Hot Pot Chain Haidilao Issues Hot Forecast

Key News

Asian equities were lower overnight, though the Asia Dollar Index was flat as CNY gained +0.13% versus the US dollar, closing at 6.95 CNY per USD.

Hong Kong stocks didn’t fall nearly as far as their US-listed counterparts did on Friday as Tencent was flat, compared to a decline of -2.13% in the US (over-the-counter) on Friday, Alibaba fell -0.72%, compared to a fall of -5.48% in the US, Baidu gained +1.98%, compared to a fall of-3.94% in the US, JD.com fell -0.22%, compared to a fall of -3.97% in the US, and NetEase gained +0.65%, compared to -5.13% in the US. Hong Kong’s lack of pessimism should lead to a bounce for US-listed Chinese stock this morning.

Hot pot chain Haidilao gained +13.71% on the release of a positive profit alert. The company expects a revenue decline of no more than 15.8% in 2022 from 2021’s level, though a net of profit of no less than RMB 1.3 billion versus a 2021 loss of RMB -4.2 billion. The company noted that “…the operating performance of our restaurants in Mainland China and other regions has markedly improved on a month-on-month basis since June 2022 as a result of the east of COVID-10 pandemic…”. This is potentially a great read on China’s consumer coming back online. However, a solid management team clearly helps as well!

Mainland investors bought the dip again to the tune of a healthy $770 million worth of net Hong Kong stock buying today via Southbound Stock Connect.

Li Auto gained +2.1% in advance of financial results, which the company reported after the market’s close, as revenue and forecast vehicle deliveries beat estimates. Fellow EV maker Xpeng HK gained +0.29% after Friday’s announcement that it will be added to the Hang Seng China Enterprises Index (HSCEI).

The Hang Seng Index failed to hold onto the 20,000 level, though traded in a narrow range overnight. Main Board short sale volume increased to 19% of total turnover, as HSBC saw 40% of turnover was short turnover, up from Friday’s 25%.

Mainland China was off slightly as the National People’s Congress (NPC) kicks off this weekend with the CPPCC starting this week. The “Dual Sessions” will confirm China’s leadership, though we know the team from the October Party Congress. More importantly, we’ll get host of economic policies confirmed, though we know December’s CEWC shows an emphasis on domestic consumption.

Foreign investors sold $276 million worth of Mainland stocks for the 4^th straight day of selling.

Geopolitical tensions have clearly weighed on offshore China (US and Hong Kong listings) as Washington DC’s China infatuation reaches new heights, though the strong dollar is also a significant factor hitting risk assets globally. Somehow, China’s Ukraine peace proposal is a bad thing? That is a head scratcher to me. How does the US know China is considering sending weapons to Russia if we aren’t spying on them?

Missing investment banker China Renaissance Chairman and CEO Bao Fu is assisting regulators, as we mentioned last week. A new hire’s activities at his prior employer have been under investigation since the fall.

The Department of Energy said Covid might have come from a Chinese lab, though not with a great deal of confidence. Again, this infatuation with China is bizarre to me. One reason could be that it distracts the media and voters from the real issues the US is facing.

Shocked at a weekend report on inflation in EM countries in advance of this week’s release of CPIs. According to the report:

Weibo and Full Truck Alliance report financial results on Wednesday.

The Hang Seng and Hang Seng Tech indexes were off -0.33% and -0.52% , respectively, on volume that decreased -3.35% from Friday, which is 90% of the 1-year average. 130 stocks advanced, while 353 stocks declined. Main Board short sale turnover increased +7.70% from Friday, which is 101% of the 1-year average, as 19% of turnover was short turnover. Growth and value factors were mixed as large caps outpaced small caps. Consumer staples and communication services gained +0.62% and +0.30%, respectively, while materials fell -2.35%, utilities fell -1.92%, and healthcare fell -1.56%. The top-performing subsectors included food, beverages, tobacco, consumer staples, and software. Meanwhile, materials, semiconductors, and media were among the worst-performing. Southbound Stock Connect volumes were light as Mainland investors bought $770 million worth of Hong Kong stocks, as Tencent was a strong buy, Meituan was a moderate net buy, and Kuiashou was a small net buy.

Shanghai, Shenzhen, and the STAR Board were off -0.28%, -0.74%, and -0.44%, respectively, on volume that increased +3.95% from Friday, which is 83% of the 1-year average. 997 stocks advanced, while 3,697 stocks declined. Growth and value factors were mixed as large caps outperformed small caps. The top-performing sectors were consumer staples, which gained +0.83%, energy, which gained +0.33%, and real estate, which gained +0.16%. Meanwhile, communication services fell -1.32%, healthcare fell -0.88%, and consumer discretionary fell -0.84%. The top-performing subsectors were liquor, fertilizer, and coal, while internet, office supplies, and education were among the worst-performing. Northbound Stock Connect volumes were light/moderate as foreign investors sold aa net -$276 million worth of Mainland stocks with Ping An Insurance, Kweichow Moutai, and Longi Green energy were small net sells. CNY gained +0.13% versus the US dollar to 6.95 CNY per USD, the Treasury curve steepened, and Shanghai copper and steel were both off.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.95 versus 6.96 Friday
• CNY per EUR 7.35 versus 7.34 Friday
• Yield on 1-Day Government Bond 1.77% versus 1.62% Friday
• Yield on 10-Year Government Bond 2.91% versus 2.91% Friday
• Yield on 10-Year China Development Bank Bond 3.10% versus 3.09% Friday
• Copper Price -1.21% overnight
• Steel Price -0.40% overnight