Key News
Asian equities had a strong day despite a stronger US dollar as Japan, Hong Kong, and South Korea outperformed. Meanwhile, Mainland China and the Philippines underperformed, and Thailand was off for a market holiday celebrating His Majesty King Maha Vajiralongkorn Phra Vajiraklaochaoyuhua’s birthday.
It was a quiet summer night on light volumes despite global central bankers’ interest rate announcements this week.
Alibaba gained +4.72% to become Hong Kong’s most heavily traded stock by value after announcing a 0.6% service fee for merchants on their Taobao E-Commerce website. The move will have a positive impact on Q3 revenue, net income, and earnings per share (EPS). Our team was given a demonstration of Taobao’s new AI-powered tools for merchants, which were quite comprehensive and being offered to merchants for free at the time. A sell side analyst also noted Alibaba’s potential inclusion in Southbound Stock Connect in September, which we discussed at length on our webinar last week.
Following Alibaba higher were Tencent, which gained +1.07%, China Construction Bank, which gained +1.3%, energy giant CNOOC, which gained +3.52%, and Meituan, which gained +0.74%.
Internet names outperformed, though many hardware names were weak after Apple’s fall in China sales ranking, led by supplier Sunny Optical, which fell -3.49%. Semiconductors were weaker as well, after the recent bout of volatility in the space.
Real estate underperformed in Hong Kong, where it fell -0.59%, and Mainland China, where the sector fell -2.57% as distressed developer Country Garden fell -1.92% as its liquidation was postponed until January by a court in Hong Kong.
Weak results from Hong Kong mall operator Whaf Holdings led its stock lower by -7.1%.
Foreign favorites Kweichow Moutai and CATL, which fell -1.70% and -2.55%, respectively, weighed on Mainland markets following foreign selling via Northbound Stock Connect. National Team-favored ETFs had light volumes, except for a flurry of activity at the day’s end.
China’s 10-Year Treasury Bond’s yield hit a new 52 week low of 2.15%. June Industrial Profits increased +3.6% year over year versus May’s +0.7%, though the release does not appear to have been a market mover.
Fuyao Glass (3606 HK) fell -6.99% after, according to Bloomberg, “US government agents searched some of Fuyao’s facilities following an investigation targeting a third-party labor service provider”. The company, which was featured in the movie American Factory, denied it was the target as 28 locations were searched due to potential labor violations.
As a recreational ping pong/table tennis player, watching Olympic players absolutely smash the ball is amazing to me. Incredible hand eye coordination! Chinese fans encourage their players by yelling “jia you”, which translates literally as “add oil” meaning “pedal to the metal”. Hopefully, policymakers will remember the term at the upcoming Politburo meeting. Last week’s subsidies for home appliances and autos represented the first fiscal stimulus post-Zero Covid.
The Hang Seng and Hang Seng Tech indexes gained +1.27% and +0.66%, respectively, on volume that declined -19.05% from Friday, which is 82% of the 1-year average. 238 stocks advanced while 221 stocks declined. Main Board short turnover declined -47.36% from Friday, which is 68% of the 1-year average, as 14% of turnover is short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The value factor and large caps outperformed growth and small caps. The top-performing sectors were Consumer Discretionary, which gained +1.59%, Financials, which gained +1.26%, and Technology, which gained +1.16%. Meanwhile, Health Care fell -1.08%, Real Estate fell -0.58%, and Consumer Staples fell -0.54%. The top-performing subsectors were retail, energy services, and banks. Meanwhile, autos, food & beverage, and semiconductors were among the worst-performing. Southbound Stock Connect volumes were light as Mainland investors bought a net $95 million worth of Hong Kong-listed stocks and ETFs, including Tencent, which was a moderate net buy, and CNOOC, which was a small net buy, and moderate/large net selling in the Hong Kong Tracker ETF.
Shanghai, Shenzhen, and the STAR Board diverged to close +0.03%, -0.47%, and -1.70%, respectively, on volume that declined -3.27% from Friday, which is 72% of the 1-year average. 2,208 stocks advanced while 2,606 declined. The value factor and large caps outperformed growth and small caps. The top-performing sectors were Financials, which gained +0.69%, Utilities, which gained +0.33%, and Communication Services, which gained +0.29%. Meanwhile, Real Estate fell -2.55%, Health Care fell -1.85%, and Consumer Staples fell -1.84%. The top-performing subsectors were highways, aerospace/military, and banking. Meanwhile, building materials, construction machinery, and power generation equipment were among the worst-performing. Northbound Stock Connect volumes were light as foreign investors were net sellers of Mainland stocks, including CATL, Kweichow Moutai, and Weichai Power. Meanwhile, ICBC, Cypc, and Cambricon were small net buys. The 10-Year Treasury Bond rallied. CNY and the Asia Dollar Index fell versus the US dollar. Copper gained while steel fell.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.26 versus 7.22 yesterday
- CNY per EUR 7.86 versus 7.84 yesterday
- Yield on 10-Year Government Bond 2.16% versus 2.22% yesterday
- Yield on 10-Year China Development Bank Bond 2.23% versus 2.26% yesterday
- Copper Price: 0.34%
- Steel Price: -0.50%
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