2021 Winners Win Again Overnight

Key News

Asian equities were largely off though Japan, China, and Taiwan were in the green while India was hit harder than most. Ukraine/Russia tension, Fed hikes, and the US tech/growth sell-off weighed on investor sentiment overnight.

It is worth noting that China’s 2021 winners, Mainland stocks, currency, and bonds had a strong day as the Mainland, which is predominantly owned by domestic investors, outpaced Hong Kong, which is predominantly owned by foreign investors, significantly while CNY appreciated versus the US dollar and Chinese Treasury bonds also rallied.

The Hang Seng was off -1.24%, led lower by internet stocks following Friday’s steep equity sell off in the US, which was focused on tech/growth and ADRs. Hong Kong volume was off -19% from Friday, which is only 77% of the 1-year average. Breadth was abysmal with 2 decliners for every 1 advancing stock. I suspect volumes will be light next week as Mainland markets will be on holiday and Hong Kong will be closed next Tuesday, Wednesday, and Thursday

E-cigarette maker Huabao (336 HK) was off -66% on reports of an investigation. One of the few bright spots today was Southbound Stock Connect flows as Mainland investors bought $342 million worth of Hong Kong stocks as Tencent, China Mobile, and Meituan led net inflows.

Real estate gained in both Hong Kong and the Mainland on reports that Evergrande has a clear restructuring plan in the works.’

Hong Kong and Mainland lithium stocks finally saw buyers emerge after a rough start to the year. Also on the Mainland, solar and wind saw buyers emerge though semiconductors were mixed.

The Mainland opened lower but grinded higher as Shanghai gained +0.04%, Shenzhen gained +0.19, and the STAR Board gained +1.34%. Volumes were off -11.96%, which is only 82% of the 1-year average. Meanwhile, breadth was even with 1 for 1 advancers to decliners.

It is interesting that healthcare and Fosun Pharma were off as the company was granted permission to produce Merck’s covid-19 pill.

Foreign investors bought $545 million worth of Mainland stocks via Northbound Stock Connect. China’s currency appreciated to 6.33 from Friday’s 6.34 level, while Chinese bonds rallied sharply and copper was off a touch.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.33 versus 6.34 Friday
• CNY/EUR 7.16 versus 7.19 Friday
• Yield on 1-Day Government Bond 1.76% versus 1.89% Friday
• Yield on 10-Year Government Bond 2.68% versus 2.71% Friday
• Yield on 10-Year China Development Bank Bond 2.97% versus 3.01% Friday
• Copper Price -0.22% overnight