Peak Hubris vs. The Nadir of Pride, Week In Review
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Week in Review
- Asian equities were mostly lower for the week as Japan and Taiwan outperformed, managing gains, while Mainland China’s STAR Board and Shenzhen Component underperformed before going on holiday on Thursday. Mainland China's markets will be closed until Thursday, October 8th, in observance of the National Holiday.
- On Monday, Mainland media came out with multiple articles laying out a 5-point consensus on the Trump-Xi meeting last week: The US-China Trade Council, The Reduction of Two-Way Tariffs on $60 Billion Worth of Goods, The US-China Agricultural Working Group, Raising Coal Imports From The US, and Increasing Direct Passenger Flights Between The US and China.
- Biotech outperformed this week on two significant outbound international licensing deals: Akeso & AstraZeneca on a new cancer therapy and Jiangsu Hengrui & Novo Nordisk on GLP-1s.
- China released purchasing managers' indexes (PMIs) on Wednesday that were better-than-expected, indicating expansion across both manufacturing and services.
Friday’s Key News
Asian equities were lower overnight as investors wait for today’s US jobs report while mainland China and India were closed for holiday.
Following yesterday’s market holiday in both Hong Kong and Mainland China, Mainland China remained closed for the National Holiday, which is also known as "Golden Week". In my opinion, it makes absolutely no sense for Hong Kong to be open today. Volumes were only 55% of the 1-year average, while decliners outpaced advancing stocks by nearly 5 to 1, as investors headed out for a four-day weekend. Without Southbound Stock Connect support, which normally accounts for 20% of volume, a few minor negative headlines led to the Hang Seng and Hang Seng Tech indexes both gapping lower through support levels, as the Hang Seng Tech Index is now down -38% in the past year. Short turnover was 27% of Hong Kong turnover, which represents an increase of +10% from Wednesday. Weak September Macau gaming revenue, higher US yields, mixed September auto sales, and concerns about cross-border brokerage accounts were all negative factor that contributed to the drawdown.
Real estate was the worst-performing sector after New World Development fell -3.8% after posting a large loss, which raised concerns about its debt obligations, despite Bloomberg reporting that Bain might invest in the company. Mainland media noted both activity and prices in Shenzhen’s real estate market were up in preliminary National Holiday week sales.
Tencent, which fell -2.27%, leased AI chips from Oracle as it ramps up its AI capex. It did not matter, as internet stocks were all lower.
BYD fell -2.2%, despite September sales of hybrid and electric vehicles increasing by +16.98% year-over-year (YoY) to 463,561 units. Meanwhile, Li Auto fell -5.37% to a 52-week low after announcing that September sales declined -6.29% YoY to 31,817 units.
Banks were weak on concerns about cross-border brokerage accounts could be further scrutinized, though that was more chatter than policy. The Qiushi Journal published an article from Minister of Finance Lan focused on raising domestic consumption, though investors are tired and have grown used to the talk without any action.
The post Labor Day travel sprint to Thanksgiving is in full effect, as this year’s travel schedule was even busier than last year’s. With ten countries under my belt YTD, my September travel was comprised of conferences here in the US. One multi-day conference was geared toward US wealth management professionals, though, interestingly, it had virtually nothing to do with investments. I can’t be certain on the rational of why not, but the thought crossed my mind that if the US stock market only goes up, why bother talk about investments? I’m not rooting for US stocks to go down, obviously. While at a conference, I happened to sit behind an attendee who was checking stocks on their iPhone on a rare down day in the US equity market. All of the two to three dozen tickers he checked were red. While not a very diversified portfolio, the attendee clearly had all their eggs in the US equity basket. Another conference included a speaker who gave a steroid-injected, nitrous oxide-fueled talk on US exceptionalism that was staggering as it was equal parts exaggerated hyperbole while managing to be completely devoid of supporting statistics outside of the simple fact of US equity performance versus non-US equities. While every non-US equity market was written off as useless, unsurprisingly, the speaker had a special soft spot for China. To each their own. It was hard not to contrast Captain Stock America’s peak hubris with a recent visit from a Chinese equity strategist from China who appeared to have given up any hope for a China rally. While we feel the pain ourselves, we had to cheer him up and give him the Vince Lombardi motivational speech that market cycles do change. Regardless of our effort, his dejection was impossible to hide. In terms of sentiment tops and bottoms, I think you know where I stand.
Hong Kong buybacks that took place today, but were announced after the close, included from Tencent, which repurchased 238,000 shares and KE Holdings (US Ticker: BEKE, which repurchased 530,817 shares.
Last Night’s Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -2.6% |
| Hang Seng Tech | HSTECH Index | -2.3% |
| Hong Kong Turnover | HKTurn Index | -22.1% |
| Hong Kong Short Sale Turnover | HKSST Index | 10.4% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 22.5% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Closed |
| China (Shanghai) | SHCOMP Index | Closed |
| China (Shenzhen) | SZCOMP Index | Closed |
| China (STAR Board) | Star50 Index | Closed |
| Mainland Turnover | .chturn Index | Closed |
| Japan | NKY Index | -0.9% |
| India | SENSEX Index | -0.8% |
| Indonesia | JCI Index | 0.5% |
| Malaysia | FBMKLCI Index | 0% |
| Pakistan | KSE100 Index | -0.3% |
| Philippines | PCOMP Index | 0% |
| South Korea | KOSPI Index | 0.5% |
| Taiwan | TWSE Index | 0.3% |
| Thailand | SET Index | 0.5% |
| Singapore | STI Index | -0.6% |
| Australia | AS51 Index | 0.8% |
| Vietnam | VNINDEX Index | -0.7% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 55 | Closed |
| Advancing Stocks | 79 | Closed |
| Declining Stocks | 495 | Closed |
| Outperforming Factors | None | Closed |
| Underperforming Factors | Growth, Value, Buybacks | Closed |
| Top Sectors | None | Closed |
| Bottom Sectors | Real Estate, Healthcare, Financials | Closed |
| Top Subsectors | None | Closed |
| Bottom Subsectors | Banks, Financial Services, Pharmaceuticals | Closed |
| Southbound Connect Buys | Closed | N/A |
| Southbound Connect Sells | Closed | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 152 | 45.82 |
| Communication Services | 7 | 10.08 |
| Consumer Discretionary | 27 | 11.31 |
| Consumer Staples | 12 | 0.95 |
| Energy | 7 | 1.67 |
| Financials | 24 | 10.04 |
| Health Care | 15 | 3.17 |
| Industrials | 16 | 1.51 |
| Information Technology | 14 | 3.59 |
| Materials | 14 | 1.94 |
| Real Estate | 6 | 0.83 |
| Utilities | 10 | 0.75 |
| Mainland China Listed | 419 | Closed |
| Communication Services | 9 | Closed |
| Consumer Discretionary | 21 | Closed |
| Consumer Staples | 16 | Closed |
| Energy | 11 | Closed |
| Financials | 60 | Closed |
| Health Care | 26 | Closed |
| Industrials | 62 | Closed |
| Information Technology | 126 | Closed |
| Materials | 69 | Closed |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -2.3 |
| Alibaba HK | 9988 HK Equity | -2.1 |
| JD.com HK | 9618 HK Equity | -1.3 |
| NetEase HK | 9999 HK Equity | -3.3 |
| Yum China HK | 9987 HK Equity | -1.7 |
| Baozun HK | 9991 HK Equity | -0.4 |
| Baidu HK | 9888 HK Equity | -3 |
| Autohome HK | 2518 HK Equity | 0 |
| Bilibili HK | 9626 HK Equity | -4.6 |
| Trip.com HK | 9961 HK Equity | -1.9 |
| EDU HK | 9901 HK Equity | 0.4 |
| Xpeng HK | 9868 HK Equity | -4 |
| Weibo HK | 9898 HK Equity | -1.8 |
| Li Auto HK | 2015 HK Equity | -5.4 |
| Nio Auto HK | 9866 HK Equity | 1.8 |
| Zhihu HK | 2390 HK Equity | -4 |
| KE HK | 2423 HK Equity | -2.8 |
| Tencent Music Entertainment HK | 1698 HK Equity | -1.8 |
| Meituan HK | 3690 HK Equity | -2.1 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -2.3 |
| ALIBABA GROUP HOLDING LTD | -2.1 |
| HSBC HOLDINGS PLC | -5.4 |
| HONG KONG EXCHANGES & CLEAR | -3.1 |
| XIAOMI CORP-CLASS B | -4 |
| AIA GROUP LTD | -6 |
| LENOVO GROUP LTD | -0.6 |
| CONTEMPORARY AMPEREX TECHN-H | -1.5 |
| CHINA CONSTRUCTION BANK-H | -2.7 |
| MEITUAN-CLASS B | -2.1 |
Last Night’s Exchange Rates, Prices, & Yields
Mainland China's currency, bond, and commodity markets were closed overnight.
