Local Investors Buy While Foreigners Flee, Week in Review
6 Min. Read Time
Week in Review
- Asian equities were mixed but mostly lower for the week as India and Thailand outperformed, managing gains, while Hong Kong's Hang Seng Tech Index and Mainland China's STAR Board underperformed.
- China's "official" purchasing managers' indexes (PMIs), released this week, indicated an unexpected contraction, while the private survey PMIs painted a more positive picture.
- Speculation that E-Commerce and online video gaming companies could be subject to a value-added tax (VAT) increase weighed on related stocks this week.
- Presidents Trump and Xi held a phone call this week, as the US president noted progress on key issues.
- In our latest video, cultural analyst Xiabing Su takes us inside China’s ultra-competitive electric vehicle (EV) market.
Friday's Key News
America’s growth and technology stock flu spread to Asia this week. Regional markets ended a mixed week also mixed, as the growth and technology-heavy markets of South Korea, Hong Kong, Mainland China, and Taiwan all added to their weekly losses. Meanwhile, India added to its weekly gain. Hong Kong opened lower, but managed to grind higher to limit losses, a small win.
In speaking with a younger colleague yesterday, he did not understand how the US’ stock market meltdown was affecting our market, since valuations and positioning are so low, in comparison. When you hit the risk off button, you sell everything indiscriminately. Additionally, when investors puke up their broad Emerging Market (EM) exposure, that means selling all EM, including China. The global risk-off sentiment was clearly evident in Alibaba, which fell -2.88%, and Tencent, which fell -1.97%.
Many investors’ China exposure tends to reflect the MSCI China Index, which is composed of 84% Hong Kong stocks and 16% in Mainland China. Investors often barbell Hong Kong-listed internet and growth stocks with high dividend stocks, such as insurance companies.Where was the pain felt today? Both sides of the barbell felt in the downdraft, as internet and insurance were both off today, for example.
Mainland investors bought a very healthy $1.90 billion worth of Hong Kong-listed stocks and ETFs today, which brings the weekly total to $7.18 billion and the year-to-date (YTD) total to a net $16.03 billion. Tencent was the largest net buy today, at $554 million, which brings its weekly net buy to $1.97 billion.
ETFs listed in China that provide exposure to Hong Kong, particularly HK tech and growth stocks, saw $778 million in net inflow today, which brings their net buying on the week to $2.49 billion. It is kind of funny that there is so much criticism of Chinese investors as “dumb retail”, and yet here they are buying low while foreign investors puke up their shares.
Non-ferrous metals and consumer discretionary names, including household appliances and food & beverage, were all off. Meanwhile, NIO’s Q4 results lifted the stock higher by +6.94%, Li Auto gained +3.61% after the CEO called their new electric vehicle (EV) a robot, and battery giant CATL gained +1.77%.
There was some drama in the online video streaming sector overnight. Online streaming and short video platform Kuiashou fell -2.4% after being fined for allowing pornography. Meanwhlile, five regulators warned about online video and live broadcasts peddling false claims and fraud.
There was a Mainland media article said that the SEC was going to reexamine US-listed China stocks, though I did not see anything to substantiate that claim. The Trump Administration did insert their appointees to run the PCAOB, as expected.
Mainland China opened low, grinded higher, but faded a touch toward the end of the session, though closed off intra-day lows. Oil& Gas outperformed, along with CATL, which gained +1.77%. Meanwhile, technology hardware and semiconductors were mixed. The "Saas-pocalypse" trade was evident in Mainland Chinas, as software was sold. Royalflush flushed down -3.33% of its share price value and Kingsoft fell by a milder -1.88%.
ETFs favored by the "National Team", i.e., investment firms associated with China's sovereign wealth, had below average volumes. The recent sell-off, partially sparked by their selling, hasn’t led the to switch to buying just yet.
Uruguayan President Yamandu Orsi appears to be hitting all the local attractions during his China visit after meeting President Xi earlier in the week. Good for him!
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1.2% |
| Hang Seng Tech | HSTECH Index | -1.1% |
| Hong Kong Turnover | HKTurn Index | -21.3% |
| Hong Kong Short Sale Turnover | HKSST Index | -26.6% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 19.2% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 1,897.72 |
| China (Shanghai) | SHCOMP Index | -0.3% |
| China (Shenzhen) | SZCOMP Index | 0% |
| China (STAR Board) | Star50 Index | -0.7% |
| Mainland Turnover | .chturn Index | -1.3% |
| Japan | NKY Index | 0.8% |
| India | SENSEX Index | 0.3% |
| Indonesia | JCI Index | -2.1% |
| Malaysia | FBMKLCI Index | 0.1% |
| Pakistan | KSE100 Index | -1.8% |
| Philippines | PCOMP Index | 0.1% |
| South Korea | KOSPI Index | -1.4% |
| Taiwan | TWSE Index | -0.1% |
| Thailand | SET Index | 0.6% |
| Singapore | STI Index | -0.8% |
| Australia | AS51 Index | -2% |
| Vietnam | VNINDEX Index | -1.5% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 94 | 115 |
| Advancing Stocks | 161 | 2566 |
| Declining Stocks | 319 | 2427 |
| Outperforming Factors | Low Volatility, Dividend Yield | Momentum |
| Underperforming Factors | Liquidity, EPS Revision, Momentum | Quality, Dividend Yield, Low Volatility |
| Top Sectors | Energy, Technology | Materials, Energy, Industrials |
| Bottom Sectors | Communication, Discretionary, Real Estate | Staples, Real Estate, Communication |
| Top Subsectors | Paper/Packaging, Petroleum/Petrochemical, Electrical Equipment | Chemicals, Oil & Gas, Raw Materials |
| Bottom Subsectors | Aerospace, Consumer Discretionary Distribution, Financial Services | Liquor, Catering/Tourism, Motorcycles |
| Southbound Connect Buys | Tencent (Very Large), Alibaba (Large), Hang Seng Tech ETF, Pop Mart, SMIC (Moderate), Xiaomi (Small) | N/A |
| Southbound Connect Sells | YOFC (Tiny) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | 0.27 |
| Communication Services | 11 | 0.3 |
| Consumer Discretionary | 28 | 0.9 |
| Consumer Staples | 13 | 1.94 |
| Energy | 6 | -1.23 |
| Financials | 25 | 0.12 |
| Health Care | 16 | 0.19 |
| Industrials | 22 | -0.23 |
| Information Technology | 12 | 1.88 |
| Materials | 14 | -4.56 |
| Real Estate | 7 | -0.03 |
| Utilities | 11 | 0.51 |
| Mainland China Listed | 386 | -0.78 |
| Communication Services | 8 | 0.79 |
| Consumer Discretionary | 26 | 0.47 |
| Consumer Staples | 19 | 1.31 |
| Energy | 12 | -2.15 |
| Financials | 64 | 0.78 |
| Health Care | 31 | 0.72 |
| Industrials | 58 | -1.31 |
| Information Technology | 95 | -1.73 |
| Materials | 52 | -3.61 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -2 |
| Alibaba HK | 9988 HK Equity | -2.9 |
| JD.com HK | 9618 HK Equity | -1.7 |
| NetEase HK | 9999 HK Equity | -2.2 |
| Yum China HK | 9987 HK Equity | -1.5 |
| Baozun HK | 9991 HK Equity | -2.4 |
| Baidu HK | 9888 HK Equity | -2.2 |
| Autohome HK | 2518 HK Equity | -2.1 |
| Bilibili HK | 9626 HK Equity | -1.4 |
| Trip.com HK | 9961 HK Equity | -1.5 |
| EDU HK | 9901 HK Equity | -1.3 |
| Xpeng HK | 9868 HK Equity | -0.4 |
| Weibo HK | 9898 HK Equity | -1.2 |
| Li Auto HK | 2015 HK Equity | 3.6 |
| Nio Auto HK | 9866 HK Equity | 6.9 |
| Zhihu HK | 2390 HK Equity | -1.9 |
| KE HK | 2423 HK Equity | -2.1 |
| Tencent Music Entertainment HK | 1698 HK Equity | -0.7 |
| Meituan HK | 3690 HK Equity | -2.6 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -2 |
| ALIBABA GROUP HOLDING LTD | -2.9 |
| XIAOMI CORP-CLASS B | 0.7 |
| AIA GROUP LTD | -5.5 |
| MEITUAN-CLASS B | -2.6 |
| SEMICONDUCTOR MANUFACTURI-H | 0.2 |
| POP MART INTERNATIONAL GROUP | 0.3 |
| YANGTZE OPTICAL FIBRE AND-H | 5 |
| HONG KONG EXCHANGES & CLEAR | -1.6 |
| ZIJIN MINING GROUP CO LTD-H | -1.4 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -3.9 |
| EOPTOLINK TECHNOLOGY INC L-A | -4.9 |
| CONTEMPORARY AMPEREX TECHN-A | 1.7 |
| SUZHOU TFC OPTICAL COMMUNI-A | 0.4 |
| ZIJIN MINING GROUP CO LTD-A | -0.7 |
| KWEICHOW MOUTAI CO LTD-A | -2.6 |
| WANGSU SCIENCE & TECHNOLOG-A | -0.2 |
| BLUEFOCUS INTELLIGENT COMM-A | -0.8 |
| ADDSINO CO LTD -A | -5.2 |
| SHENZHEN SUNWAY COMMUNICAT-A | 2.1 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.94 versus 6.94 yesterday
- CNY per EUR 8.19 versus 8.18 yesterday
- Yield on 10-Year Government Bond 1.81% versus 1.82% yesterday
- Yield on 10-Year China Development Bank Bond 1.95% versus 1.96% yesterday
- Copper Price -2.44%
- Steel Price -0.23%
