Asian equities were largely higher overnight though Japan, Taiwan, and Australia were down.
The key news was President Xi’s two-hour Sunday speech, which kicked off the week-long Party Congress. Check out our own Dr. Xiaolin Chen’s analysis of the opening speech here.
The key takeaway for investors was the emphasis on economic development. The seeds of policy change may have been planted as we’ve seen a number of pro-economic policy tweaks in the past few weeks. Yes, the speech included the success of zero covid in curtailing deaths, though we’ve seen a clear change since the Shanghai lockdown.
Both Hong Kong and Mainland China opened lower but grinded higher to close in the green. Internet names were off despite e-commerce companies being a beneficiary of pro-consumption policies. However, they were not down nearly as much as their US-listed counterparts were on Friday. I am somewhat surprised that Xi’s pro-consumption speech did not give the space a lift.
Pro-fertility comments helped lift healthcare stocks in addition to last week’s equipment-buying policies.
Mainland investors bought a healthy net $706 million worth of Hong Kong stocks as Tencent saw another strong net buy, Meituan was a moderate buy, while BYD and Li Auto were small net buys. Hong Kong shorts increased their bets overnight as 20% of Main Board turnover was short. CNY was off slightly versus the US dollar despite the Asia dollar index’s gain versus the US dollar. Onshore China outperformed offshore China as mainland investors appeared to notice the pro-economic element of Xi’s speech. The 1-year medium-term lending facility rate was left unchanged at 2.75% as September economic data will be delayed until after the Party Congress.
The Hang Seng and Hang Seng Tech Index diverged to close +0.15% and -0.2%, respectively, on volume that decreased -6.06% from Friday, which is 77% of the 1-year average. 281 stocks advanced, while 195 stocks declined. Main Board short sale turnover increased +4.56% from Friday, which is 91% of the 1-year average, as 20% of the Main Board turnover was short. Value and growth factors were both off, as small caps outperformed large caps. The top performing sectors were financials, which gained +0.82%, technology, which gained +0.82%, and industrials, which gained +0.8%. Meanwhile, communications fell -1.21%, utilities fell -0.61%, and real estate fell -0.43%. The top-performing subsectors were technology hardware, healthcare equipment makers, and biotech. Meanwhile, auto parts, software, and semiconductors were among the worst. Southbound Stock Connect volumes were moderate as Mainland investors bought a healthy net $706 million worth of Hong Kong stocks.
Shanghai, Shenzhen, and the STAR Board gained +0.42%, +0.68%, and +0.87%, respectively, on volume that was down -6.6% from Friday, which is 81% of the 1-year average. 3,627 stocks advanced, while 930 stocks declined. The top performing sectors were tech, which gained +1.01%, communication services, which gained +0.53%, and healthcare, which gained +0.43%, while staples fell -0.97%, real estate fell -0.95%, and utilities gained +0.72%. The top-performing subsectors were education stocks, shippers, and military stocks. Meanwhile, gas, coal, and liquor were among the worst. Northbound Stock Connect volumes were light/moderate as foreign investors sold a net $618 million worth of Mainland stocks. Treasury bonds were off slightly while CNY was flat, and copper gained +0.41%.
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.19 versus 7.19 Friday
- CNY per EUR 7.04 versus 6.01 Friday
- Yield on 1-Day Government Bond 1.21% versus 1.20% Friday
- Yield on 10-Year Government Bond 2.70% versus 2.70% Friday
- Yield on 10-Year China Development Bank Bond 2.87% versus 2.87% Friday
- Copper Price +0.41% overnight