CLN
Key news
Asian stocks had a good day, with Japan, South Korea and Hong Kong outperforming, while India and Thailand rarely underperformed.
We have previously stated that the 3,100 level of the Shanghai Composite Index and the 1,900 level of the Shenzhen Composite Index are lines in the sand for Chinese policymakers. As the market rose, stimulus measures were announced in August when these levels were exceeded, and repeated measures have been deployed since then. Today we saw Central Huijin Investment Ltd., an arm of China’s sovereign wealth fund, a member of the proverbial “national team”, increase its stakes in four mainland-listed Chinese banks: Bank of China, which gained + 3.18%, the Agricultural Bank of China, which gained +0.55%, ICBC, which gained +2.54%, and China Construction Bank, which gained +2.68%. As we said before, the Chinese government is telling you to buy stocks. Today, they walk their talk. Yes, it was only $68 million, even though they said their positions would be increased over the next six months. Central Huijin last publicly bought shares in August 2015, after the mainland’s margin debt bubble burst. Their entry point was a short-term low, although it took time for all of these margin positions to unwind. Yet their entry point was profitable.
Banks represent a significant weighting in the continent’s indices and therefore play an outsized role in index levels. Central Huijin has stakes in more than a hundred listed stocks, including Kweichow Moutai, Wuliangye and Midea. Central Huijin purchased Kweichow Moutai in August 2015 for 180 RMB, compared to 1,786 today, according to a mainland media source. Foreign investors flocked to mainland stocks via Northbound Stock Connect with $906 million in net purchases. Hong Kong advanced on strong volumes as advancing stocks outpaced declining stocks, including the most traded stocks by value today, China Construction Bank, which gained +5.63%, Tencent , which gained +1.8%, and Meituan, which gained +1.63%. We saw that the massive purchases of Hong Kong-listed ETFs made earlier in the week were reversed via sales. We still don’t understand the big swings in ETFs listed in Hong Kong via Southbound Connect.
New signs of improving diplomatic relations between the United States and China emerged overnight, as China extended them and the United States accepted an invitation to an Asian military forum being held in Beijing. Last week I failed to mention that China appears to have helped free the American soldier who defected to North Korea (he was supposed to return to the United States to face the charges against him).
The CNY and Asian dollar index gained overnight against the US dollar, which also helped markets.
Japanese retailer Fast Retailing, known for its Uniqlo brand, announced that fiscal year revenue from Greater China increased +15.2% year-on-year to 620.2 billion yen and its operating profit increased 25% year-on-year to 104.3 billion yen. The company said: “While sales in the region struggled in the first half due to COVID-19, performance recovered more than expected in the second half, resulting in a record performance for the whole year. » The company had a great year, with Japan, Europe, the United States and other regions reporting strong results.
The Hang Seng and Hang Seng Tech indices gained +1.93% and +1.68% respectively, on volume up +13.88% compared to yesterday, or 89% of the one-year average. 371 stocks rose, while 116 fell. Main Board short turnover increased by +23.35% from yesterday, or 92% of the year-over-year average, as 17% of the volume was short turnover (remember Please note that Hong Kong short turnover includes ETF short volume, which is determined by market makers’ ETF coverage). Growth and value factors were mixed, with large caps outperforming small caps. The leading sectors were Finance +4.04%, Healthcare +3.15% and Industrials +2.51%, while Utilities -0.31% and Real Estate -0.02%. The top subsectors were security surveillance, counterterrorism, and medical cosmetology, while property management, power companies, and film/television were the worst. Southbound Stock Connect volumes were moderate/high as the Wuxi Bio and Hong Kong exchanges were small net purchases, while the Hong Kong Tracker ETF saw a large net outflow, and the ICBC and Hang ETF Seng H Share were moderate/high net sales.
Shanghai, Shenzhen and the STAR Board gained +0.94%, +0.72% and +0.73% respectively, on a volume down -0.86% compared to yesterday, or 95% of the average over a year. 3,123 stocks advanced, while 1,287 stocks declined. Values outperformed growth, while small caps outperformed large caps. The leading sectors were materials +1.72%, discretionary goods +1.63% and financial services +1.48%, while communication -0.42% and energy -0.18%. Top subsectors included lithium mining, batteries and electric vehicles, while optical modules, photolithography machines and gold were the worst. Northbound Stock Connect volumes were moderate/high as foreign investors purchased over $906 million worth of mainland BYD shares, a moderate/large net purchase, China Merchants Bank, Gangfeng Lithium and Kweichow Moutai, a small net purchase , while Sokon, Changan Auto and CTG Duty Small net sales were free.
Last night’s performance
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Last night’s exchange rates, prices and yields
- CNY per USD 7.30 compared to 7.30 yesterday
- CNY per EUR 7.74 against 7.74 yesterday
- Yield on 10-year government bonds 2.69% compared to 2.69% yesterday
- Yield on 10-year Chinese Development Bank bonds 2.76% compared to 2.76% yesterday
- Copper price +0.11%