Asian equities were largely higher with Japan underperforming as investors come to grips with the Omicron outbreak and Fed Chair Powell’s taper talk.
Hong Kong internet stocks were mixed following yesterday’s Bloomberg article that China will ban the VIE structure. The CSRC, China’s SEC, said succinctly in response that “the news is not true.” Such is the state of markets that a completely false article still moves markets. VIEs exist not only in the US market but also in Hong Kong and China’s Mainland market.
Alibaba continues to take the brunt of the pain trade as the HK share class was off -2.47% overnight which isn’t as bad as the US listing’s -3.95% yesterday. I suspect many investors are taking losses in Alibaba to offset capital gains in US tech stocks in advance of potentially higher capital gains tax rates next year.
Tencent and Meituan were both up +1.02% and +1.31% with both seeing small net buying from Mainland investors via Southbound Stock Connect. Today’s market action had a value bias from a sector perspective in both Hong Kong and China as growth sectors such as healthcare and technology were both off. The STAR Board was off -1.85% on no news.
Staples had a strong day after rules around e-cigarettes were released sending Smoore International +14.68% in Hong Kong. The clean energy ecosystem had a strong day that was led by rare earth and EVs following several companies posting strong November sales and the auto industry providing positive guidance on November sales.
NetEase HK had a strong day +1.2% following the IPO of spin-off its music streaming arm Cloud Village. Weibo will be relisting in Hong Kong shortly after raising $385mm from investors. Foreign investors were net buyers of Mainland stocks via Northbound Stock Connect purchasing $473mm of Mainland stocks today.
Despite the constant drumbeat of negative media coverage and its effect on Chinese equities listed in Hong Kong and the US, it is worth noting how stable China’s currency has been versus the US $. Historically the foreign listed stocks have benefited from a strong currency though that is clearly not occurring.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.38 versus 6.37 yesterday
- CNY/EUR 7.23 versus 7.22 yesterday
- Yield on 10-Year Government Bond 2.86% versus 2.84% yesterday
- Yield on 10-Year China Development Bank Bond 3.13% versus 3.12% yesterday
- Copper Price -0.59% overnight