Alibaba Spin-Off IPO In The US As Mainland Returns From Vacation

Key News

Asian investors cheered the potential Fed pause as the Asia Dollar Index gained +0.23% versus the US dollar, while Japan, Malaysia, and Thailand were on holiday.

Mainland China markets re-opened overnight as Shanghai, Shenzhen, and the STAR Board closed mixed at +0.82%, -0.08%, and -2.18%, respectively, on high volumes. Financials had a strong day in China +2.62% and Hong Kong +5.26% as a beneficiary of SOE reform, with recent solid financial results, outlook, and a Fed hike pause. I suppose not blowing up is a factor though there is no schadenfreude here, having known good people at both First Republic and Silicon Valley Bank.

Bank of China (601988 CH, 3988 HK ) jumped +7.36% in China and +4.18% in Hong Kong though insurance companies had a strong day with Ping An (601318 CH, 2318 HK) +3.67% in China and +7.73% in Hong Kong. Reopening plays such as restaurants and Macao casinos were mixed/lower on buy the rumor/sell the news on strong travel data.

The Ministry of Culture and Tourism reported that during the April 29th to May 1st holiday vacation, there were 274mm domestic tourist trips, while Ctrip reported 80,000 domestic flights +15% from 2019. Some have speculated that vacation spending might be weak though expectations should be low as the rebound occur incrementally over 2023.

The April Caixin Manufacturing PMI release was a non-factor/miss at 49.5 versus expectations of 50 and May’s 50. Remember, China’s manufacturing is telling you that the global economy is slowing, which is why the government is emphasizing consumption support.

Hong Kong’s most heavily traded were Tencent -0.47%, Ping An +7.73%, Alibaba HK +0.44%, China Construction Bank +4.08%, Meituan +0.53%, Bank of China +4.18%, ICBC +5.05%, and energy giant CNOOC +1.31%. Strong day for value sectors and stocks!

Alibaba should see a pop in US trading on chatter; it will spin off its non-China/international e-commerce companies in a US IPO. Mainland investors bought the Hong Kong dip with $358mm of Hong Kong stocks today. Short volume has been slightly higher than usual but not too problematic.

It might be a little early to call them green shoots, but there were a few positive developments in the US-China relationship as US-China flights will increase to 12 from 8 (down from 150 weekly flights pre-covid). Reuters is reporting that China has invited climate envoy John Kerry to visit. Yesterday Secretary of State Blinken mentioned wanting to reschedule his China trip. President Biden is expected to veto the Senate’s effort to repeal solar panel tariffs. Commerce Secretary Gina Raimondo reiterated the “small yard, high fence” versus decoupling on CNBC yesterday.

Western media reported that non-Chinese firms were being cut off from economic data in Wind, a Chinese data/terminal provider similar/different to a Bloomberg terminal. As a Wind terminal user, I’ve not noticed any changes other than they raised the price recently, which our CFO
CFO
nor I’m happy about.

The Hang Seng and Hang Seng Tech gained +1.27% and +0.55% on volume +58.94% from yesterday, 88% of the 1-year average. 370 stocks advanced, while 126 stocks declined. Main Board short turnover increased +16.65% from yesterday, which is 79% of the 1-year average, as 15% of turnover was short turnover. Value factors outperformed growth factors as large caps outpaced small caps. The top sectors were financials +5.26%, industrials +2.81%, and healthcare +2.25%, while communication -0.25% and staples -0.79%. The top subsectors were insurance, banks, and food, while good/beverage/tobacco, consumer services, and semis. Southbound Stock Connect volumes were light as Mainland investors bought $358mm of Hong Kong stocks with Tencent, Meituan, and China Construction Bank small net buys.

Shanghai, Shenzhen, and STAR Board were mixed +0.82%, -0.08%, and -2.18% on volume +5.36% from Friday, 129% of the 1-year average. 2,739 stocks advanced, while 1,935 stocks declined. Value factors outperformed growth factors as large caps outpaced small caps. The top sectors were communication +4.61%, utilities +2.71%, and financials +2.64%, while tech -2.1%, discretionary -1.58%, and staples -0.83%. The top sub-sectors were cultural media, insurance, and land transportation, while restaurants, airports, and semis. Northbound Stock Connect volumes high as foreign investors sold -$208mm of Mainland stocks, with Kweichow Moutai a strong net buy, China Tourism Group and Ping An small net sells. CNY reopened flat versus the US dollar as the Asia dollar index made a small gain versus the US dollar. Treasury bonds had a strong day while copper was up small and steel off -1.14%.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.92 versus 6.92 yesterday
• CNY per EUR 7.64 versus 7.58 yesterday
• Asia Dollar Index +0.15% overnight
• Yield on 10-Year Government Bond 2.76% versus 2.78% yesterday
• Yield on 10-Year China Development Bank Bond 2.93% versus 2.94% yesterday
• Copper Price +0.04% overnight
• Steel Price -1.14% overnight