Key News

Asian equities had a strong night driven by Powell’s dovish press conference yesterday.

Hong Kong, which represents the historical definition of China for foreign investors, rose on very high volume, at 120% of the 1-year average. Hong Kong’s most heavily traded stocks were Tencent, which gained +0.83% after yesterday’s earnings, AIA, which gained +1.88%, Meituan, which gained+1.88% in advance of tomorrow's earnings, Alibaba, which gained +1.82% after E-Commerce peer Pinduoduo’s strong Q4 results, which also helped JD.com gain +2.34%. Meanwhile, Kuaishou fell -1.91% despite Q4 results that looked strong to me.

Tim Cook’s time in Shanghai, opening Apple’s largest store in China, did not help its supplier Sunny Optical, which fell -13.16% after fiscal year results missed estimates. Photos of the massive crowd outside Apple’s new flagship store and Tim Cook being cheered on the day the US Department of Justice sues the company on antitrust grounds are an interesting dichotomy.

XPeng fell -6.54% after Alibaba subsidiary Taobao China Holdings Limited trimmed its position.

Mainland China was off slightly as the rally stalled in afternoon trading on high volumes. The PBOC, NDRC, and Ministry of Finance joint conference spoke to the ample policy tools available to support the economy, though they did not indicate any urgency. Exhibit A is the Loan Prime Rate, which was kept unchanged yesterday. There is a strong argument that the PBOC will not cut until the Fed does to prevent Renminbi weakness. Northbound Stock Connect had a net outflow of $836 million today, which may have pressured Mainland stocks. There were light volumes in the National Team’s favorite ETFs.

Luxury goods company Kering fell yesterday after Gucci warned of Asia and China weakness. The nattering nabobs of negativity immediately used the statement as an example of China’s economic weakness. However, last month, we hosted CLSA Luxury Analyst Chris Gao, who discussed Gucci’s weakness in China versus other luxury brands. She said it is not a China problem but a Gucci problem! Luxury shoppers in China are apparently shunning Gucci's new, bold, and avant-garde look. This adds to the countless examples of Western media’s lack of credibility on China. There is no greater example than TikTok, though what’s happening to Wuxi AppTec is even worse, in my opinion, as every politician and pundit calls the social media platform a tool of the CCP without providing any evidence. Just show us the proof. It is so simple. Regardless, that’s why we take our data-driven approach to ChinaLastNight.com.

Yesterday, we hosted macroeconomic strategist Larry McDonald in our office as he promotes his new book How to Listen When Markets Speak: Risks, Myths, and Investment Opportunities in a Radically Reshaped Economy. It was an excellent presentation. I have already started the book and I’ve enjoyed it thus far. We are long-time clients of Larry’s Bear Traps Report, in full disclosure.  

The Hang Seng and Hang Seng Tech indexes gained +1.93% and +0.89%, respectively, on volume that increased +38.33% from yesterday, which is 120% of the 1-year average. 360 stocks advanced, while 127 declined. Main Board short turnover increased +32.99% from yesterday, which is 139% of the 1-year average, as 20% of turnover was short turnover. All factors were positive, with the value factor and large caps outpacing the growth factor and small caps. The top-performing sectors were Real Estate, which gained +3.93%, Materials, which gained +3.21%, and Consumer Staples, which gained +2.32%. Meanwhile, Health Care was the only down sector, falling -0.15%. The top-performing subsectors were consumer services, real estate, and food & beverages. Meanwhile, the semiconductor industry was negative. Southbound Stock Connect volumes were high as Mainland investors bought a net $610 million worth of Hong Kong-listed stocks.

Shanghai, Shenzhen, and the STAR Board fell -0.08%, -0.13%, and -0.97%, respectively, on volume that increased +6.67%, which was 122% of the 1-year average. 2,127 stocks advanced, while 2,675 declined. The value factor and large caps fell less than the growth factor and small caps. The top-performing sectors were Financials, which gained +0.64%, Real Estate, which gained +0.43%, and Consumer Staples, which gained +0.41%. Meanwhile, Technology fell -0.82%, Health Care fell -0.78%, and Consumer Discretionary, which fell -0.62%. The top-performing subsectors were agriculture, cultural media, and precious metals. Meanwhile, household appliances, chemicals, and biotech were among the worst-performing. Northbound Stock Connect volumes were moderate as foreign investors sold a net -$836 million worth of Mainland stocks. CNY was off slightly versus the US dollar while the Asia Dollar Index gained. Treasury bonds rallied while copper and steel gained.

Last Night's Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.19 versus 7.19 yesterday
• CNY per EUR 7.85 versus 7.80 yesterday
• Yield on 10-Year Government Bond 2.28% versus 2.29% yesterday
• Yield on 10-Year China Development Bank Bond 2.40% versus 2.42% yesterday
• Copper Price +0.34%
• Steel Price +0.22%