Key News
Asian equities were largely higher except for Hong Kong, despite a stronger US dollar, while Pakistan was closed for Ashura, a day of commemoration in Islam.
No news/catalysts were announced from the Third Plenum, and recent mediocre economic data, combined with light volumes and sentiment, weighed on Hong Kong as the Hang Seng fell below the big round/meaningless number 18,000.
The higher probability of a Trump second term, JD Vance as his VP, and his “China threat” comment appeared to be a factor as popular foreign favorite growth stocks underperformed. After the Trump-Biden debate, did anyone not think the probability of a Trump win was high? If Trump is so negative about China, shouldn’t US multinationals with high China revenue, like Apple, Caterpillar, Boeing, Exxon Mobile, etc., be down as well? Amongst the pro-Trump business people include Elon Musk (Tesla derives 22% of its revenue in China) and Jeff Yass (investor/owner of Bytedance).
Similar to Trump’s first term, there are likely to be negotiating tactics, such as sky-high tariffs, but we should remember the potential impact on US firms, too. Ironically, Apple’s China supply chain had a strong day on an analyst upgrade, with Sunny Optical up +6.95% and AAC Technologies up +0.78%. The other bright spot was that as foreign investors puked up shares, Mainland Chinese investors bought them with a healthy $782 million net buying of Hong Kong stocks, especially the Hong Kong Tracker ETF. Let’s hope they know something is coming out of the Third Plenum that we don’t!
Hong Kong’s most heavily traded stocks by value were Tencent, down -3.13%, Ping An, down -5.41% as it issued a convertible note, Alibaba, down -1.5%, Meituan, down -1.34%, and China Construction Bank, down -2.67%. Baidu fell -2.98% despite further Mainland media coverage of its robotaxi rollout in Wuhan, with rumors that Shanghai’s rollout could be next week and Shenzhen shortly thereafter. Mainland China was bouncing around the room until a late afternoon rally lifted the market as the National Team’s favorite ETFs saw big jumps in volume. The Huatai-Pinebridge CSI 300 ETF Fund had a volume of 1.6 million versus a 30-day average of 982k, the E Fund Seeded CSI 300 ETF traded 2 million shares versus a 30-day average of 568k, and the ChinaAMC China 50 ETF traded 1.2 million shares versus a 30-day average of 832k. Mainland media noted how low mortgage rates are, with Guangzhou’s rate cut of 3% and Yunnan’s 2.95%. Like Hong Kong, Apple’s supply chain and semiconductor stocks had a strong day after Hangzhou Chang Chuan Technology gained +6.35% on a positive profit alert that lifted the space. CNY and the Asia dollar index were off overnight.
The Hang Seng and Hang Seng Tech indexes fell -1.60% and -1.35%, respectively, on volume that increased +3.4% from yesterday, which is 91% of the 1-year average.146 stocks advanced, while 328 declined. Main Board short turnover increased +12.15% from yesterday, which is 107% of the 1-year average, as 20% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Small caps “outperformed”/fell less than large caps, while value and growth fell nearly the same amount. The technology and healthcare sectors gained +0.3% and +0.26%, while communication services fell -2.77%, financials fell -2.18%, and real estate fell -1.8%. The top sub-sectors were semiconductors and technical hardware, while food/staples, software, and insurance were the worst. Southbound Stock Connect volumes were light as Mainland investors bought a healthy $784 million of Hong Kong stocks and ETFs with the Hong Kong Tracker ETF and Tencent having moderate net buying while Hong Kong Exchanges was a small net sell.
Shanghai, Shenzhen, and STAR Board gained +0.08%, +0.49%, and +2.26%, respectively, on volume up +6.54% from yesterday, which is 78% of the 1-year average. 2,001 stocks advanced, while 2,825 declined. Growth and small caps outperformed value and large caps. The top sectors were technology, up +2.95%, real estate, up+1.09%, and utilities, up +0.91%, while staples and financials were down -0.03% and -0.11%. The top sub-sectors were computer hardware, power generation equipment, and precious metals, while chemicals, insurance, and construction machinery were the worst. Northbound Stock Connect volumes were moderate as foreign investors were net sellers. CNY and the Asia dollar index were lower versus the US dollar. The Treasury Curve steepened. Copper and steel both fell.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.26 versus 7.26 yesterday
- CNY per EUR 7.91 versus 7.92 yesterday
- Yield on 10-Year Government Bond 2.26% versus 2.25% yesterday
- Yield on 10-Year China Development Bank Bond 2.33% versus 2.33% yesterday
- Copper Price -0.36%
- Steel Price -0.08%
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