Key News
Asian equities were mixed overnight on light news and volumes as Taiwan and South Korea outperformed as investors reloaded on crowded countries and stocks after the recent bout of turbulence while Japan was on holiday for Mountain Day and Thailand for the Queen Mother’s birthday.
It was a light news night as investors forgot about the State Council’s press conference on increasing service consumption, which we wrote about at length on Friday. The light market action was not too surprising not only because of the summer but also because July economic data will be released on Wednesday and financial results from heavyweights Tencent and Meituan will also come out on Wednesday after the close in Hong Kong. Then, Alibaba will report on Thursday after the close in Hong Kong.
This morning, online real estate company KE Holdings beat analyst estimates on the big three: revenue, which increased +9.9% year-over-year (YoY) to RMB 23.4B, adjusted net income +13.9% YoY to RMB 2.693B and adjusted EPS. Having repurchased 2.75% of shares outstanding for $408 million by year’s end, the company’s board increased the buyback to $3 billion from $2 billion.
Health Care outperformed on reports of COVID cases picking up in China, though no one believes lockdowns will return.
Hong Kong had a choppy session as light volumes resulted in intra-day volatility, led by Hong Kong’s most heavily traded stocks: Tencent, which gained +1.35%, Alibaba, which gained +0.77%, Meituan, which fell -2.07%, China Mobile, which fell -0.56%, and ICBC, which gained +2.05%.
Bilibili fell -6.88% on reports of slowing volume for their Olympic coverage, though we might not know until financial results are released on August 22nd.
Mainland investors bought a healthy net $557 million worth of Hong Kong-listed stocks and ETFs via Southbound Stock Connect as the Hong Kong Tracker ETF saw big net inflow. This led to a jump in short selling driven by market makers hedging the sale of ETF shares.
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Mainland China had a lackluster day on the lightest volumes in a year, as both Shanghai and Shenzhen continue to sit at support levels. Most Mailand financial news was about the PBOC trying to cool the Treasury bond rally, as the Shanghai Composite now yields 2.96% versus a 10-year Treasury’s 2.25%.
The National Team appeared to take the day off based on their favorite ETFs’ volumes.
Real estate hit with profit taking despite reports of Guangdong Province looking to implement real estate policy support.
Bloomberg’s technical analyst and senior equity strategist wrote a worthwhile piece on combining technical and fundamental analysis. China internet companies are in a “bullish engulfing pattern” against the backdrop of above-average short interest, according to the piece. Bloomberg has coined the term “China Tech 8” to represent Tencent, Alibaba, Meituan, Pinduoduo, JD.com, Baidu, and Xiaomi. These companies’ growth is “expected to accelerate into the second half” unlike the broader MSCI China Index, which they anticipate will see “profit declines”. This week should be fun to watch!
The Hang Seng and Hang Seng Tech indexes diverged to close +0.13% and +0.20%, respectively, on volume that decreased -20% from Friday, which is 69% of the 1-year average. 197 stocks advanced while 272 declined. Large caps outperformed small caps while the value and growth factors were both lower. Main Board short turnover decreased -0.58% from Friday, which is 80% of the 1-year average, as 20% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The top-performing sectors were Financials and Health Care, which were both up +1.12% and Communication Services, which gained +1.04%. Meanwhile, Real Estate fell -1.19%, Consumer Staples, which fell -1.11%, and Consumer Discretionary, which fell -0.19%. The top-performing subsectors were banks, pharmaceuticals, and business & professional services. Meanwhile media, consumer services, and real estate services were among the worst-performing. Southbound Stock Connect volumes were light as Mainland investors bought a net $557 million worth of Hong Kong-listed stocks and ETFs, including the Hong Kong Tracker ETF, which was a large net buy, Tencent, which was a moderate net buy, and Meituan, which was a small net buy. Meanwhile, China Unicom was a small net sell.
The Shanghai, Shenzhen, and the STAR Board were diverged to close -0.14%, -0.47%, and +0.25%, respectively, on volume that decreased -12% from Friday, which is 61% of the 1-year average. 1,414 stocks advanced while 3,499 declined. Large caps outperformed small caps while the value and growth factors were both lower. Health Care and Energy were the only positive sectors, gaining +1.21% and +0.90%, respectively, while Real Estate fell -2.68%, Utilities fell -0.67%, and Industrials fell -0.53%, to make up the worst performers. The top-performing subsectors were biotech, energy equipment, and environmental protection. Meanwhile, education, real estate services, and catering & tourism were among the worst-performing. Northbound Stock Connect volumes were light as foreign investors were small net sellers of Mainland stocks, including Cypic, East Money, and HR, which were small net buys while CATL was a moderate net sell, and Foxconn and Kweichow Moutai were small net sells.
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Last Night's Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.18 versus 7.17 yesterday
- CNY per EUR 7.85 versus 7.83 yesterday
- Yield on 10-Year Government Bond 2.25% versus 2.20% yesterday
- Yield on 10-Year China Development Bank Bond 2.31% versus 2.26% yesterday
- Copper Price: 0.36%
- Steel Price: -1.52%
