Consumption Stimulus

The State Council Information Office held a 9 am press conference featuring the People's Bank of China’s (PBOC) Central Bank Governor Pan Gongsheng, the Financial Supervision Bureau (FSB) Director Li Yunze, and China Securities Regulatory Commission (CSRC) Chairman Wu Qing. Q1 Chinese economic data was “relatively good” though the “global economy is full of uncertainties, economic fragmentation, and increased trade tensions, disrupting the world's industrial supply chain”. Due to the effect of “weakening global growth momentum,” blamed on the US' tariff policy, the PBOC announced the following measures would be taken following instruction from the CPC Central Committee’s April 25^th economic and monetary policy meeting:

• Bank’s reserve requirement ratio (RRR), the amount of bank deposits kept in reserve and not lent out, will be reduced to 9.0% from 9.5%, which will add CNY 1 trillion to the market.
• The deposit reserve ratio of auto finance and financial leasing companies will be reduced to 0% from 5%. This should be a strong catalyst for automakers, though Hong Kong-listed stocks had a mixed performance.
• The 7-day reverse repo interest rate has been reduced to 1.4% from 1.5%, which will lower the LPR by 0.1%.
• “The interest rate of structural monetary policy instruments was reduced by 0.25%,” including agricultural and small business loans, 1.5%, and the PBOC loan rate to commercial banks (PSL) to 2%.
• The personal housing fund loan was reduced by 0.25% to 2.6% for a 5-year loan. It's a bit surprising real estate stocks didn’t have a better day.
• Loans supporting scientific and technological innovation increased to CNY 800 billion from CNY 500 billion to “support large-scale equipment replacement and consumer goods exchange.”
• CNY 500 billion will be lent to commercial banks to “service consumption and pension refinancing.” The objective is to “encourage and guide financial institutions to increase financial support for key areas of service consumption such as accommodation, catering, culture, sports and entertainment, education, and the elderly care industry, and cooperate with fiscal and other industry policies to better meet the needs of the masses for consumption upgrading.” I highlighted this section as all the commentary/media is focused on interest rates, though no one mentions this consumption stimulus.
• Loans to agricultural and small businesses will be increased by CNY 300 billion.
• CNY 300 billion will be lent to support stock share repurchases, and CNY 500 billion to “securities fund insurance companies.”
• Support local governments to minimize the default loss risk of bonds.

The CSRC’s Wu Qing spoke to the “Nine National Policies,” which include encouraging corporate governance reforms, including buybacks and dividends. The CSRC also supports stock market purchases from sovereign wealth fund Central Huijin, national social security fund, securities and fund institutions, banking and insurance institutions. He noted that 90% of Chinese Mainland-listed companies’ revenues are generated in China. FSB’s Li Yunze focused on measures to support the real estate and stock markets. He stated that the “white list”, real estate projects deemed too big to fail, have received CNY 6.7 trillion of loans. Insurance companies are being encouraged to increase their equity allocations. Interestingly, the speakers explicitly blamed the US and US tariff policies for the turbulence in the global economy.

US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will meet with Vice Premier He Lifeng this weekend in Switzerland. Progress can be made by focusing on easy wins, such as fentanyl and reducing tariffs from both sides, as we’ve seen already in critical goods. The Ministry of Commerce (MoC) press conference noted that, "Based on the full consideration of global expectations, Chinese interests, and appeals from American industry and consumers, China has agreed to engage with the US. Vice Premier He Lifeng, as the Chinese leader of China-US economic and trade, will talk with the US leader, US Treasury Secretary Bessent, during his visit to Switzerland.”

Key News

Asian equities had a positive day despite a stronger US dollar, led by Thailand, while Pakistan underperformed following India’s airstrikes.

Interestingly, Indian equities overcame morning losses to post small gains, hopefully indicating the situation doesn’t escalate amongst the nuclear-armed countries. Interestingly, defense and military stocks were top performers in both Mainland China and Hong Kong. Both markets opened higher following the financial press conference and US-China trade talks, though faded over the course of the trading day. The Hang Seng, Hang Seng Tech, Shanghai, and Shenzhen indexes have hit resistance levels, as they rebound to pre-Liberation Day levels.

Financials were a strong performer in both markets as beneficiaries of the lower interest rate, as old school value plays outperformed growth in both markets. Mainland China had a much better day compared to Hong Kong due to the higher growth exposure, as Hong Kong's growth stocks appeared to be hit with profit taking. Trip.com gained +2.29%, a rare growth outperformer following the strong May Day holiday travel data. Mainland investors sold -$1.038 billion of Hong Kong (net buying year-to-date is $78.585 billion). President Xi’s visit to Moscow might weigh on foreign investors' sentiment, though it is hard to say. Potentially, today’s press conference didn’t meet expectations, though the fact that it was called at all should be taken as a positive. The Chinese government is very focused on stimulating its economy, supporting the real estate and stock markets. All good things in my opinion.  

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	0.1%
Hang Seng Tech	HSTECH Index	-0.8%
Hong Kong Turnover	HKTurn Index	12.5%
Hong Kong Short Sale Turnover	HKSST Index	-13.3%
Short Turnover as a % of Hong Kong Turnover	N/A	12.5%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	-472.2
China (Shanghai)	SHCOMP Index	0.8%
China (Shenzhen)	SZCOMP Index	0.5%
China (STAR Board)	Star50 Index	0.4%
Mainland Turnover	.chturn Index	9.9%
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	-0.1%
India	SENSEX Index	0.1%
Indonesia	JCI Index	0.4%
Malaysia	FBMKLCI Index	0.9%
Pakistan	KSE100 Index	-3%
Philippines	PCOMP Index	0.7%
South Korea	KOSPI Index	0.5%
Taiwan	TWSE Index	0.1%
Thailand	SET Index	2.7%
Singapore	STI Index	0.1%
Australia	AS51 Index	0.3%
Vietnam	VNINDEX Index	0.7%

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	133	120
Advancing Stocks	241	2621
Declining Stocks	221	2374
Outperforming Factors	Value, Dividend, Low Volatility	Low Volatility, Value, Quality
Underperforming Factors	Momentum, Quality, Buyback	Liquidity, Growth, Momentum
Top Sectors	Energy, Financials, Utilities	Financials, Industrials, Energy
Bottom Sectors	Healthcare, Tech, Staples	Tech, Communication, Healthcare
Top Subsectors	REITs, Electrical Equipment, National Defense	Aerospace/Military, Land Transportation, Forest
Bottom Subsectors	Consumer Durables/Apparel, Pharmaceuticals, Tech Hardware	Office Supplies, Biotech, Eeducation
Southbound Connect Buys	Holly Futures, Meituan (Small)
Southbound Connect Sells	Pop Mart, Shandong Molong (Small), Alibaba, SMIC (Moderate), Tencent, Xiaomi (Large)

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	151	-0.76
Communication Services	9	-1.18
Consumer Discretionary	28	-0.81
Consumer Staples	13	-1.37
Energy	7	1.1
Financials	23	0.89
Health Care	13	-4.4
Industrials	20	-0.12
Information Technology	10	-2.46
Materials	10	0.25
Real Estate	6	-0.12
Utilities	12	0.57
Mainland China Listed	404	0.43
Communication Services	6	-0.16
Consumer Discretionary	31	0.02
Consumer Staples	24	0.2
Energy	13	0.82
Financials	64	1.1
Health Care	31	-0.08
Industrials	64	0.88
Information Technology	91	-0.42
Materials	58	0.42
Real Estate	6	0.79
Utilities	16	0.32

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	-1.1
Alibaba HK	9988 HK Equity	-2
JD.com HK	9618 HK Equity	-0.5
NetEase HK	9999 HK Equity	-1.4
Yum China HK	9987 HK Equity	0.2
Baozun HK	9991 HK Equity	6
Baidu HK	9888 HK Equity	-0.5
Autohome HK	2518 HK Equity	-0.9
Bilibili HK	9626 HK Equity	-1.5
Trip.com HK	9961 HK Equity	2.3
EDU HK	9901 HK Equity	0.3
Xpeng HK	9868 HK Equity	-0.4
Weibo HK	9898 HK Equity	1.2
Li Auto HK	2015 HK Equity	2.3
Nio Auto HK	9866 HK Equity	0.3
Zhihu HK	2390 HK Equity	0
KE HK	2423 HK Equity	-1
Tencent Music Entertainment HK	1698 HK Equity	2.6
Meituan HK	3690 HK Equity	0.4

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
ALIBABA GROUP HOLDING LTD	-2
TENCENT HOLDINGS LTD	-1.1
XIAOMI CORP-CLASS B	-2.8
MEITUAN-CLASS B	0.4
HONG KONG EXCHANGES & CLEAR	1.9
AIA GROUP LTD	2.9
POP MART INTERNATIONAL GROUP	-5.4
BYD CO LTD-H	-0.1
SEMICONDUCTOR MANUFACTURING	-1.6
CHINA CONSTRUCTION BANK-H	2

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
EAST MONEY INFORMATION CO-A	1.2
TALKWEB INFORMATION SYSTEM-A	-3.1
CONTEMPORARY AMPEREX TECHN-A	3
SHIJIAZHUANG CHANGSHAN BEI-A	1.3
SHANGHAI STONEHILL TECHNOL-A	3.9
ZHEJIANG HAIKONG NANKE HUATI	-3.1
LUXSHARE PRECISION INDUSTR-A	-0.9
SHENZHEN TIANYUAN DIC INFO-A	8.5
CAMBRICON TECHNOLOGIES-A	2
HITHINK ROYALFLUSH INFORMA-A	0.8

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.22 versus 7.21 yesterday
• CNY per EUR 8.21 versus 8.16 yesterday
• Yield on 10-Year Government Bond 1.64% versus 1.63% yesterday
• Yield on 10-Year China Development Bank Bond 1.67% versus 1.66% yesterday
• Copper Price +0.46%
• Steel Price +0.45%