Hong Kong Rises As Foreign Investors Return
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Key News
Asian equities were mixed overnight, despite the US dollar’s weakness, led higher by South Korea, Hong Kong, and Taiwan, while Indonesia was crushed, falling -7.35% on a MSCI review of the investability of companies due to low free-float market caps and light trading volumes. China's currency, the renminbi (CNY), hit another 52-week high against the US dollar, closing at 6.95 per US dollar.
The "Tale of Two Chinas" was on full display last night. Domestic investors dominated onshore China, and foreign investors dominated offshore China. The resulting performance disparity widened, as Hong Kong enjoyed an exceedingly strong volume rally with very strong breadth, as all sectors ended the session higher. The average premium paid for onshore shares of the same companies versus their offshore share class has fallen -24% from its high in February of 2024, which was 157, indicating that the onshore A share was, on average, worth 57% more than the offshore H share, to only 117, as Hong Kong stocks have risen and Mainland China-listed stocks have fallen. It could be a good financial news story, in my opinion!
Efforts to tap the brakes on the Mainland stock bull market were in full effect today, though onshore markets were only off slightly. Yesterday, the Mainland-listed China equity ETFs favored by the "National Team", i.e., investment firms associated with sovereign wealth, saw only slightly above average volumes, after several ultra-high volume days and outflows. Today, we were back to ultra-high volumes. Several of the favored ETFs saw volumes that reached 5X to 6X their 1-year averages. Outflows were not too high, though, on a net basis, as only three ETFs experienced net outflows above $1 billion, as the 1,071 Mainland-listed China equity ETFs had -$7.13 billion worth of net outflow today, which brings the 1-week total to $56.77 billion and the year-to-date (YTD) total to $91.10 billion. To put this into perspective, only two ETFs recorded inflows of over $100 million, with the highest at just $236 million! Remember that this is an effort to cool and tap the brakes on Mainland China's bull market, not Hong Kong's.
Southbound Stock Connect had its fourth consecutive day of net outflow, as Mainland investors sold -$439 million worth of Hong Kong-listed stocks and ETFs, bringing the four-day total to -$831 million. Should we freak out? Not if you consider the YTD net inflow is still +$7.88 billion! What’s important to remember is that the Mainland was only 19% of Hong Kong's volume today. Who was buying Hong Kong-listed stocks, then, if it wasn’t Mainland Chinese investors? Foreign investors who are underweight China!
Hong Kong's rally was broad, led by Alibaba, which gained +2.12% despite net selling via Southbound Stock Connect, and Tencent, which gained +2.31% amid another large call option trade and net buying via Southbound Stock Connect. The Hong Kong heatmap looks as green as Ireland, as banks, insurance, oil & gas, semiconductors, technology hardware, etc., all rising.
Kuiashou gained +4.44% on reports that the company’s Kling AI has 12 million monthly active users.
Today’s Hong Kong IPO was snack and beverage maker Busy Ming Group, which gained +68% on its debut, though ended the session well off its intra-day highs, despite being 1,899 times oversubscribed by retail investors.
Non-ferrous metals had another strong day in both markets, as gold marches higher, along with energy stocks.
Real Estate had a strong day in both markets on reports that the government is becoming less strict on the fundamental-ratio requirements for developers in monthly updates. We prefer to play this through the developers' debt, as the companies will likely raise cash via private placements. Hong Kong-listed real estate developers appear to be making a comeback.
The Mainland-listed Foxconn was off by 0.46%, despite announcing preliminary results, as Q4 net profit grew 56% to 63% year-over-year (YoY), and 2025 net profits increased 51% to 54%.
Jensen Huang’s China trip came to a close in Shenzhen today. This is pure speculation on my part, but he may have lined up a big chip deal announcement from Tencent and BYD and decided to let Trump and Xi announce it in April.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 2.6% |
| Hang Seng Tech | HSTECH Index | 2.5% |
| Hong Kong Turnover | HKTurn Index | 42.1% |
| Hong Kong Short Sale Turnover | HKSST Index | 105% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 16.5% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -437.72 |
| China (Shanghai) | SHCOMP Index | 0.3% |
| China (Shenzhen) | SZCOMP Index | 0% |
| China (STAR Board) | Star50 Index | -0.1% |
| Mainland Turnover | .chturn Index | 2.4% |
| Japan | NKY Index | 0% |
| India | SENSEX Index | 0.6% |
| Indonesia | JCI Index | -7.3% |
| Malaysia | FBMKLCI Index | -0.8% |
| Pakistan | KSE100 Index | -0.1% |
| Philippines | PCOMP Index | 0.8% |
| South Korea | KOSPI Index | 1.7% |
| Taiwan | TWSE Index | 1.5% |
| Thailand | SET Index | 0.3% |
| Singapore | STI Index | -0.3% |
| Australia | AS51 Index | -0.1% |
| Vietnam | VNINDEX Index | -1.5% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume as % of 1-Year Average | 139 | 161 |
| Advancing Stocks | 334 | 1649 |
| Declining Stocks | 161 | 3411 |
| Outperforming Factors | Large Caps, Momentum, Low Volatility | Momentum, Value, EPS Revision |
| Underperforming Factors | Small Caps, Value | Growth, Liquidity, Low Volatility |
| Top Sectors | Materials, Energy, Real Estate | Materials, Energy, Real Estate |
| Bottom Sectors | Utilities, Consumer Staples, Health Care | Communication, Healthcare, Discretionary |
| Top Subsectors | Non Ferrous Metal, Consumer Durables, Apparel, Petroleum & Petrochemicals | Precious Metals, Energy Equipment, Base Metals |
| Bottom Subsectors | Consumer Services, Healthcare Equipment, Aerospace | Healthcare, Aerospace, Leisure Products |
| Southbound Connect Buys | Tencent (Large), Pop Mart (Moderate), CNOOC (Small) | N/A |
| Southbound Connect Sells | Alibaba, HK Tracker ETF, Zijin Mining (Large), Semiconductor Manufacturing International (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 151 | 2.39 |
| Communication Services | 9 | 2.24 |
| Consumer Discretionary | 28 | 2.06 |
| Consumer Staples | 13 | 1.79 |
| Energy | 7 | 4.1 |
| Financials | 23 | 2.43 |
| Health Care | 13 | 2.06 |
| Industrials | 20 | 2.21 |
| Information Technology | 10 | 2.28 |
| Materials | 10 | 5.18 |
| Real Estate | 6 | 3.08 |
| Utilities | 12 | 1.33 |
| Mainland China Listed | 404 | 0.52 |
| Communication Services | 6 | -0.85 |
| Consumer Discretionary | 31 | -0.53 |
| Consumer Staples | 24 | -0.46 |
| Energy | 13 | 2.91 |
| Financials | 64 | -0.31 |
| Health Care | 31 | -0.72 |
| Industrials | 64 | -0.44 |
| Information Technology | 91 | 0.12 |
| Materials | 58 | 5.02 |
| Real Estate | 6 | 1.4 |
| Utilities | 16 | -0.48 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 2.3 |
| Alibaba HK | 9988 HK Equity | 2.1 |
| JD.com HK | 9618 HK Equity | 2.5 |
| NetEase HK | 9999 HK Equity | 2.4 |
| Yum China HK | 9987 HK Equity | 3 |
| Baozun HK | 9991 HK Equity | 2 |
| Baidu HK | 9888 HK Equity | 0.6 |
| Autohome HK | 2518 HK Equity | -0.4 |
| Bilibili HK | 9626 HK Equity | 3.6 |
| Trip.com HK | 9961 HK Equity | -0.8 |
| EDU HK | 9901 HK Equity | 1.9 |
| Xpeng HK | 9868 HK Equity | 3 |
| Weibo HK | 9898 HK Equity | 1.6 |
| Li Auto HK | 2015 HK Equity | 4.9 |
| Nio Auto HK | 9866 HK Equity | 4 |
| Zhihu HK | 2390 HK Equity | 0.7 |
| KE HK | 2423 HK Equity | 2 |
| Tencent Music Entertainment HK | 1698 HK Equity | 3.6 |
| Meituan HK | 3690 HK Equity | 1.9 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | 2.1 |
| TENCENT HOLDINGS LTD | 2.3 |
| SEMICONDUCTOR MANUFACTURI-H | 3.5 |
| ZIJIN MINING GROUP CO LTD-H | 3.1 |
| CNOOC LTD-H | 4.8 |
| XIAOMI CORP-CLASS B | 2.1 |
| POP MART INTERNATIONAL GROUP | 7 |
| CHINA MOBILE LTD-H | 3.1 |
| HUA HONG SEMICONDUCTOR LTD-H | 7.4 |
| MEITUAN-CLASS B | 1.9 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| VISUAL CHINA GROUP CO LTD-A | -7 |
| SHANTUI CONSTRUCTION MACHI-A | 0.1 |
| ZIJIN MINING GROUP CO LTD-A | 4.2 |
| ZHONGJI INNOLIGHT CO LTD-A | 2 |
| BLUEFOCUS INTELLIGENT COMM-A | -8.3 |
| CONTEMPORARY AMPEREX TECHN-A | 0.2 |
| SUNGROW POWER SUPPLY CO LT-A | -3.3 |
| EOPTOLINK TECHNOLOGY INC L-A | -1.6 |
| CHINA NORTHERN RARE EARTH -A | 4.2 |
| PING AN INSURANCE GROUP CO-A | -0.9 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.95 versus 6.95 yesterday
- CNY per EUR 8.31 versus 8.33 yesterday
- Yield on 10-Year Government Bond 1.82% versus 1.83% yesterday
- Yield on 10-Year China Development Bank Bond 1.96% versus 1.96% yesterday
- Copper Price -0.51%
- Steel Price -0.35%
