Key News
Asian equities were higher overnight, led by Mainland China’s reopening following its Labor Day holiday, though Japan was closed for Children’s Day, South Korea was closed for Substitution Holiday, and Thailand was closed for Coronation Day.
The Ministry of Culture and Tourism reported “total domestic travel in China was 295 million person-times, a year-on-year increase of 7.6% and an increase of 28.2% versus 2019” and the “total cost of domestic tourists traveling was 166.89 billion yuan, a year-on-year increase of 12.7% and a growth rate of 13.5%” versus 2019.
Real estate policy support continues to be amplified as Shenzhen clarified home purchase restriction adjustments after Beijing’s similar move last week received media attention. Hong Kong had a choppy morning but grinded higher to close near intra-day highs on high volumes that were 146% of the 1-year average.
Mainland investors were active via Southbound Stock Connect, buying a healthy net $650 million worth of Hong Kong-listed ETFs and stocks, including the Hong Kong Tracker ETF, which was a large net buy. The ETF purchases require market makers to hedge, which spiked short-selling turnover, though it wasn’t outright short-selling but hedging.
Hong Kong’s most heavily traded stocks by value were Tencent, which gained +1.59%, Meituan, which gained +0.50%, Alibaba, which gained +0.38%, CNOOC, which fell -2.68%, and AIA, which gained +1.87%. I sense that trading desks’ mood appears to be picking up though skepticism about the rally remains high, which is great news to me. Going from underweight to neutral would be a big move for Chinese equities. Over the last five trading days, three US-listed China equity ETFs received net inflows, i.e. increases in shares outstanding. Meanwhile, three had net outflows and decreases in shares outstanding, including one that lost -8.5% of their shares outstanding last week. The pain trade is higher, in my opinion!
Mainland China reopened after bring off since last Tuesday. Shanghai and Shenzhen rose and stayed there on strong breath (i.e. advancers versus decliners) and good volume that increased to 130% of the 1-year average. Railroad stocks were higher following the implementation of surge pricing. Foreign investors bought a healthy net $1.29 billion worth of Mainland stocks, including Kweichow Moutai, which saw significant net buying.
CNY made a strong move versus the US dollar, closing today at 7.21 CNY per USD versus last Tuesday’s 7.24 CNY per USD, indicating appreciation.
The April Caixin Services PMI release of 52.5 versus expectations of 52.5 and Marchs’ 52.7 received little attention overnight.
President Xi arrived in France today to talk trade with President Macron.
Interestingly, Geely Automobile is looking to pursue an IPO of its electric vehicle (EV) brand Zeekr in the US.
Berkshire Hathaway’s
BRK.B
The Hang Seng and Hang Seng Tech indexes gained +0.55% and +0.92%, respectively, on volume that increased +24.35% from Friday, which is 146% of the 1-year average. 296 stocks advanced while 189 declined. Main Board short turnover increased +34.06% from Friday, which is 145% of the 1-year average, as 18% of turnover was short turnover (Hong Kong shore turnover includes ETF market makers’ hedging). The value factor outperformed the growth factor. The top-performing sectors were Utilities, which gained +1.88%, Industrials, which gained +1.69%, and Health Care, which gained +1.60%. Meanwhile, Real Estate fell -2.38%. The top-performing subsectors were media and capital goods. Meanwhile, Real Estate services and food & beverages were among the worst-performing. Southbound Stock Connect volumes were light as Mainland investors bought a net $650 million worth of Hong Kong-listed stocks and ETFs, including the Hong Kong Tracker ETF, which was a large net buy, and the Bank of China and Li Auto, which were small net buys.
Shanghai, Shenzhen, and the STAR Board gained +1.16%, +2.07%, and +1.33%, respectively, on volume that increased +6.97% from last Tuesday, which is 130% of the 1-year average. 4,435 stocks advanced while 762 declined. All factors were positive as the growth factor and small caps outperformed the value factor and large caps. All sectors were positive, including Consumer Staples, which gained +3.22%, Health Care, which gained +2.91%, and Consumer Discretionary, which gained +2.47%. The top-performing subsectors were motorcycles, chemicals, and chemical fibers. Meanwhile, telecom, oil & gas, and computer hardware were among the worst-performing sectors. Northbound Stock Connect volumes were light, as foreign investors bought a healthy net $1.29 billion worth of Mainland stocks, including Kweichow Moutai, which was a large net buy, and LXJM and China Merchants Bank, which were small net buys. Meanwhile, Midea Group, Focus Media and Nari-Tech were moderate net sells. CNY and the Asia Dollar Index were higher versus the US dollar. The Treasury curve steepened. Steel gained while copper was off.
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China Market Connect March 2024: Marching in Asia
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.20 versus 7.24 Friday
- CNY per EUR 7.77 versus 7.79 Friday
- Yield on 1-Day Government Bond 1.44% versus 1.43% Friday
- Yield on 10-Year Government Bond 2.31% versus 2.30% Friday
- Yield on 10-Year China Development Bank Bond 2.40% versus 2.41% Friday
- Copper Price -1.06%
- Steel Price +1.14%
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