China Fares Better Than Most Markets, Week In Review
7 Min. Read Time
Week in Review
- Asian equities were mixed for the week, as India and Hong Kong outperformed, while Taiwan and Korea bore the brunt of the global AI supply chain sell off.
- China's markets rallied this week on strong buying from the "National Team", i.e. investment firms associated with sovereign wealth.
- Similar to September of 2024, when China's markets rallied, the PBOC is also meeting with financial institutions, extending significant swap facilities to banks, and lowering the interest rate for borrowing for the purpose of stock buybacks.
- Biotech company BeOne Medicines gained 10% in Hong Kong this week after reporting Q3 revenue increased +34% to $1.90 billion and adjusted net profit increased +77% to $539 million.
Friday's Key News
Asia ended the week with a thud, as the AI supply chain heavy markets of Japan, Korea, and Taiwan all fell significantly. Meanwhile, China’s AI "picks and shovels", such as the Science & Technology (STAR) Board, were off, but not nearly as much,. Hong Kong held up better than most markets, while India continued its outperformance from earlier in the week.
It is worth noting that the AI light markets of Hong Kong and India benefited from turmoil in AI supply chain stocks this week. Investors appear to be pivoting from the AI supply chain globally. However, Mainland China is a different story. China's government wants domestic AI supply chain companies to succeed as a counterweight to import, driven by historical US export controls.
Overrnight, Premier Li and the State Council had a meeting. They issued a press release saying “We will improve the mechanism for stabilizing the capital market, enhance the intrinsic stability of the stock market, and promote the stable and healthy development of the capital market.” The release also stated that “fiscal and financial coordination should promote domestic demand policies.”
All told, it was a quiet night, as Mainland investors bought the Hong Kong dip via Southbound Stock Connect with $308 million worth of net buying. The buying from Mainland investors was concentrated in MSCI China's top holdings: Tencent, which fell -2.46%, Alibaba, which fell -3.85%, and Meituan, which gained +0.12%. Meanwhile, the AI supply chain in both Mainland China and Hong Kong, which includes semconductors, semiconductor equipment, electronic components, and communication equipment, was mostly lower, mirroring its regional peers.
The National Team’s favored ETFs diverged as large and mega cap-focused ETFs had below average volumes. Meanwhile, the STAR Board, Shenzhen, and mid and small cap ETFs all had slightly above-average volumes. Again, only two ETFs had above volumes above the RMB 10 billion level: a STAR Board ETF and a Shenzhen-focused ETF. Per the below table, Thursday's inflows were $1.57 billion into 16 Mainland-listed domestic equity ETFs. These have all seen more than $1 billion worth of net inflow in the last month.
| Category | 1D Flow | 1M Flow |
|---|---|---|
| Large Cap ETF | $81 | $13,932 |
| STAR Board ETF | $265 | $10,192 |
| Shenzhen ETF | $2 | $9,619 |
| Large Cap ETF | $45 | $8,495 |
| Small Cap ETF | ($133) | $4,941 |
| Large Cap ETF | – | $4,640 |
| Large Cap ETF | $45 | $4,594 |
| Small Cap ETF | ($69) | $4,247 |
| Mega Cap ETF | ($63) | $3,984 |
| Mid Cap ETF | $159 | $1,988 |
| Mid Cap ETF | $129 | $1,503 |
| Shenzhen ETF | $103 | $1,329 |
| STAR Board ETF | $224 | $1,243 |
| Mid Cap ETF | $74 | $1,201 |
| Shenzhen ETF | $72 | $1,123 |
| STAR Board ETF | $640 | $1,069 |
| Total | $1,573 | $74,101 |
There were a multitude of Mainland-listed companies that announced buybacks overnight, including high-profile companies like Montage Technology, which fell -8.36% despite buying back RMB 49 million worth of its own shares, which amounts to 336,100 shares. Luxshare, which fell -1.59%, also announced a continued buyback program in China. Hygon, which fell -1.17%, Han Laser, which fell -4.41%, Shanhua, which fell -3.47%, all announced strong buybacks, as well.
Alibaba announced that it will report Q3 financial results on Thursday, November 19th. A Mainland broker believes Alibaba Cloud revenue growth will exceed +50% year-over-year (YoY). Mainland China also had lighter volume and poor breadth, though mega-cap banks, oil & gas, liquor, and telecom all outperformed.
Hua Hong Semiconductor gained +6.86% in Mainland China and +4.31% in Hong Kong. The chipmaker benefited from strong Q4 guidance and Q3 financial results that showed revenue increased +19.9% YoY to $987 million and net profit increased +147% to $123 million.
It was a brutal week in global markets. However, Mainland China and Hong Kong both had an awful October, which explains an element of their resilience this week and positive performance on the unwinding of the AI supply chain trade in other markets.
The China-Canada Economic and Financial Strategic Dialogue will take place on Monday and will be attended by Vice Premier He Lifeng.
Hong Kong-listed entertainment platform Bilibili bought back 13.59 million shares overnight. Meanwhile, Tencent issued a convertible bond. Real estate platform KE Holdings (US Ticker: BEKE) also bought back 239,631 shares
Last Night's Performance
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.67 versus 6.67 yesterday
- CNY per EUR 7.45 versus 7.48 yesterday
- Yield on 10-Year Government Bond 1.59% versus 1.60% yesterday
- Yield on 10-Year China Development Bank Bond 1.64% versus 1.65% yesterday
- Copper Price -1.14%
- Steel Price 0.36%
