Asian equities were mixed overnight as Japan, China, and Southeast Asia outperformed while Taiwan, Korea, and India were off. It was another day of Mainland China outperforming overnight as Shanghai gained +0.4%, Shenzhen gained +0.6%, and the STAR Board gained +0.7%. Meanwhile, the Hang Seng fell -0.17% and the Hang Seng Tech Index fell -0.22%.
Mainland outperformance has become standard operating procedure as Mainland investors cheered Friday’s Central Economic Working Conference Group’s (CEWC) implied promise of proactive stimulus measures while foreign investors were bombarded with another weekend full of negative media coverage.
On Saturday, Han Wenxiu, a member of the Central Committee for Financial and Economic Affairs, spoke about the CEWC release, stating that “the government should be cautious about unveiling policies that could trigger contraction.” There has been chatter that this statement is a veiled reference to dialing back internet regulation.
Hong Kong-listed internet stocks were mixed though Tencent gained +0.69% and Meituan gained +2.06% as both stocks saw strong buying from Mainland investors via Southbound Stock Connect overnight. It is feasible that domestic Chinese investors were more attuned to Saturday’s statement, leading to the Connect flow. For Tencent, it was the largest inflow day since October 11th. Alibaba HK was off a touch despite their investor day taking place later this week, during which I anticipate a strong message from management.
Healthcare and real estate saw steeper declines in Hong Kong than the sectors saw on the Mainland. Meanwhile, the clean energy ecosystem had a strong day in both markets though its performance was especially strong on the Mainland due to the CEWC’s highlighting of the space.
Liquor stocks had a strong day as Kweichow Moutai gained +1.35% and Wuliangye Yibin gained +1.21% following the former announcing it would be rolling out new products.
Foreign investors’ insatiable appetite for Mainland Chinese stocks continued with a net buy of $843 million overnight.
The lack of media coverage on the CEWC is incredible though I am not surprised. The Renminbi’s strength versus the US dollar highlights how wrong the media’s narrative has been. On December 31, 2020, CNY was at 6.52 versus today’s close of 6.37. On September 3, 2019, CNY was at 7.17.
Evergrande’s April 2022 bonds were flat overnight at $23.46 while the June 2025 bonds were up +0.03 to $20.81.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.37 versus 6.37 Friday
- CNY/EUR 7.19 versus 7.20 Friday
- Yield on 1-Day Government Bond 1.70% versus 1.63% Friday
- Yield on 10-Year Government Bond 2.86% versus 2.84% Friday
- Yield on 10-Year China Development Bank Bond 3.10% versus 3.09% Friday
- Copper Price +0.01% overnight