Hong Kong Outperforms, EVs Clipped On Tesla Price Cuts

Key News

Asian equities were mixed overnight as Hong Kong shares outpaced Mainland shares except for the STAR Board, which continues to outperform.

The People’s Bank of China (PBOC), China’s central bank, left key lending rates unchanged overnight. Evidently, economic policymakers are pleased with the country’s recovery so far this year. That being said, we may still see other forms of stimulus including direct support for key industries and SOE reform.

According to brokers, officials from China’s Ministry of Commerce met with US economic officials in Beijing last week. This meeting was not papered in the US press (big surprise…). Meanwhile, Yellen is set to provide remarks today on the US’ economic relationship with China at Johns Hopkins’ School of Advanced International Studies.

Mainland technology outperformed while offshore internet stocks were slightly lower overnight. Shares in short-video platform Kuaishou led internet declines overnight on further selling by key investor Tencent. However, a Tencent spokesperson said that they continue to believe in the long-term prospects for the platform. Meituan gained +3% in Hong Kong overnight as the company is expected to beat estimates for the rest of the year on easing competitive pressure from China’s TikTok. Meanwhile, a key mutual fund research firm stated in a report that active EM funds are increasing their over-weights to E-Commerce.

The electric vehicle (EV) ecosystem in China was broadly lower as NIO led declines by falling -6% overnight in Hong Kong. The driver of the selloff was the additional price cuts announced by Tesla yesterday, creating fears that China-based EVs may have to follow suit in order to compete. However, it is important to note that lowering the price of EVs is important as the industry needs to reach sustainable cost parity with internal combustion engine (ICE) vehicles. Meanwhile, the Ministry of Industry and Information Technology (MIIT) issued a positive statement on increasing the number of publicly-available charging stations in China.

STAR Board-listed Beijing Kingsoft, a cloud services and office software company similar to Microsoft in the US, gained +8% overnight on a positive earnings release.

The Hang Seng and Hang Seng Tech indexes diverged to close +0.14% and -0.09%, respectively, overnight on volume that increased +2% from yesterday. The top-performing sectors in Hong Kong overnight were utilities and technology. Meanwhile, materials, health care, and real estate were were among the worst-performing. Mainland investors bought a net $655 million worth of Hong Kong shares overnight via Southbound Stock Connect.

Shanghai, Shenzhen, and the STAR Board also diverged to close -0.09%, -0.40%, and +2.96%, respectively, on volume that increased +5% from yesterday. The top-performing sectors on the Mainland were technology, communication services, and energy. Meanwhile, materials, consumer discretionary, and health care were among the worst-performing. Foreign investors bought a net $681 million worth of Mainland-listed stocks overnight.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.87 versus 6.88 yesterday
• CNY per EUR 7.54 versus 7.54 yesterday
• Yield on 1-Day Government Bond 1.60% versus 1.55% yesterday
• Yield on 10-Year Government Bond 2.83% versus 2.83% yesterday
• Yield on 10-Year China Development Bank Bond 3.02% versus 3.02% yesterday
• Copper Price -0.49% overnight