Key News
Asian equities were largely lower after Tesla and Google’s financial results, which weighed on growth/technology stocks regionally. The Philippines and Taiwan were closed due to a typhoon.
Tesla’s poor earnings results, which were reported yesterday, weighed on Hong Kong-listed automobile and electric vehicle (EV) ecosystem stocks. Some EV ecosystem stocks that were impacted included BYD, which fell -2.27%, Li Auto, which fell -4.06%, XPeng, which fell -5.01%, and NIO, which fell -4%, though CATL managed to close higher by +0.06% in the Mainland market. Maybe Tesla’s results were a miss because of these companies?
In addition to Google’s lack of artificial intelligence (AI) revenues taking some of the momentum out of the AI frenzy, semiconductor assembly and packing company ASMPT LTD (522 HK) fell -23.14% after poor financial results, which also weighed on the growth/technology sector.
This morning’s tepid LVMH results were due to “China weakness,” though their CFO mentioned Chinese tourists are buying not in China but in Japan due to the Yen’s weakness. I experienced this while connecting through Tokyo’s Narita to Asia. Once in Asia, I was told Narita’s Rolex store was out of watches due to this phenomenon.
Both Hang Seng and HS Tech breached short-term support on light volumes and poor breadth. Hong Kong’s most heavily traded stocks by value were Meituan, which fell by -4.06% on no news, Tencent, which fell -0.82%, AIA, which fell -3.91%, Alibaba, which gained +0.13%, and energy giant CNOOC, which gained +1.23%. NetEase gained +4.57% and also bucked the trend on a new game launch. Today was a rare, albeit small, -$9 million net sell of Hong Kong stocks from Mainland investors. The Mainland market was also off, though mega-cap stocks held up better than most, while the National Team’s favored ETFs saw above-average volumes.
National Team buying kept the Shanghai Composite from falling below the 1,900 level, though the Shenzhen breached 1,500 today. A Goldman Sachs strategist stated that China would keep economic powder due to a potential Trump win garnering attention, though it runs counter that the Chinese government would prefer a Trump win per our conversation with Trump’s Ambassador to China, Terry Branstad. One mea culpa as I failed to report that Berkshire Hathaway’s reduction yesterday in BYD was below the 5% level, which means they no longer have to report sales going forward. Totally out of census is my belief under Trump, BYD and others will be allowed to build EVs and hybrids in US factories.
Ukraine’s Foreign Minister Dmytro Kuleba is in China with reports a “good faith” negotiation with Russia is feasible.
The US dollar’s weakness overnight is worth highlighting, as foreign investment in US growth stocks is very high. A weak dollar only exacerbates a pullback in the space, in my opinion.
The Hang Seng and Hang Seng Tech fell -0.91% and -1.52%, respectively, on volume +1.25% from yesterday which is 84% of the 1-year average. 137 stocks advanced, while 333 declined. Main Board short turnover increased by +7.07% from yesterday, which is 92% of the 1-year average, as 19% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Large-cap and value stocks “outperformed”/fell less than small-cap and growth stocks. The top sectors were utilities, up +1.67%, energy, up +1.5%, and industrials, up +0.51%, while consumer staples fell -3.95%, real estate fell -2.37%, and technology fell -2%. The top sub-sectors were media, utilities, and energy, while semiconductors, food/beverage, and automobile were the worst. Southbound Stock Connect volumes were light as Mainland investors sold -$9 million of Hong Kong stocks and ETFs, with ICBC, a small net buy, while Tencent and Meituan were small/moderate net sells.
Shanghai, Shenzhen, and STAR Board fell -0.46%, -1.32%, and -1.08%, respectively, on volume -5.23% from yesterday, which is 77% of the 1-year average. 901 stocks advanced, while 4,057 declined. Large-cap and value stocks “outperformed”/fell less than small-cap and growth stocks. Utilities and energy gained +1.97% and +0.91%, while real estate fell -2.65%, consumer discretionary fell -2.42%, and technology fell -1.29%. The top sub-sectors were water, power, and telecommunications, while motorcycle, office supply, and household appliances were the worst. Northbound Stock Connect volumes were moderate/light as foreign investors were small net sellers of Mainland stocks, with Citic Securities, Goertek, and Eoptlink small net buys, while Kweichow Moutai and CATL were moderate net sells. Treasury bonds were off small. CNY was off small versus the US dollar. Copper and Steel were down.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.27 versus 7.27 yesterday
- CNY per EUR 7.88 versus 7.90 yesterday
- Yield on 10-Year Government Bond 2.23% versus 2.23% yesterday
- Yield on 10-Year China Development Bank Bond 2.29% versus 2.29% yesterday
- Copper Price -0.64%
- Steel Price -0.88%
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