rolling on daily, Alibaba, which gained +1.98% with their buyback rolling on daily, Xiaomi which gained +4.04%, and ANTA Sports, which gained +1.56%. After the close, the National Office issued an “Action Plan for Effectively Reducing the Logistics Cost of the Whole Society,” specifically naming the platform economy, which is code for internet stocks.
Logistics giant SF Holding (6936 HK) raised $732 million with its initial public offering (IPO) today, though closed flat. This was the 2nd largest Hong Kong IPO behind home appliance giant Midea Group’s $3.9 billion. Mainland investors bought a healthy $677 million of Hong Kong stocks and ETFs via Southbound Stock Connect. After the close, twelve provinces reported the issuance of RMB 1.239 trillion of special bonds to replace hidden debt. As JD Group’s Chief Economist Jianguang Shen wrote in today’s Financial Times, Western media and investors don’t consider this pro-consumption stimulus, but it is. This piece titled Five Things the Market Got Wrong about China’s Stimulus Package” is a must-read, in my opinion. Also worth reading is McKinsey & Company’s “China Brief: China Consumption – Momentum Amid Uncertainty.” Lastly, you should watch Unbound founder and CEO David Woo’s CNBC appearance, as he might be more bullish than I am. He also believes Trump’s tariff threat is the Art of the Deal. Link below.
While I’ll be up to check on China’s market tomorrow, we will not be publishing a daily note as the team deserves a day off. Yes, there is more to China Last Night than myself. While I write it and pull the data, Henry, Cole, and Joe correct my grammatical errors, format, publish, and send the email, all under the watchful eye of our Head of Marketing, Joe Dube. For those celebrating Thanksgiving, may you and your loved ones enjoy this uniquely and grand American holiday. To those not celebrating, take a page from your friends here in the US by overeating, laughing, and yelling at loved ones!
The Hang Seng and Hang Seng Tech diverged +2.32% and +3.61%, respectively, on volume up +13% from yesterday which is 109% of the 1-year average. 438 stocks advanced, while 59 declined. Main Board short turnover increased by 29% from yesterday, which is 111% 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 and small capitalization stocks outperformed value and large capitalization stocks. All sectors were positive, led by technology, up +3.73%, healthcare, up +3.28%, and consumer discretionary, up +3.23%. The top sub-sectors were technology hardware, media, and household products, while industry conglomerates were the only negative sub-sectors. Southbound Stock Connect volumes were light as Mainland investors bought $677 million of Hong Kong stocks and ETFs.
Shanghai, Shenzhen, and the STAR Board gained +1.53%, +2.07%, and +3.61%, respectively, on volume up +11.81% from yesterday, which is 151% of the 1-year average. 4,140 stocks advanced, while 848 declined. Growth and small capitalization stocks outperformed value and large capitalization stocks. All sectors were positive, led by technology, up +3.18%, communication services, up +2.53%, and healthcare, up +1.98%. The top sub-sectors were office supplies, power generation, and software. Northbound Stock Connect volumes were just above average. CNY was off slightly while the Asia dollar index gained versus the US dollar. The Treasury curve flattened. Copper gained while steel fell.
Last Night's Performance
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 2.3% |
| Hang Seng Tech | HSTECH Index | 3.6% |
| Hong Kong Turnover | HKTurn Index | 13.6% |
| HK Short Sale Turnover | HKSST Index | 29.8% |
| Short Turnover as a % of HK Turnovr | N/A | 16.1% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 674.9 |
| China (Shanghai) | SHCOMP Index | 1.5% |
| China (Shenzhen) | SZCOMP Index | 2.1% |
| China (STAR Board) | Star50 Index | 3.6% |
| Mainland Turnover | .chturn Index | 11.8% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 0.5% |
| Japan | NKY Index | -0.8% |
| India | SENSEX Index | 0.3% |
| Indonesia | JCI Index | -0.9% |
| Malaysia | FBMKLCI Index | 0.1% |
| Pakistan | KSE100 Index | 4.8% |
| Philippines | PCOMP Index | -1.5% |
| South Korea | KOSPI Index | -0.7% |
| Taiwan | TWSE Index | -1.5% |
| Thailand | SET Index | -0.5% |
| Singapore | STI Index | -0.1% |
| Australia | AS51 Index | 0.6% |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 154 | 2.52 |
| Communication Services | 9 | 2.35 |
| Consumer Discretionary | 29 | 3.23 |
| Consumer Staples | 13 | 3.06 |
| Energy | 7 | 0.7 |
| Financials | 24 | 1.68 |
| Health Care | 14 | 3.28 |
| Industrials | 18 | 1.41 |
| Information Technology | 11 | 3.73 |
| Materials | 11 | 1.47 |
| Real Estate | 6 | 2.52 |
| Utilities | 12 | 1.58 |
| Mainland China Listed | 487 | 1.8 |
| Communication Services | 13 | 2.53 |
| Consumer Discretionary | 41 | 1.43 |
| Consumer Staples | 32 | 1.04 |
| Energy | 17 | 0.9 |
| Financials | 68 | 1.74 |
| Health Care | 45 | 1.97 |
| Industrials | 74 | 1.67 |
| Information Technology | 93 | 3.17 |
| Materials | 80 | 1.44 |
| Real Estate | 7 | 1.97 |
| Utilities | 17 | 1.26 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 2.3 |
| Alibaba HK | 9988 HK Equity | 2 |
| JD.com HK | 9618 HK Equity | 5 |
| NetEase HK | 9999 HK Equity | 3.1 |
| Yum China HK | 9987 HK Equity | -0.9 |
| Baozun HK | 9991 HK Equity | 4.3 |
| Baidu HK | 9888 HK Equity | 1.5 |
| Autohome HK | 2518 HK Equity | 1.3 |
| Bilibili HK | 9626 HK Equity | 4.2 |
| Trip.com HK | 9961 HK Equity | 0.5 |
| EDU HK | 9901 HK Equity | 0.6 |
| Xpeng HK | 9868 HK Equity | 4.1 |
| Weibo HK | 9898 HK Equity | 2.8 |
| Li Auto HK | 2015 HK Equity | 2.5 |
| Nio Auto HK | 9866 HK Equity | -1.7 |
| Zhihu HK | 2390 HK Equity | -0.1 |
| KE HK | 2423 HK Equity | 5 |
| Tencent Music Entertainment HK | 1698 HK Equity | 2.9 |
| Meituan HK | 3690 HK Equity | 7.2 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| MEITUAN-CLASS B | 7.2 |
| TENCENT HOLDINGS LTD | 2.3 |
| ALIBABA GROUP HOLDING LTD | 2 |
| XIAOMI CORP-CLASS B | 4 |
| ANTA SPORTS PRODUCTS LTD | 1.6 |
| SF HOLDING CO-H | 0 |
| JD.COM INC-CLASS A | 5 |
| SEMICONDUCTOR MANUFACTURING | 4.3 |
| AIA GROUP LTD | 1.8 |
| PING AN INSURANCE GROUP CO-H | 3.1 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| EAST MONEY INFORMATION CO-A | 5.1 |
| SICHUAN DEVELOPMENT LOMON -A | 10 |
| HITHINK ROYALFLUSH INFORMA-A | 11.5 |
| 360 SECURITY TECHNOLOGY IN-A | 2.4 |
| DAWNING INFORMATION INDUST-A | 3.2 |
| ZHEJIANG JINKE TOM CULTURE-A | 20 |
| CONTEMPORARY AMPEREX TECHN-A | 1.2 |
| SEMICONDUCTOR MANUFACTURIN-A | 3.4 |
| ANHUI JIANGHUAI AUTO GROUP-A | -6.2 |
| SHENZHEN YSSTECH INFO-TECH-A | 12.2 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 7.25 versus 7.25 yesterday
- CNY per EUR 7.63 versus 7.61 yesterday
- Yield on 10-Year Government Bond 2.06% versus 2.07% yesterday
- Yield on 10-Year China Development Bank Bond 2.14% versus 2.14% yesterday
- Copper Price +0.12%
- Steel Price -0.36%
