• March 20, 2023

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Key News

Asian equities had a rough night except for China and Indonesia, which both managed small gains. Hong Kong internet stocks were off following Tencent’s modest financial results and outlook yesterday. Shanghai’s lockdown is easing but won’t officially end until the end of the month, weighing on economic activity and earnings releases in Q2. This shouldn’t be a surprise to anybody. The internet names have gone through a 2000-like drawdown as the stocks already reflect a lot of bad news. Remember Hong Kong/US ADRs, which I call the offshore China market, reflect foreign investor sentiment toward China. In contrast, the onshore market, comprised of Shanghai & Shenzhen exchanges, reflects Mainland Chinese investor sentiment.

We have the WSJ article on “China Insists Party Elites Shed Overseas Assets….” this morning. No clue if true/not true though Dr. Kissinger’s comments in yesterday’s note reflect China’s significant economic ties to the West. I can contrast the Western media narrative with Mainland financial media’s focus.

Premier Li’s comments on strengthening the economy were the top headline as policymakers are very attuned to the economy and its challenges. We also had the SOE regulator (State-Owned Assets Supervision and Administration Commission) recommend companies “increase the injection of high-quality assets into listed companies,” i.e., dividends and buybacks. Europe’s green energy push is benefiting China-based solar and wind companies, which had a strong day. One of the top China financial headlines was “Why did US stocks plummet again?” which dispels the myth that folks in China don’t know what’s happening around the world. Real estate was a top performer in China and Hong Kong as the mortgage rate could be cut on Friday. Some foreign investors have noticed this as Northbound Stock Connect saw +$759mm of net buying overnight.

The Hang Seng and Hang Seng Tech opened lower and stayed there, closing -2.54% and -3.98% on volume +7.49% from yesterday, 84% of the 1-year average. There were 113 advancers versus 356 decliners. Hong Kong short sale volume increased by 9.4%, which is 104% of the 1-year average. Value factors outperformed but not by a significant margin versus growth factors. Small caps outperformed large caps. Real estate was the only sector positive +0.19%, while communication -5.8%, discretionary -4.91%, and tech -2.83%. Mainland investors were net buyers of Hong Kong via Southbound Stock Connect, with both Tencent and Meituan seeing net buying.

Shanghai, Shenzhen, and STAR Board gained +0.36%, +0.58%, and +2.2% on volume +4.61% from yesterday, 74% of the 1-year average. 2,190 stocks advanced while 2,125 stocks declined. Growth factors outperformed value factors, while small caps outperformed large caps. Real estate was the top-performing sector +2.22%, utilities +1.57%, tech +1.54% and industrials +1.09% while staples -0.59%, financials -0.56% and communication -0.3%. The cleantech ecosystem was an outperformer, with solar and wind names outperforming. Foreign investors bought +$759mm of Mainland stocks today via Northbound Stock Connect. Bonds were flat, CNY was off versus the US $, and copper off a touch.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.75 versus 6.74 yesterday
  • CNY/EUR 7.10 versus 7.09 yesterday
  • Yield on 10-Year Government Bond 2.78% versus 2.78% yesterday
  • Yield on 10-Year China Development Bank Bond 2.99% versus 2.99% yesterday
  • Copper Price -0.54% overnight

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