Safer, Not Immune

Key News

Asian equities had another rough night on the ongoing Middle East conflict, though Hong Kong, Mainland China, and Thailand all outperformed on a relative basis.

While all of East Asia, except for China, is very dependent on the Middle East for oil and natural gas, it is hard not to notice that the home countries of the AI "picks & shovels" trade, i.e. semiconductor fabricators TSMC, SK Hynix, and Samsung are particularly exposed, along with the additional headwind of Google’s recent Turbo Quant announcement. Investors’ Asia overweight of Japan, South Korea, and Taiwan are now underperforming for the 1-month time period, though they are still significantly outperforming for the three and six-month time periods, which makes me wonder whether the China underweight could see some inflow.

Overnight, both Hong Kong and Mainland China opened lower, but managed to grind higher on moderate volumes, as the Shanghai posted a small gain following the financial results of Agricultural Bank of China and Bank of China as banks outperformed in both markets.

The State Administration for Market Regulation (SAMR) stated that “further implementation” of the Unfair Competition Law of the People's Republic of China have been applied to industries including the “platform economy, photovoltaic power generation, lithium batteries, and new energy vehicles”.  Last week, the headline was that the “Delivery War is Over,” though the Middle East risk-off sentiment is obviously the dominant issue, as investors will want to see tangible evidence of the subsidy wars ending, i.e. stronger financial results showing greater profitability.

Hong Kong-listed stocks, which constitute the definition of China for foreign investors, underperformed Mainland China, as big index stocks, including Tencent, Alibaba, and AIA were all off.  Mainland investors were net sellers of Hong Kong via Southbound Stock Connect. They pulled another "Jekyll & Hyde: swinging out of the Hong Kong Tracker ETF, as their brokers must love the trading.

Tencent fell -2.39% despite a large share repurchase of 624,000 shares and moderate net buying from Mainland investors via Southbound Stock Connect. Xiaomi and AIA also reported large stock repurchases today. Alibaba fell -1.71% with selling pressure from Mainland investors via Southbound Stock Connect and two big put, i.e. bearish, options trades.

There was no love for Hong Kong-listed China clean technology, as CATL fell -0.32% and BYD fell -0.66%, following financial results on Friday. Non-ferrous metals and oil & gas rallied in both markets, led by aluminum stocks following an Iran strike.

There was no sign of activity driven by the "National Team", i.e. investment firms associated with China's sovereign wealth, as their favored ETFs had below average volumes.

SAMR Director Luo Wen was in Liaoning Province to research “food safety in online catering and the rectification of irregularities in the live-streaming e-commerce industry”. He emphasized "the need to crack down on the chaos in the live-streaming e-commerce industry”.

March's “official” purchasing managers' indexes (PMIs) will be announced this morning, Eastern US time.

President Xi has invited Taiwan’s KMT head to visit Beijing from April 7^th to 12^th.

Hong Kong had four IPOs today. Meanwhile, Baidu spin-off iQiyi announced it will relist in Hong Kong, filing for an IPO with the exchanges. At the same time, iQiyi's board approved a $100 million stock repurchase plan. There are still several US-listed Chinese companies without a Hong Kong listing, including Full Truck Alliance and PDD Holdings. There are also some companies with a Hong Kong listing that does not have dual share classes, which prevents them from being included in Southbound Stock Connect and thereby becoming available to Mainland investors. These include JD.com, Baidu, and NetEase.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	-0.8%
Hang Seng Tech	HSTECH Index	-1.8%
Hong Kong Turnover	HKTurn Index	8.5%
Hong Kong Short Sale Turnover	HKSST Index	9%
Short Turnover as a % of Hong Kong Turnover	N/A	19.1%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	-315.04
China (Shanghai)	SHCOMP Index	0.2%
China (Shenzhen)	SZCOMP Index	0%
China (STAR Board)	Star50 Index	-0.8%
Mainland Turnover	.chturn Index	3.5%
Japan	NKY Index	-2.8%
India	SENSEX Index	-2.2%
Indonesia	JCI Index	-0.1%
Malaysia	FBMKLCI Index	-1.4%
Pakistan	KSE100 Index	-3.2%
Philippines	PCOMP Index	-1.7%
South Korea	KOSPI Index	-3%
Taiwan	TWSE Index	-1.8%
Thailand	SET Index	0.2%
Singapore	STI Index	0%
Australia	AS51 Index	-0.6%
Vietnam	VNINDEX Index	-0.6%

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	110	98
Advancing Stocks	146	2685
Declining Stocks	370	2307
Outperforming Factors	Low Volatility	Quality, Momentum, Low Volatility
Underperforming Factors	Liquidity, Growth, Buyback	Growth, Liquidity, EPS Revision
Top Sectors	Materials, Financials, Industrials	Materials, Energy, Healthcare
Bottom Sectors	Communication, Discretionary, Utilities	Utilities, Communication, Discretionary
Top Subsectors	Non Ferrous Metal, Construction Materials, Steel	Foret, Precious Metals, Communication Equipment
Bottom Subsectors	Household Appliances, National Defense, Paper/Packaging	Power, Energy Equipment, Construction Machinery
Southbound Connect Buys	Tencent (Moderate)	N/A
Southbound Connect Sells	HK Tracker ETF (Very Large), Alibaba, HS Tech ETF, HS China Enterprise ETF (Large), SMIC (Moderate), Pop Mart, YOFC (Small)	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	164	-1.02
Communication Services	11	-2.3
Consumer Discretionary	28	-1.71
Consumer Staples	12	-0.09
Energy	6	-0.38
Financials	25	0.38
Health Care	16	-0.36
Industrials	19	0.06
Information Technology	15	-0.88
Materials	14	1.77
Real Estate	1	-1.05
Utilities	6	-1.7
Mainland China Listed	11	-0.15
Communication Services	11	-1.16
Consumer Discretionary	26	-0.8
Consumer Staples	18	0.08
Energy	11	0.41
Financials	64	-0.02
Health Care	29	0.4
Industrials	60	-0.7
Information Technology	113	-0.57
Materials	58	1.43

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	-2.4
Alibaba HK	9988 HK Equity	-1.7
JD.com HK	9618 HK Equity	-0.6
NetEase HK	9999 HK Equity	-0.4
Yum China HK	9987 HK Equity	-2.3
Baozun HK	9991 HK Equity	-9.5
Baidu HK	9888 HK Equity	-2.6
Autohome HK	2518 HK Equity	-2.5
Bilibili HK	9626 HK Equity	-3.5
Trip.com HK	9961 HK Equity	-1.7
EDU HK	9901 HK Equity	-1.8
Xpeng HK	9868 HK Equity	-4.5
Weibo HK	9898 HK Equity	-0.7
Li Auto HK	2015 HK Equity	-1.8
Nio Auto HK	9866 HK Equity	-2.5
Zhihu HK	2390 HK Equity	-1.4
KE HK	2423 HK Equity	-3.1
Tencent Music Entertainment HK	1698 HK Equity	-2.8
Meituan HK	3690 HK Equity	-2

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
CHINA CONSTRUCTION BANK-H	1.9
BANK OF CHINA LTD-H	0.6
SENSETIME GROUP INC-CLASS B	0
IND & COMM BK OF CHINA-H	1.8
GCL TECHNOLOGY HOLDINGS LTD	-1.1
CHINA PETROLEUM & CHEMICAL-H	-1.5
COUNTRY GARDEN HOLDINGS CO	0
PETROCHINA CO LTD-H	1.5
CHINA ALUMINUM INTERNATION-H	22.5
XIAOMI CORP-CLASS B	-1.9

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
WINTIME ENERGY GROUP CO L-A	-4.6
CHINA ENERGY ENGINEERING C-A	-2.6
AURORA OPTOELECTRONICS CO-A	2.6
JIANGSU ZHONGLI GROUP CO L-A	9.9
BEIJING ORIENT ECOENERGY C-A	-1
GCL SYSTEM INTEGRATION TEC-A	-5.1
CECEP WIND POWER CORP-A	-6.7
KINGENTA ECOLOGICAL ENGINE-A	4.2
ALUMINUM CORP OF CHINA LTD-A	4.6
INNER MONGOLIA BAOTOU STE-A	0.4

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 6.91 versus 6.91 Friday
• CNY per EUR 7.94 versus 7.96 Friday
• Yield on 10-Year Government Bond 1.81% versus 1.82% Friday
• Yield on 10-Year China Development Bank Bond 1.95% versus 1.97% Friday
• Copper Price -0.31%
• Steel Price 0.48%