Industrial Production Surges In May, Auto Sales Disappoint
5 Min. Read Time
Key News
Asian equities were mostly higher overnight, as Indonesia and Korea outperformed, while Hong Kong and the Philippines underperformed.
Mainland China outperformed Hong Kong overnight, as the STAR (Science & Technology) Market 50 Index managed to continue gains from yesterday, while Hong Kong and Mainland China's Shenzhen Component ended lower. Internet and consumer plays were sold off in reaction to China's May economic data release, which showed a rare year-over-year decline in retail sales. Meanwhile, real estate was lower broadly as new home prices also fell, as indicated by the release. However, Mainland investors bought the dip in Hong Kong via Southbound Stock Connect, which saw net inflow of over $400 million.
China's May retail sales indicated a -0.6% year-over-year (YoY) decline. Meanwhile, new home prices fell -0.20% YoY. Fixed Asset Investment declined -4.1%. However, Industrial Production surged 4.5%, as exports continued to be strong.
It is important to note that the retail sales decline was mostly due to a fall in auto sales. The decline in auto sales appears to be driven by the unfavorable year-over-year comparison with last year, which was near the height of consumers' use of the attractive trade-in subsidies for electric vehicles. This is important because you can only trade in your car so many times and there is likely no need to do so within one year. Nonetheless, it is a little disheartening to see that other areas of consumption could not pick up the slack in the year-over-year comparison. This just increases the likelihood of another major stimulus package, in my opinion.
Real estate underperformed in both Hong Kong and Mainland China, which is to be expected considering the decline indicated by the official data. However, it was interesting that "building materials" companies were the top-performing subsector within our Wind-powered baskets on the Mainland. This could have been policy-driven, though I have not seen anything specific. Affordable housing conversions have been discussed by China's government to get sales off the ground, so that could be happening.
Hong Kong's weakness lately could be driven partly by new listings. Without additional buyers coming in (US and European investors remain somewhat on the sidelines), more supply can lead to lower prices. Also, investors already in the market could be raising cash to buy new offerings. HKD 255 billion ($32.5 billion) in shares from recent IPOs and secondary offerings are set to become tradable in July alone, according to Bloomberg.
There was an article by Xi Jinping in the Mainland journal Qiushi that outlined an integrated push to develop education, science, technology, and talent. China's president stresses their role as foundational, strategic pillars of national modernization in the article.
Social media platform Xiaohongshu ("Little Red Book") is said to be preparing to file for a Hong Kong IPO this month. Based on secondary market data for the currently private company, it could be valued at $50 billion.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1.4% |
| Hang Seng Tech | HSTECH Index | -2.2% |
| Hong Kong Turnover | HKTurn Index | -11.8% |
| Hong Kong Short Sale Turnover | HKSST Index | 3.6% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 18.4% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 442.28 |
| China (Shanghai) | SHCOMP Index | -0.1% |
| China (Shenzhen) | SZCOMP Index | 1% |
| China (STAR Board) | Star50 Index | 0.6% |
| Mainland Turnover | .chturn Index | 1% |
| Japan | NKY Index | 0.1% |
| India | SENSEX Index | 0.7% |
| Indonesia | JCI Index | 4.1% |
| Malaysia | FBMKLCI Index | 1.1% |
| Pakistan | KSE100 Index | 1.9% |
| Philippines | PCOMP Index | -0.4% |
| South Korea | KOSPI Index | 2.1% |
| Taiwan | TWSE Index | 0.9% |
| Thailand | SET Index | -0.2% |
| Singapore | STI Index | 0.8% |
| Australia | AS51 Index | 0% |
| Vietnam | VNINDEX Index | 0.5% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 94 | 135 |
| Advancing Stocks | 17 (Hang Seng) | 93 (CSI 300) |
| Declining Stocks | 74 (Hang Seng) | 206 (CSI 300) |
| Outperforming Factors | Growth | Value |
| Underperforming Factors | Value | Growth |
| Top Sectors | Information Technology, Financials, Industrials | Real Estate, Energy, Health Care |
| Bottom Sectors | Real Estate, Materials, Communication Services | Real Estate, Materials, Communication Services |
| Top Subsectors | Electrical Equipment, Steel, Chemical Industry | Building Materials, Communication Equipment, Fine Chemicals |
| Bottom Subsectors | Paper & Packaging, Non-Ferrous Metals, Consumer Staples | Marine Industry, Fertilizer & Pesticides, Precious Metals |
| Southbound Connect Buys | KB Laminates, Kiingboard Holdings, Knowledge Atlas | N/A |
| Southbound Connect Sells | Alibaba, Meituan, CNOOC | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -1.77 |
| Communication Services | 11 | -2.69 |
| Consumer Discretionary | 28 | -2.09 |
| Consumer Staples | 13 | -1.83 |
| Energy | 6 | -1.45 |
| Financials | 25 | -0.54 |
| Health Care | 16 | -1.96 |
| Industrials | 22 | -0.79 |
| Information Technology | 12 | -0.43 |
| Materials | 14 | -2.9 |
| Real Estate | 7 | -3.4 |
| Utilities | 11 | -2.57 |
| Mainland China Listed | 386 | 0.03 |
| Communication Services | 8 | -1.59 |
| Consumer Discretionary | 26 | -0.83 |
| Consumer Staples | 19 | -1.45 |
| Energy | 12 | -2.59 |
| Financials | 64 | -0.62 |
| Health Care | 31 | -1.66 |
| Industrials | 58 | 0.63 |
| Information Technology | 95 | 1.55 |
| Materials | 52 | -1.03 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -2.7 |
| Alibaba HK | 9988 HK Equity | -2.1 |
| JD.com HK | 9618 HK Equity | -0.8 |
| NetEase HK | 9999 HK Equity | -2.4 |
| Yum China HK | 9987 HK Equity | -1.3 |
| Baozun HK | 9991 HK Equity | 0 |
| Baidu HK | 9888 HK Equity | -3.5 |
| Autohome HK | 2518 HK Equity | 3 |
| Bilibili HK | 9626 HK Equity | -3.8 |
| Trip.com HK | 9961 HK Equity | -1 |
| EDU HK | 9901 HK Equity | -3 |
| Xpeng HK | 9868 HK Equity | -1.2 |
| Weibo HK | 9898 HK Equity | -2.5 |
| Li Auto HK | 2015 HK Equity | -1.5 |
| Nio Auto HK | 9866 HK Equity | -2.3 |
| Zhihu HK | 2390 HK Equity | -2.1 |
| KE HK | 2423 HK Equity | -3.2 |
| Tencent Music Entertainment HK | 1698 HK Equity | -1.9 |
| Meituan HK | 3690 HK Equity | -3.8 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -2.7 |
| ALIBABA GROUP HOLDING LTD | -2.1 |
| KINGBOARD LAMINATES HLDG LTD | 7.1 |
| SEMICONDUCTOR MANUFACTURI-H | -3.5 |
| KINGBOARD HOLDINGS LTD | -1.6 |
| KNOWLEDGE ATLAS TECHNOLOGY-H | 1.2 |
| HUA HONG GRACE SEMICONDUCTOR | -4.2 |
| YANGTZE OPTICAL FIBRE AND-H | -0.5 |
| POP MART INTERNATIONAL GROUP | -1.2 |
| MEITUAN-CLASS B | -3.8 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | 0.2 |
| SUZHOU DONGSHAN PRECISION-A | 4.1 |
| HENGTONG OPTIC-ELECTRIC CO-A | 8.3 |
| GIGADEVICE SEMICONDUCTO-CL A | 2.8 |
| EOPTOLINK TECHNOLOGY INC L-A | 1.6 |
| SUZHOU TFC OPTICAL COMMUNI-A | 6.4 |
| JIANGSU ZHONGTIAN TECHNOLO-A | 5.5 |
| SHENGYI TECHNOLOGY CO LTD -A | 7.8 |
| VICTORY GIANT TECHNOLOGY -A | 3.2 |
| BOE TECHNOLOGY GROUP CO LT-A | 3 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.76 versus 6.76 yesterday
- CNY per EUR 7.84 versus 7.84 yesterday
- Yield on 10-Year Government Bond
- Yield on 10-Year China Development Bank Bond
- Copper Price -0.71%
- Steel Price 0.18%
