Hong Kong Internet Stocks Bounce As Alibaba’s Singles Day Kicks Off

Key News

Asian equities were mixed overnight as the Asia dollar index made another 52-week low.

Please see our take on yesterday’s market volatility using the below link: KraneShares Market Volatility Commentary – KraneShares.

Hong Kong did better than a quick glance would reveal as the Hang Seng Index declined -0.1% while the Hang Seng Tech gained +2.96% led higher by internet stocks. Hong Kong’s most heavily traded by value were Tencent +0.1%, Meituan +2.4%, and Alibaba HK +3.16% with JD.com HK +5.01% and Kuiashou +4.58% making the top ten. Early pre-sale commitments for Alibaba’s Singles Day event appear promising as you can even buy a Tesla with a 24-month interest loan during the event. Financials weighed on Hong Kong with AIA -2.68%, HK Exchanges -1.84%, and HSBC down -5.11% after it reported disappointing results after the lunch break. Ping An Insurance gained +0.92% and bucked the trend after good financial results.

A well-respected strategist from a major investment bank called the decline in Chinese internet stocks “disconnected from the fundamentals”. The severity of yesterday’s move is a significant head-scratcher to me. Hong Kong shorts were relatively quiet today as only 15% of total Main Board turnover was short as the market appears due for a rebound. Mainland investors bought a healthy $832 million of Mainland stocks today with Tencent seeing another strong net buy. The Mainland market was off slightly though the STAR Board managed a gain of +0.19%. Mainland investors, as opposed to foreign investors/offshore investors, may have noticed that Li Qiang, likely the new Premier though we won’t know until March, was responsible for the launch of STAR Board, Tesla’s Shanghai factory, and has been a strong supporter of the technology sector. I’ll send a link to a good overview on Twitter (@ahern_brendan).

Restaurants had a good day after the State Council support for small businesses. Six government agencies released a statement on attracting foreign capital to manufacturing as both Germany and France’s leaders will visit China next month. The PBOC made several technical adjustments that support inflows into the renminbi (CNY) as CNY fell -0.63% versus the US dollar to 7.31. Healthcare was the worst performer in China despite reports that an inhalable vaccine will be approved as 205 new covid cases were reported across 31 provinces. Foreign investors bought $389 million of Mainland stocks today after yesterday’s large sell off.

The Hang Seng and Hang Seng Tech Index diverged -0.10% and +2.96% on volume -11.32% from yesterday, which is 116% of the 1-year average. 253 stocks advanced while 234 declined. Main Board short turnover declined -23.55% which is 102% of the 1-year average as 15% of turnover was short. Growth factors outperformed value factors as large caps outpaced small caps. All sectors were positive except real estate which fell -1.51%, with tech gaining +3.49%, discretionary up +2.76%, and industrials finishing higher +2.35%. Top sub-sectors were tech hardware, retailers, and semis while property developers, food, and insurance were among the worst. Southbound Stock Connect volumes were elevated as Mainland investors bought $832 million of Hong Kong stocks with Tencent seeing another strong net buy, BYD, Wuxi Biologics, Li Auto, Meituan, and Kuaishou moderate/small net buys.

Shanghai, Shenzhen, and STAR Board were mixed -0.04%, -0.46%, and +0.19% on volume -8.82% from yesterday which is 82% of the 1-year average. 1,978 stocks advanced while 2,553 stocks declined. Growth and value factors were mixed as large caps outpaced small caps. The only positive sectors were industrials +0.36% and discretionary +0.23%, while healthcare fell -2.51%, communication down -2.49%, and real estate closing lower -1.57%. Top sub-sector included airports, auto parts, and restaurants while education, biotech, and petrochemical were among the worst. Northbound Stock Connect volumes were moderate/high as foreign investors bought $389 million of Mainland stocks today. Chinese Treasury bonds were flat, CNY was off -0.63% to 7.30, and copper gained +0.35%.

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.31 versus 7.26 yesterday
• CNY per EUR 7.21 versus 7.14 yesterday
• Yield on 10-Year Government Bond 2.72% versus 2.72% yesterday
• Yield on 10-Year China Development Bank Bond 2.87% versus 2.86% yesterday
• Copper Price +0.35% overnight