Massive Inflow Into Hong Kong Stocks From Mainland China Overnight
6 Min. Read Time
Key News
Asian equities had a strong day, led by Australia, South Korea, Taiwan, Thailand, and Vietnam, while India underperformed, as the US dollar weakened overnight.
Despite wet and overcast conditions, both Hong Kong and Mainland China stocks advanced in a broad-based rally. Hong Kong was buoyed by Tencent, which rose 1.64% ahead of a mobile game release, and by gains in online entertainment stocks, including Kuaishou (up 2.79%), Bilibili (up 2.94%), and Tencent Music Entertainment (up 2.61%). Banks and healthcare companies, particularly in the biotechnology and pharmaceutical sectors, also outperformed. However, some large-cap stocks lagged, including Alibaba, which was down -0.17%, Xiaomi, which was down -0.46%, Contemporary Amperex Technology (CATL), which was down -1.29%, and BYD, which was down -2.1%.
Mainland investors were highly active, purchasing a substantial $2.98 billion worth of Hong Kong-listed exchange-traded funds (ETFs) and stocks. The Hong Kong Tracker ETF saw an especially large inflow, and Tencent had significant buying.
It is notable how little attention Western media gives to positive Chinese economic data. For instance, today’s S&P Global July Services Purchasing Managers’ Index (PMI) for China came in at 52.6, beating expectations of 50.4 and up from June’s reading of 50.6.
Meituan finished down -0.08%, but after the close, it announced plans to support small and medium-sized merchants and restaurants. This sector has suffered from intense price competition among Meituan, JD.com, and Alibaba in the food delivery and instant commerce space. The response stems from the firm’s intention to follow the government’s mandate to curb unhealthy internal competition.
The People’s Bank of China (PBOC) and seven other government agencies, including the Ministry of Industry and Information Technology (MIIT), State Administration of Foreign Exchange (SAFE), the National Development and Reform Commission (NDRC), and the Ministry of Finance (MoF), issued new “Guiding Opinions on Financial Support for New Industrialization” following the third Plenary Session of the Communist Party of China (CPC) Central Committee. This document demonstrates how top government leadership sets overall direction, which is then implemented by various agencies. As the name suggests, the policy aims to ease the allocation of financial resources to strengthen industrial chains with a focus on science and technology.
Mainland media highlighted the goal of “strengthening medium and long-term loan support for digital infrastructure construction, such as 5G, industrial internet, data, and computing centers.” Agencies are tasked with supporting “emerging industries such as new-generation information technology, basic software, industrial software, intelligent (networked) automobiles, new energy, new materials, high-end equipment, spatiotemporal information, commercial aerospace, biomedical, and network and data security.” Spatiotemporal information refers to data that has both spatial (location-based) and temporal (time-based) elements. While the document does not use the term “anti-involution,” it specifically calls for actions to “prevent internal competition.”
Despite the document’s emphasis on growth and technology sectors, value stocks outperformed, led by banks, insurance, and oil companies in Shanghai. Electronic equipment companies were also strong, as Foxconn was up 6.31%. Broad market internals in both Hong Kong and Mainland China remain strong. Although a few stocks are technically overbought, the continued market breadth is a positive sign.
In political news, President Trump expressed optimism about a potential US-China trade deal during his CNBC appearance this morning. He also made comments about potentially raising tariffs on India, noting how little profit US companies make in India; currently, only one publicly traded US company generates more than 20% of its revenue from India, compared to 25 companies with over 20% from China and 57 companies with more than 10% from China, according to Bloomberg’s equity screening tool.
On a personal note, the Ground News app was recently recommended to me. It provides a measure of the political bias of news stories by source, a useful tool to check out!
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.7% |
| Hang Seng Tech | HSTECH Index | 0.7% |
| Hong Kong Turnover | HKTurn Index | -2.3% |
| Hong Kong Short Sale Turnover | HKSST Index | 4.2% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 17.4% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 335.6 |
| China (Shanghai) | SHCOMP Index | 1% |
| China (Shenzhen) | SZCOMP Index | 0.8% |
| China (STAR Board) | Star50 Index | 0.4% |
| Mainland Turnover | .chturn Index | 6.5% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 0% |
| Japan | NKY Index | 0.6% |
| India | SENSEX Index | -0.4% |
| Indonesia | JCI Index | 0.7% |
| Malaysia | FBMKLCI Index | 0.8% |
| Pakistan | KSE100 Index | 0.8% |
| Philippines | PCOMP Index | 0.1% |
| South Korea | KOSPI Index | 1.6% |
| Taiwan | TWSE Index | 1.2% |
| Thailand | SET Index | 1.4% |
| Singapore | STI Index | 0.3% |
| Australia | AS51 Index | 1.2% |
| Vietnam | VNINDEX Index | 1.2% |
| Indicator | A | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 108% | 114% |
| Advancing Stocks | 391 | 3485 |
| Declining Stocks | 85 | 1426 |
| Outperforming Factors | Growth, EPS Revisions, Momentum | Dividend Yield, Large Caps, Value |
| Underperforming Factors | ||
| Top Sectors | Healthcare, Communication, Materials | Communication, Financials, Real Estate |
| Bottom Sectors | Real Estate, Discretionary | |
| Top Subsectors | Steel, Paper/Packaging, Pharmaceutical | Office Supplies, Soft Drinks, Energy Equipment |
| Bottom Subsectors | Semis, Electrical Equipment, Auto Components | Internet, Healthcare |
| Southbound Connect Buys | HK Tracker ETF (Very Large), Tencent (Large), Alibaba, Kuiashou, Li Auto, Meitu (Moderate), SMIC (Small) | |
| Southbound Connect Sells |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 152 | 0.94 |
| Communication Services | 9 | 1.63 |
| Consumer Discretionary | 28 | -0.07 |
| Consumer Staples | 13 | 0.78 |
| Energy | 6 | 0.33 |
| Financials | 24 | 1.41 |
| Health Care | 12 | 3.63 |
| Industrials | 21 | 0.24 |
| Information Technology | 10 | 0.34 |
| Materials | 10 | 1.51 |
| Real Estate | 7 | -0.89 |
| Utilities | 12 | 1.21 |
| Mainland China Listed | 395 | 0.7 |
| Communication Services | 7 | 1.37 |
| Consumer Discretionary | 29 | 0.53 |
| Consumer Staples | 24 | 0.75 |
| Energy | 13 | 0.78 |
| Financials | 64 | 1.34 |
| Health Care | 32 | 0.17 |
| Industrials | 61 | 0.27 |
| Information Technology | 90 | 0.54 |
| Materials | 54 | 0.5 |
| Real Estate | 6 | 1.27 |
| Utilities | 15 | 0.12 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 1.6 |
| Alibaba HK | 9988 HK Equity | -0.2 |
| JD.com HK | 9618 HK Equity | 0 |
| NetEase HK | 9999 HK Equity | 1.6 |
| Yum China HK | 9987 HK Equity | -0.1 |
| Baozun HK | 9991 HK Equity | 4.1 |
| Baidu HK | 9888 HK Equity | -0.1 |
| Autohome HK | 2518 HK Equity | 1.6 |
| Bilibili HK | 9626 HK Equity | 2.9 |
| Trip.com HK | 9961 HK Equity | 0.9 |
| EDU HK | 9901 HK Equity | -1.3 |
| Xpeng HK | 9868 HK Equity | 2.4 |
| Weibo HK | 9898 HK Equity | 0.5 |
| Li Auto HK | 2015 HK Equity | 1.6 |
| Nio Auto HK | 9866 HK Equity | -6.5 |
| Zhihu HK | 2390 HK Equity | -0.4 |
| KE HK | 2423 HK Equity | -3 |
| Tencent Music Entertainment HK | 1698 HK Equity | 2.6 |
| Meituan HK | 3690 HK Equity | -0.1 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | 1.6 |
| BYD CO LTD-H | -2.1 |
| ALIBABA GROUP HOLDING LTD | -0.2 |
| XIAOMI CORP-CLASS B | -0.5 |
| KUAISHOU TECHNOLOGY | 2.8 |
| MEITUAN-CLASS B | -0.1 |
| SEMICONDUCTOR MANUFACTURI-H | -1 |
| LI AUTO INC-CLASS A | 1.6 |
| MEITU INC | -6.9 |
| INNOSCIENCE SUZHOU TECHNOL-H | -6.7 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | 1.2 |
| FOXCONN INDUSTRIAL INTERNE-A | 6.3 |
| EOPTOLINK TECHNOLOGY INC L-A | -1.1 |
| TIBET TIANLU CO LTD-A | 0.6 |
| HYBIO PHARMACEUTICAL CO LT-A | 5.6 |
| EAST MONEY INFORMATION CO-A | 1.2 |
| SUNWARD INTELLIGENT EQUIPM-A | 10 |
| CONTEMPORARY AMPEREX TECHN-A | -0.3 |
| VICTORY GIANT TECHNOLOGY -A | 0.5 |
| SHANGHAI ZHANGJIANG HIGH-A | 6.3 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.18 versus 7.18 yesterday
- CNY per EUR 8.29 versus 8.32 yesterday
- Yield on 10-Year Government Bond 1.71% versus 1.71% yesterday
- Yield on 10-Year China Development Bank Bond 1.79% versus 1.79% yesterday
- Copper Price +0.33%
- Steel Price +0.66%
