Asian equities had a rough night following US equity weakness yesterday with an emphasis on tech/growth stocks going into tomorrow’s US payrolls and unemployment release. Investors are grappling with Fed minutes, which indicated the Fed is going to back up their tough inflation talk with higher rates.
I am happy to report that the Hang Seng was one of the few equity markets up overnight, gaining +0.72% led by internet stocks as the Hang Seng Tech Index gained +1.37%.
Did you notice Alibaba’s volume yesterday in the US? I did along with several of our institutional brokers. Alibaba’s US ADR traded 36 million shares yesterday versus its 1-year average of 20 million shares as the value traded was $3.74 billion. That is the Charlie Munger effect I suppose. However, Hong Kong’s volume was light, down -13% from yesterday, which is only 81% of the 1-year average. We would prefer to see strong volume on an up day.
The Hang Seng Index is sitting on the 23,000 level, which should be a level of support. Hong Kong internet names had a strong day while the clean technology ecosystem had another tough day. Mainland investors bought both Tencent and Meituan via Southbound Stock Connect.
December’s Caixin China Services PMI came in at 53 versus expectations of 51.7 and November’s 52.1 though it doesn’t appear to be a market-moving release. Premier Li’s speech on reducing taxes did garner attention as he stated taxes should be cut to support businesses and the economy. It feels like economic policy support is only going to increase.
Infrastructure stocks were a winner in both Hong Kong and China on chatter that it is viewed as a way to support the economy as cement stocks had a strong day. There is also increased chatter on the digital renminbi pilot program expanding nationally. We anticipate implementation in advance of the Winter Olympics. The nattering nabobs of negativity will use the occasion to talk about the US dollar demise but this is nonsense.
The Mainland market was off though markets came off their intra-day lows as Shanghai closed -0.25%, Shenzhen -0.1%, and STAR Board -0.93%. Volume was off -12.42% from yesterday which is just above the 1-year average. Materials was the only sector in the green +0.85% though in China red means up and green means down. Advancers did outpace decliners 2 to 1 in a positive sign. Clean tech and liquor stocks were off as the Mainland’s most heavily traded stocks, Kweichow Moutai -2.06%, CATL -1.1%, and broker East Money -3.17%, are also big foreign holdings.
Foreign investors sold -$1.04B of Mainland stocks which is the first sell day since December 22nd. Chinese Treasury bonds were off a touch along with the currency versus the US dollar and copper.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.38 versus 6.37 yesterday
- CNY/EUR 7.22 versus 7.21 yesterday
- Yield on 10-Year Government Bond 2.82% versus 2.80% yesterday
- Yield on 10-Year China Development Bank Bond 3.09% versus 3.08% yesterday
- Copper Price -0.51%