China COVID Cases Increase Though No Lockdowns

Key News

Asian equity markets were mixed as Japan and South Korea outperformed while India had the day off for Guru Nanak Jayanti which celebrates the birth of the first Sikh guru, Guru Nanak according to GoogleGOOG
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Hong Kong and China were off on a “boring day” according to a Mainland broker as volumes were light. Fair amount of headlines on the uptick in Chinese COVID cases overnight with 843 new cases and 6,632 new asymptomatic cases. And yet we aren’t seeing Shanghai style lockdowns, are we? The economic consequence is too great. There were no signs of social distancing if you look at photos from the Hong Kong Sevens tournament. Macao loosened inbound visitor restrictions overnight. Two Chinese pharma companies announced progress in their COVID trials as Staidson Beijing Biopharmaceuticals (300204 CH) reported its first human trials in China.

Fairly light on news today though October EV sales are now 30% of auto sales as EV sales was 676,000 versus 675,000 in September though up significantly year over year. Total auto sales increased year over year +11% to 2.191 million though off -4.6% month over month. After the close, BYD announced the launch of its first luxury model while Geely and Renault agree to partner on engine production. Hong Kong’s most heavily traded were Tencent +0.16%, Meituan -2.75%, and Alibaba HK -3.73% though volumes were light. Mainland investors bought another $534 million of Hong Kong stocks today with Tencent seeing moderate/light net buying.

Strange to see Alibaba off as Singles Day data looks promising thus far especially for foreign brands with earnings next Thursday. I had the chance to attend an event Alibaba held for US companies from many industries such as luxury goods, pet food, and household goods that are selling during Singles Day. I was very impressed by the technology and live streaming used. Hong Kong short turnover increased as a percentage of total turnover to 17% today with internet names seeing mixed short volumes as Tencent had 15% of turnover short (15% yesterday), JD.com 33% (31% short turnover yesterday), and Alibaba 12% (down from yesterday’s 25%). Mainland markets were off with shipping down on weak export data though several tech sub-sectors had a good day. Foreign investors were net sellers -$523 million.

The Hang Seng and Hang Seng Tech fell -0.23% and -1.56% on volume -29.52% from yesterday which is 85% of the 1-year average. 155 stocks advanced while 320 declined. Main Board short turnover decreased -21.21% from yesterday which is 82% of the 1-year average as 17% of turnover was short turnover. Value factors edged out growth factors by a small margin as large caps “outperformed” small caps. Materials and energy were the only positive sectors up +0.51% and +0.29% while closing down was discretionary -2.2%, real estate -0.72%, and healthcare -0.65%. Top sub-sectors included household products, insurance, and semiconductors while auto, retailers, and healthcare equipment were among the worst. Southbound Stock Connect volumes were moderate as Mainland investors bought $534 million of Hong Kong stocks today with Meituan a small net sell while Tencent, Wuxio Biologics, and Kuaishou both a small net buy.

Shanghai, Shenzhen, and STAR Board eased -0.43%, -0.4%, and -0.91% respectively on volume -16.87% from yesterday which is 86% of the 1-year average. 1,840 stocks advanced while 2,663 stocks declined. Value factors outperformed growth factors while small caps “outperformed” large caps by a very small amount. Real estate was the only positive sector gaining +0.06% while closing lower were staples -1.77%, healthcare -1.48%, and energy -1.35%. Top sub-sectors included computer hardware, software, and motorcycles while marine/shipping, liquor, and power generation equipment were among the worst. Northbound Stock Connect volumes were moderate/light as foreign investors sold -$523 million of Mainland stocks. Treasury bonds rallied, CNY was off -0.3% versus the US dollar to 7.25 and copper -0.38%.

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.25 versus 7.22 yesterday
• CNY per EUR 7.25 versus 7.21 yesterday
• Yield on 10-Year Government Bond 2.69% versus 2.70% yesterday
• Yield on 10-Year China Development Bank Bond 2.81% versus 2.82% yesterday
• Copper Price -0.38% overnight