Key news
Asian stocks had a good day following weak US CPI yesterday, which sent the US dollar lower and risky assets higher as Hong Kong outperformed the region.
Today we see how interconnected the world we live in is. Hong Kong and Mainland China grew on strong volumes, with Hong Kong posting 124% of its year-on-year average volumes and Mainland China posting 113% of its year-on-year average volumes and strong scale, with the Hang Seng closing at -above 18,000 for the first time. time since October 12th. The most traded stocks in Hong Kong by value were Tencent +4.81%, Alibaba HK +5.05% and Meituan +4.62%.
Other catalysts from mainland China and Hong Kong include yesterday’s announcement of RMB 1 trillion for “urban village restoration and subsidized housing projects” and the PBOC’s injection of largest amount of liquidity in the financial system since December 2016 via its medium-term lending facility. Widespread rumors claim that the move comes ahead of a reduction in bank reserve requirements, which would free up bank balance sheets for lending.
October economic data was mixed but better than expected as retail sales were +7.6% year-on-year (y-o-y) versus expectations of 7.0% and 5.5% in September , and industrial production of +4.1% year-on-year against expectations of 4.1% and 4.5% in September. In retail sales data, online retail sales increased 11.2% year to date, as 26.7% of total retail sales were consumer goods sold online. Automobiles stood out for their strong sales. Real estate data was as expected.
There is also the meeting between President Biden and Xi that will include Treasury Secretary Yellen at 2 p.m. EST here in San Francisco, with a press conference at 7 p.m. EST. Climate change appears to be an area of mutual interest, although restricting chemical inputs for fentanyl, approving the Boeing 737MAX in China, and purchasing agricultural products from China seem feasible.
All this happened Before Tencent and JD.com reported third-quarter financial results after the Hong Kong close that beat analysts’ expectations. Tencent’s revenue increased +10% YoY to RMB154.6 billion ($21.5 billion) versus expectations of RMB154.8 billion, adjusted net profit increased +39% at RMB 44.9 billion ($6.3 billion) versus expectations of RMB 39.98 billion and adjusted EPS was RMB 4.65. compared to expectations of RMB 4.13. Free cash flow increased +85% year-over-year to RMB51.1 billion as the company purchased 47.5 million shares in the third quarter.
JD.com’s revenue increased +1.7% year-on-year to RMB 247.7 ($34 billion) versus expectations of RMB 246 billion, adjusted net profit increased slightly to 10 .6 billion RMB ($1.5 billion) compared to expectations of 9.24 billion RMB and adjusted EPS was 6.70 RMB ($0.92). ) against expectations of 5.87 RMB. JD also noted a sharp increase in free cash flow, bringing in RMB39.4 billion ($5.4 billion) from RMB6.27 billion. Both companies demonstrated the prowess of their management teams in a challenging environment.
The only negative today was significant net selling of Hong Kong Tracker ETF and Tencent from mainland investors via Southbound Stock Connect. Their behavior is difficult to explain, even if the sale of Tencent seems ill-advised. Foreign investors bought $500 million worth of mainland growth stocks via Northbound Stock Connect. All this good news comes as allocations to China are at historic lows. Alibaba reports tomorrow after the Hong Kong close.
MSCI has released its pro forma for its month-end semi-annual index review (SAIR). Nothing major to report as the percentage of emerging markets in Asia is now 79%, with China at 29.5%/765 stocks, India at 16.3%/131 stocks, Taiwan at 15.1 %/90 shares and Korea at 12.4%/103 shares. The United States represents 61.4% of the global all-country index.
The Hang Seng and the Hang Seng Tech gained +3.92% and +4.41% in volume +75.76% compared to yesterday, or 123% of the 1-year average. 453 stocks rose, while 48 fell. The Main Board’s short turnover increased by +81.94% from yesterday, or 135% of the year-over-year average, as 18% of the turnover consisted of short turnover (remember that Hong Kong short-term turnover includes ETF short volume, which is determined by market makers’ ETFs. coverage). The growth factor and small caps outperformed the value factor and large caps. All sectors were up, led by technology +4.95%, real estate +4.83% and communication +4.42%. All sub-sectors were positive, with retail, technical hardware and software performing the best. Southbound Stock Connect volumes were strong as mainland investors sold $1.222 billion worth of Hong Kong stocks and ETFs, with Kuiashou making a small net purchase while the Hong Kong Tracker ETF and Tencent achieved very significant net sales.
Shanghai, Shenzhen and STAR closed +0.55%, +0.68% and -0.24% on volume +10.6% from yesterday, or 113% of the one-year average. 3,148 stocks rose, while 1,607 fell. The growth factor and large caps outperformed the value factor and small caps. All sectors were positive, led by Discretionary +2.15%, Materials +2% and Industrials +1.5%. The top subsectors were motorcycles, auto parts and power generation equipment, while internet, cultural media and aerospace/military were the worst. Northbound Stock Connect volumes were strong as foreign investors bought $500 million worth of mainland stocks, with Gangfeng Lithium, Longi Green Tech, Kweichow Moutai, BYD, China Merchants Bank, Cypc, Tiangqi Lithium and Mindray all recorded moderate net purchases. The CNY and Asian Dollar Index had a very strong day against the US Dollar. The Treasury curve steepened as copper gained and steel retreated.
Last night’s performance
Last night’s exchange rates, prices and returns
- CNY per USD 7.24 compared to 7.29 yesterday
- CNY per EUR 7.86 against 7.82 yesterday
- Yield on 10-year government bonds 2.66% compared to 2.65% yesterday
- Yield on 10-year Chinese Development Bank bonds 2.73% compared to 2.73% yesterday
- Copper price +0.27% overnight
- Steel prices -0.41% overnight