Asian equities were mixed but mostly lower overnight as Mainland China mirrored choppy trading in the US yesterday. Value outperformed in China as growth stocks, including the largest China internet names continued to come under pressure overnight following miniscule fines over the weekend. The re-nomination of Powell was a non-event for Asian markets. Bond yields were stable in China despite their rise in the US. Shanghai, Shenzhen, and the STAR Board closed +0.20%, -0.21%, and -0.25%, respectively. Meanwhile, the Hang Seng fell -1.20% and the Hang Seng Tech Index lagged, falling -1.36% overnight.
Short video platform and TikTok rival Kuaishou Technology reported Q3 earnings overnight. The company grew overall revenue by +33% year-over-year in Q3 to RMB 7.7 billion. The company’s net loss was less than expected as its sales and marketing expense ratio decreased to 54% from 59% in the second quarter. The company also increased monthly active users (MAUs) by +19% year-over-year.
Real estate stocks rebounded in Hong Kong (+1.30%) and on the Mainland (+1.05%) as the sector appears to be normalizing following the regulatory overhaul. Evergrande’s restructuring is still underway, but it appears that investors are more comfortable with real estate prices, which are no longer in freefall. China’s “Lehman moment,” as the Western media liked to say, appears to have been more fleeting than originally expected.
Value outperformed growth once again as materials gained in Hong Kong following the sector’s strong performance on the Mainland yesterday.
Alibaba HK fell -2.99%, Tencent HK fell -2.67%, and Baidu HK fell -2.36% overnight on fines over the weekend. The State Administration of Market Regulation (SAMR) fined each company $78,000 per deal that was seen as in violation of the new antitrust laws, retroactively. To put that in context, Alibaba had revenues of $31 billion in the third quarter alone. $78,000 does not even register! Not surprisingly, many analysts are saying that the worst has already been priced in. Investors were also reacting to an article in the People’s Daily saying that China should strengthen tax enforcement for internet platforms.
Trading on the new Beijing Stock Exchange (BSE) began on November 15th and several listings are up nearly six-fold. In a recent meeting with local government officials to discuss the economy, Premier Li Keqiang urged officials to support small businesses. China’s support for small businesses is constantly questioned in the Western media. However, the establishment of the Beijing Stock Exchange is supportive of small business development as it allows small companies to freely list, even if they are not in the technology sector. Previously, the companies listed in Beijing could only trade over-the-counter (OTC).
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.39 versus 6.39 yesterday
- CNY/EUR 7.19 versus 7.18 yesterday
- Yield on 1-Day Government Bond 1.70% versus 1.70% yesterday
- Yield on 10-Year Government Bond 2.89% versus 2.89% yesterday
- Yield on 10-Year China Development Bank Bond 3.17% versus 3/17% yesterday
- Copper Price +0.46% today