Policy Cannonball Coming?
7 Min. Read Time
Key News
If you read one thing, please read the last paragraph.
Asian equities were largely higher on light volume, amid hopes that Middle East tensions are easing, with all eyes on Nvidia’s quarterly results today. Pakistan was closed for Eid-Milad-un-Nabi a celebration of Muhammed’s birth.
Hong Kong and Mainland China had decent sessions, though the former closed off of its intra-day highs. It was interesting that Southbound Stock Connect accounted for only 19% of Hong Kong volumes (again), which could indicate that foreign investors are dipping their toes back into the market. Alibaba gained +2.1% and was by far the most heavily traded stock by value today, more than 2X Tencent’s +0.77% gain on volume that made it the second most heavily traded stock by value.
After the close, Alibaba filed that the proceeds of 710 million shares sold, which increases the number of shares by 3.7%, i.e., dilution, and will be used for: (1) 60% to "expand its global computing infrastructure to meet accelerating customer demand", (2) 40% to "accelerate the buildout of hyperscale AI data centers and upgrade traditional cloud infrastructure". The buyers included JP Morgan, Citigroup, and BlackRock. Local news focused on the Alibaba stock purchases by Jack Ma, Joe Tsai, and Eddie Wu, totaling HKD 800 million, as the former buying a hefty HKD 600 million. Mainland investors bought a net $154 million (HKD 1.21 billion) worth of Alibaba’s Hong Kong-listed stock today via Southbound Stock Connect.
Innovent Biologics gained +9.69% following the release of strong first half financial results. CanSino Biologics gained +25.99% after announcing a mRNA cancer vaccine partnership with a China-based firm.
Except for the oil and gas, and the electric vehicle and auto sectors, it was a strong day. Baidu gained +1.28% as shareholders approved the Hong Kong stock to convert to a dual share class, which will involve regulatory oversight from both the US SEC and Hong Kong's regulatory. The conversion could allow an inclusion into the Southbound Stock Connect in early September.
Mainland China had a good day, as well, as AI supply chain stocks largely higher, including the Science and Technology (STAR) Board, which gained +1.71%. Meanwhile, CXMT closed lower by -0.71%. Non-ferrous metals rebounded. There were a great deal of good financial results released overnight, which helped support markets.
The Ministry of Industry and Information Technology (MIIT) held a press conference chaired by Vice Minister Xin Guobin titled "Getting Off to a Good Start for the 15th Five-Year Plan". It focused on supporting small and medium-sized companies (SMEs), upgrading mobile communication to 6G, and “accelerating the development of emerging pillar industries,” including “biomedical, low-altitude economy, new energy storage, smart robots and other emerging pillar industries”. The emphasis was on AI, robotics, improving the communication network, “electronic information manufacturing”, electric vehicles (EVs), including support through “pilot projects to replace old cars with new ones,” and expanding consumer goods.
President Xi will visit Egypt and Kyrgyzstan at the end of the month. Shanghai’s local government issued the “15th Five-Year Plan for Strategic New Industry Development in Shanghai," which focused on integrated circuits, biotech, and AI.
In my morning review of the Mainland media website Sohu.com, I found a very interesting article that is part of a series of four articles in the People’s Daily and signed by “Zhong Caiwen”. The articles were titled "The Resilience and Vitality of the Chinese Economy," "China is an Active Contributor and Strong Stabilizing Anchor of Global Economic Growth," "What Does the 4.7% Economic Growth in the First Half of the Year Indicate?", and "How to Promote High-Quality Development for Steady and Sustainable Progress." The unknown author had previously written in advance of policy support in the past, which is why the series has garnered attention, as it follows July’s Politburo meeting and comes in advance of October’s Fifth Plenary Session of the 20th CPC Central Committee. The series heavily emphasizes manufacturing, as Sohu.com summed up the articles’ focus on “technological innovation is accelerating its transformation into industrial competitiveness, with achievements in fields such as integrated circuits, innovative drugs, and industrial robots continuing to be implemented; China's position as a global supply chain hub is being continuously consolidated; enterprises are accelerating their digital transformation and achieving a new upgrade; and risks and hidden dangers in the economic field are being resolved and contained in an orderly manner, which together constitute a solid foundation for the steady and positive development of the economy”.
In the Sohu.com article, Zheshang Securities’ economist Lin Chengwei commented “Fiscal policy will focus on implementation, monetary policy will maintain easing, domestic demand will focus on increasing income and service consumption, industrial policy will focus on AI”. In poker we might call this a “tell” as they are literally telling us what is coming. The market is apt to do what is least expected, which, against the backdrop of exceedingly light China positioning, has me quite optimistic.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.6% |
| Hang Seng Tech | HSTECH Index | 0.8% |
| Hong Kong Turnover | HKTurn Index | 0.3% |
| Hong Kong Short Sale Turnover | HKSST Index | -2.3% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 21% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 57.81 |
| China (Shanghai) | SHCOMP Index | 0.6% |
| China (Shenzhen) | SZCOMP Index | 0.5% |
| China (STAR Board) | Star50 Index | 1.7% |
| Mainland Turnover | .chturn Index | -1.3% |
| Japan | NKY Index | 0.6% |
| India | SENSEX Index | -0.2% |
| Indonesia | JCI Index | -1.5% |
| Malaysia | FBMKLCI Index | 0.7% |
| Pakistan | KSE100 Index | 0.2% |
| Philippines | PCOMP Index | -0.9% |
| South Korea | KOSPI Index | 1% |
| Taiwan | TWSE Index | 1.5% |
| Thailand | SET Index | 0.4% |
| Singapore | STI Index | -0.2% |
| Australia | AS51 Index | -0.4% |
| Vietnam | VNINDEX Index | 1.7% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 93% | 72% |
| Advancing Stocks | 282 | 2646 |
| Declining Stocks | 234 | 2350 |
| Outperforming Factors | Large Caps, EPS Revision, Liquidity | EPS Revision, Value, Momentum |
| Underperforming Factors | Low Volatility, Dividend Yield | None |
| Top Sectors | Real Estate, Materials, Healthcare | Materials, Real Estate, Financials |
| Bottom Sectors | Energy | Energy, Communication, Staples |
| Top Subsectors | Paper/Packaging, Financial Services/ Insurance, Non Ferrous Metal | Paper, Securities, Fertilizer/Pesticide |
| Bottom Subsectors | Building, Petroleum/Petrochemical, Consumer Staples Distribution | Soft Drink, Energy Equipment, Marine |
| Southbound Connect Buys | Alibaba, SMIC, YOFC (Large), Wuxi Biologics (Moderate), KB Laminates (Small) | N/A |
| Southbound Connect Sells | Tencent, Xiaomi (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | 1.1 |
| Communication Services | 11 | 0.51 |
| Consumer Discretionary | 28 | 1.24 |
| Consumer Staples | 13 | 0.82 |
| Energy | 6 | -0.78 |
| Financials | 25 | 1.31 |
| Health Care | 16 | 1.58 |
| Industrials | 22 | 0.45 |
| Information Technology | 12 | 1.38 |
| Materials | 14 | 2.29 |
| Real Estate | 7 | 3.16 |
| Utilities | 11 | 1.41 |
| Mainland China Listed | 386 | 0.8 |
| Communication Services | 8 | -0.65 |
| Consumer Discretionary | 26 | 0.21 |
| Consumer Staples | 19 | -0.13 |
| Energy | 12 | -0.88 |
| Financials | 64 | 1.43 |
| Health Care | 31 | 0.06 |
| Industrials | 58 | 0.82 |
| Information Technology | 95 | 0.62 |
| Materials | 52 | 1.91 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 0.8 |
| Alibaba HK | 9988 HK Equity | 2.1 |
| JD.com HK | 9618 HK Equity | 0.1 |
| NetEase HK | 9999 HK Equity | -1.8 |
| Yum China HK | 9987 HK Equity | -0.3 |
| Baozun HK | 9991 HK Equity | 1.9 |
| Baidu HK | 9888 HK Equity | 1.3 |
| Autohome HK | 2518 HK Equity | -2.4 |
| Bilibili HK | 9626 HK Equity | -1.8 |
| Trip.com HK | 9961 HK Equity | 0.6 |
| EDU HK | 9901 HK Equity | 0.6 |
| Xpeng HK | 9868 HK Equity | 7.8 |
| Weibo HK | 9898 HK Equity | 0.6 |
| Li Auto HK | 2015 HK Equity | 0.9 |
| Nio Auto HK | 9866 HK Equity | 2.8 |
| Zhihu HK | 2390 HK Equity | 0.1 |
| KE HK | 2423 HK Equity | 5 |
| Tencent Music Entertainment HK | 1698 HK Equity | 1.2 |
| Meituan HK | 3690 HK Equity | 1.1 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | 2.1 |
| TENCENT HOLDINGS LTD | 0.8 |
| YANGTZE OPTICAL FIBRE AND-H | 0.3 |
| SEMICONDUCTOR MANUFACTURI-H | 2.7 |
| WUXI BIOLOGICS CAYMAN INC | -2.8 |
| INNOVENT BIOLOGICS INC | 9.7 |
| XIAOMI CORP-CLASS B | 2.5 |
| HUA HONG GRACE SEMICONDUCTOR | 6.4 |
| KINGBOARD LAMINATES HLDG LTD | -0.5 |
| Z AI CO LTD | -2.7 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| VISUAL CHINA GROUP CO LTD-A | -4 |
| SHANTUI CONSTRUCTION MACHI-A | -0.1 |
| ZHONGJI INNOLIGHT CO LTD-A | 0.6 |
| HENGTONG OPTIC-ELECTRIC CO-A | 0.4 |
| EOPTOLINK TECHNOLOGY INC L-A | -0.5 |
| SUZHOU DONGSHAN PRECISION-A | 1.8 |
| CXMT CORP-A | -0.7 |
| GIGADEVICE SEMICONDUCTO-CL A | -0.8 |
| ZIJIN MINING GROUP CO LTD-A | 2.3 |
| CAMBRICON TECHNOLOGIES-A | 0.9 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.72 versus 6.72 yesterday
- CNY per EUR 7.83 versus 7.83 yesterday
- Yield on 10-Year Government Bond 1.69% versus 1.68% yesterday
- Yield on 10-Year China Development Bank Bond 1.76% versus 1.76% yesterday
- Copper Price +0.59%
- Steel Price 0.00%
