Trump’s China Olive Branch
6 Min. Read Time
Key News
Asian equities rebounded following Friday’s weaker US inflation data on light holiday week volumes and little news.
Seinfeld’s George Costanza would be proud that, on Festivus Day, Hong Kong and Mainland China underperformers outperformed while outperformers underperformed, i.e. the value factor outpaced the growth factor. In Hong Kong, Exhibit A would be Tencent which fell-1.45% and Meituan, which fell -1.89%. Meanwhile, banks were the top-performing subsector.
It was not all bad news for growth stocks. Alibaba gained +1.12% and Baidu gained +3.17% on reports the company’s AI is still in the running to operate China's iPhones. Tencent’s WeChat gifting function is being incorporated by East Buy, which gained +5.87%, though Weimob fell -3.5% after a significant run-up.
High-yielding value sectors and subsectors outperformed, as China’s 10-Year Treasury bond hit another 52-week and all-time low of 1.71%, leading to speculation that investors will finally pivot away from bonds. Mainland media spoke about this potential pivot in several articles, though Mainland investors' behavior appears to be stuck in a funk.
The "National Team", which includes investment firms associated with sovereign wealth, appeared to be active in the Mainland market, as several favored ETFs had above average volumes. Mainland investors bought a net $340 million worth of Hong Kong-listed stocks via Southbound Stock Connect. Premier Li’s China tour garnered some attention though it was a light day overnight.
The Saturday Wall Street Journal article on the House and Senate passage included the line “The bill strips out a series of other provisions that were included in the bipartisan deal that Trump shot down, such as restrictions on investments in China”. Having noticed that the 2nd post-Trump/Musk House bill/continuing resolution no longer included the outbound China investment restrictions, we wrote about it on Friday expecting other investors and the media to connect the dots. No such luck as no journalist has written about the outbound China investment provision being removed. Isn’t this a clear signal that Trump and his advisor Musk want to engage with China? Wasn’t Trump’s inauguration invitation to Xi another flashing green light? Sparing TikTok is not just about China, though it is still yet another signal of President Trump’s olive branch to China. After four years of negative government announcements that were heavily covered by the media, I suppose changing the narrative will take some time.
The Hang Seng and Hang Seng Tech indexes rose +0.82% and +0.31%, respectively, on volume that decreased -28% from Friday, which is 96% of the 1-year average. 310 stocks advanced while 170 stocks declined. Main Board short turnover decreased -29% from Friday, which is 85% of the 1-year average, as 14% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The value factor and large caps gained more than growth factor and small caps. The top-performing sectors were Financials, which gained +2.57%, Industrials, which gained +1.91%, and Utilities, which gained +1.48%. Meanwhile, Communication Services was the worst-performing sector, falling -0.91%. The top-performing subsectors were banks, machinery, and consumer staples. Meanwhile, consumer durables, software, and consumer services were among the worst-performing. Southbound Stock Connect volumes were 1.5x pre-stimulus levels as Mainland investors bought a net $340 million worth of Hong Kong-listed stocks and ETFs, including ICBC, which was a large net buy, China Mobile, CCB, Weimob, Tencent, and Xiaomi. However, Meituan was a large net sell.
Shanghai, Shenzhen, and the STAR Board fell -0.50%, -2.29%, and -1.25%, respectively, on volume that increased +1.04% from Friday, which is 147% of the 1-year average. 527 stocks advanced while 4,567 declined (notice the declines sequence!). The value factor and large caps fell less than the growth factor and small caps. The top-performing sectors were Utilities, which gained +1.62%, Energy, which gained +1.01%, and Financials, which gained +0.66%. Meanwhile, the worst-performing sectors were Real Estate, which fell -1.89%, Communication Services, which fell -1.59%, and Technology, which fell -1.55%. The top-performing subsectors were precious metals, banking, and oil & gas. Meanwhile, education, leisure products, and cultural media were among the worst-performing. Northbound Stock Connect volumes were just above average. CNY and the Asia Dollar Index fell versus the US dollar. The Treasury bond curve flattened. Copper and steel rose.
Last Night's Performance
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.8% |
| Hang Seng Tech | HSTECH Index | 0.3% |
| Hong Kong Turnover | HKTurn Index | -28.7% |
| HK Short Sale Turnover | HKSST Index | -29.3% |
| Short Turnover as a % of HK Turnovr | N/A | 13.5% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 339.2 |
| China (Shanghai) | SHCOMP Index | -0.5% |
| China (Shenzhen) | SZCOMP Index | -2.3% |
| China (STAR Board) | Star50 Index | -1.2% |
| Mainland Turnover | .chturn Index | 1% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 0.1% |
| Japan | NKY Index | 1.2% |
| India | SENSEX Index | 0.6% |
| Indonesia | JCI Index | 1.6% |
| Malaysia | FBMKLCI Index | 0.3% |
| Pakistan | KSE100 Index | 3.9% |
| Philippines | PCOMP Index | 2% |
| South Korea | KOSPI Index | 1.6% |
| Taiwan | TWSE Index | 2.6% |
| Thailand | SET Index | 1.6% |
| Singapore | STI Index | 0.9% |
| Australia | AS51 Index | 1.7% |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 152 | 0.53 |
| Communication Services | 9 | -0.91 |
| Consumer Discretionary | 30 | 0.27 |
| Consumer Staples | 13 | 0.99 |
| Energy | 7 | 1.24 |
| Financials | 23 | 2.57 |
| Health Care | 13 | 0.67 |
| Industrials | 19 | 1.91 |
| Information Technology | 10 | 0.04 |
| Materials | 10 | 1.37 |
| Real Estate | 6 | 0.61 |
| Utilities | 12 | 1.48 |
| Mainland China Listed | 432 | -0.05 |
| Communication Services | 9 | -1.59 |
| Consumer Discretionary | 31 | -0.01 |
| Consumer Staples | 27 | -0.25 |
| Energy | 16 | 1.01 |
| Financials | 63 | 0.66 |
| Health Care | 40 | -0.63 |
| Industrials | 69 | 0.22 |
| Information Technology | 85 | -1.55 |
| Materials | 68 | 0.24 |
| Real Estate | 7 | -1.89 |
| Utilities | 17 | 1.62 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -1.5 |
| Alibaba HK | 9988 HK Equity | 1.1 |
| JD.com HK | 9618 HK Equity | 1.6 |
| NetEase HK | 9999 HK Equity | 0.9 |
| Yum China HK | 9987 HK Equity | -1.2 |
| Baozun HK | 9991 HK Equity | 5.3 |
| Baidu HK | 9888 HK Equity | 3.2 |
| Autohome HK | 2518 HK Equity | 4.2 |
| Bilibili HK | 9626 HK Equity | -1.2 |
| Trip.com HK | 9961 HK Equity | 1 |
| EDU HK | 9901 HK Equity | 2.6 |
| Xpeng HK | 9868 HK Equity | 0.8 |
| Weibo HK | 9898 HK Equity | -2 |
| Li Auto HK | 2015 HK Equity | 0.6 |
| Nio Auto HK | 9866 HK Equity | -1 |
| Zhihu HK | 2390 HK Equity | 0 |
| KE HK | 2423 HK Equity | 1.2 |
| Tencent Music Entertainment HK | 1698 HK Equity | -2.4 |
| Meituan HK | 3690 HK Equity | -1.9 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -1.5 |
| SEMICONDUCTOR MANUFACTURING | 2.8 |
| MEITUAN-CLASS B | -1.9 |
| ALIBABA GROUP HOLDING LTD | 1.1 |
| IND & COMM BK OF CHINA-H | 5 |
| CHINA CONSTRUCTION BANK-H | 2.9 |
| XIAOMI CORP-CLASS B | 0.3 |
| WEIMOB INC | -3.5 |
| CHINA MOBILE LTD | 0.5 |
| KUAISHOU TECHNOLOGY | -0.7 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| SEMICONDUCTOR MANUFACTURIN-A | 1 |
| ZTE CORP-A | -3.3 |
| EAST MONEY INFORMATION CO-A | -0.8 |
| ACCELINK TECHNOLOGIES CO -A | -1.4 |
| DAWNING INFORMATION INDUST-A | 1.6 |
| ZHONGJI INNOLIGHT CO LTD-A | 4.3 |
| CAMBRICON TECHNOLOGIES-A | -4 |
| IEIT SYSTEMS CO LTD-A | -1.4 |
| HYGON INFORMATION TECHNOLO-A | 4.3 |
| SHANGHAI BELLING CO LTD-A | -0.1 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 7.30 versus 7.30 Friday
- CNY per EUR 7.59 versus 7.59 Friday
- Yield on 10-Year Government Bond 1.70% versus 1.70% Friday
- Yield on 10-Year China Development Bank Bond 1.76% versus 1.78% Friday
- Copper Price 0.41%
- Steel Price 0.03%
