Asian equities were broadly higher as China, Taiwan, and South Korea underperformed though volumes were light in advance of today’s US CPI release and tomorrow’s US interest rate hike. Hong Kong volumes were off -21% from yesterday, while Hong Kong short turnover, an indication of professional investor risk tolerance, fell -41% from yesterday.
Hong Kong’s most heavily traded stocks by value were Tencent, which gained +0.25%, Meituan, which gained +2.05%, Alibaba, which was flat, and Kuaishou, which gained +4.49% as investors cheered the continued rollback of COVID restrictions as Hong Kong scrapped all rules on inbound visitors.
After the close, Berkshire Hathaway announced it trimmed its BYD position by 1.3mm shares, though they still own 15%/164mm shares.
Mainland markets were off a touch, led lower by tech and semiconductors as local investors worry about the US pulling Japan and the Netherlands into banning semi-conductor equipment, which will be challenged at the World Trade Organization (WTO). It is worth noting that Hong Kong semiconductors had a strong day on the belief that the Chinese government will provide subsidies to such companies. Yesterday’s tepid credit was potentially a factor as well.
The Central Economic Work Conference (CEWC) has pushed back to this weekend from Thursday on COVID concerns. China’s US Ambassador alluded that Mainland travel restrictions might be eased soon. The offshore Renminbi (CNH) and the Asia dollar index are rallying post the US CPI print, a positive signal for risk assets.
The Hang Seng and Hang Seng Tech gained +0.68% and +0.73% on volume -21.83% from yesterday, which is 100% of the 1-year average. 218 stocks advanced, while 260 stocks declined. Main Board short turnover decreased -41.78% from yesterday, 71% of the 1-year average, as 12% of turnover was short. Growth factors had a slight edge over value sectors though large caps outpaced small caps handily. The top sectors were staples +0.57%, tech +0.54%, and discretionary +0.27%, while healthcare -1.04%, real estate -0.82%, and materials -0.72%. The top sub-sectors were semis, consumer services, and transports, while media, pharma, and materials. Southbound Stock Connect volumes were moderate as Mainland investors bought $213mm of Hong Kong stocks, with Shandong Xinhua Pharmaceutical the most heavily traded as a small buy, Tencent a small net sell, Kuaishou and Meituan both small net buys.
Shanghai, Shenzhen, and STAR Board were off -0.09%, -0.56%, and -1.51% on volume -10.01% from yesterday, which is 86% of the 1-year average. 1,951 stocks advanced, while 2,661 stocks declined. Value factors outperformed growth factors as large caps outpaced small caps. The top sectors were energy +0.78%, staples +0.72%, and financials +0.52%, while tech -2.01%, industrials -1.01%, and healthcare -0.7%. The top sub-sectors were paper, highway, and transport, while software, power generation equipment, and industrial machinery were the bottom. Northbound Stock Connect volumes were light as foreign investors were small net buys of Shenzhen growth stocks over Shanghai value stocks as a small net sell with a total net sale of -$135mm. CNY fell -0.05% versus the US dollar to 6.98, Treasury bonds sold off, and copper eased -0.56%.
Major City Mobility Tracker
Both traffic and metro usage dropped recently as COVID spreads. It is worth watching this trend as individual cities will have to navigate the top-down message to reopen while balancing potentially increased hospitalizations.
Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 6.98 versus 6.97 yesterday
- CNY per EUR 7.34 versus 7.37 yesterday
- Yield on 10-Year Government Bond 2.90% versus 2.89% yesterday
- Yield on 10-Year China Development Bank Bond 3.06% versus 3.05% yesterday
- Copper Price -0.56% overnight