Asian stocks had a mixed day with India, Singapore, Malaysia and Thailand all posting positive returns. Japan, China, Hong Kong and South Korea are closed for its presidential elections today. South Asia may have benefited from optimism over Ukraine’s peace talks, which lift European markets. The Hang Seng Index is down -0.67%, hitting a 52-week low in volume which is up +8.48% from yesterday, which is 124% from the first year average. The Hang Seng was off -3.19% on the day, but managed to rally in a late session to pare the loss. Internet stocks were diverging to the upside with Hang Seng Tech up +0.26% led by Tencent up +0.42%, Meituan up +2.06%, JD.com HK, up +2%, and Kuaishou, which pulled back James Bond and gained +0.07%. With that said, Alibaba HK stock fell -0.67%.
Ant’s IPO will not happen in 2022 despite the “news” coming from a somewhat dubious source. Tencent, Meituan and Kuaishou were net buys from mainland investors via Southbound Stock Connect. The CSRC has approved a Chinese technology company for an IPO in the United States in a small sign of a potential regulatory thaw.
Healthcare and real estate were among the weakest sectors in both Hong Kong and mainland China. The healthcare weakness was prompted by the CIA chief’s mention of a ban on US investments in Chinese tech companies, which local investors interpreted as focusing on healthcare after Wuxi was added to an unverified US list. The addition of the company is a joke as the company cannot be verified until travel to China resumes. Investors continue to worry about China’s real estate sector as bond spreads widen in the risk-free macro environment.
Li Ning, the Hong Kong-listed apparel manufacturer (2,331 Hong Kong), fell 12.16% to close at -9.36% after Norway’s sovereign wealth fund Norges Bank said it would sell its stake out of humanitarian concerns.
The market ignored the hidden monetary stimulus announcement as the People’s Bank of China transferred 1 trillion RMB to the Ministry of Finance to support small private businesses. We also had China’s CPI for February meeting expectations at 0.9% while PPI fell from 9.1% in January to 8.8%, although it was slightly above expectations of 8.6%.
In addition to the horrific human toll of the invasion, inflation should be an important economic stimulus for a peaceful solution, driven by Western policy and Putin’s appeasement in Western media. It also provides a little taste of what “classroom” would look like.
Shanghai, Shenzhen and the STAR Board closed lower for the fifth day, falling -1.13%, -1.1%, and -0.65% respectively, although the indices closed above their intraday lows at -4.43%, and -5.2%, and -3.52%, respectively. Local investors appear to have been shaken by the risk aversion environment. There was a flurry of announced buyouts from mainland companies overnight. Liquor giant Kweichow Moutai (600519) gained +1.48% after reporting strong January/February results for the first time following recent inventory weakness. Electric vehicle battery maker CATL (300750 CH) rebounded 3.6% after the recent weakness on concerns about higher prices for battery inputs. Foreign investors trimmed their mainland stocks to $1.731 billion via Northbound Stock Connect. Too much to buy a dip! Chinese Treasuries eased some touches while the currency rose very slightly against the US dollar and copper fell -1.05%.
The Financial Times published an interesting article about the approximate performance of prestigious hedge funds in 2021 and up to 2022 due to poor technology. The article did not specifically mention weak Chinese technology, although it was likely a factor in the performance of many hedge funds.
A local newspaper in Hong Kong published an article on the CEO of institutional broker Citic stating that Southbound Stock Connect standards must be relaxed in order to allow mainland investors access to more Hong Kong stocks. I agree! The CEO is a member of the HKeX board of directors, so the article was, admittedly, a bit self-serving and a bit biased.
Currency exchange rates, rates, and returns
- CNY/USD 6.32 vs. 6.32 yesterday
- CNY / EUR 6.93 vs. 6.89 yesterday
- China’s 10-year government bond yield is 2.84% vs. 2.83% yesterday
- China Development Bank’s 10-year bond yield is 3.12% vs. 3.10% yesterday
- Copper price -1.05% overnight