China Goes Risk On

Key News

Asian equities were mostly higher overnight as bank failure contagion fears receded.

The People’s Bank of China (PBOC), China’s central bank, took its foot off the gas today, injecting only RMB 30 billion into the system, down from RMB 180 billion on Friday. However, Friday’s reserve requirement ratio (RRR) cut has been well received by the market.

Foreigners bought a net $625 million worth of Mainland shares overnight, the 7th straight day of net buying, and the most in a week. Mainland investors bought a net $129 million worth of Hong Kong shares, the 10th consecutive day of net buying.

Financials were one of the best performing sectors in Mainland China, Hong Kong, and globally. HSBC was up +2.9% overnight. Technology was also a strong performer in Hong Kong as the Hang Seng Tech Index gained +2.5% overnight, led by gaming names on strong approvals, including of foreign games, in the lates round.

We heard news last night that Vanguard is exiting a joint venture with Ant Group, an interesting development following a regulatory reprieve for the fintech giant, which could be gearing up for a long-delayed IPO.

Pinduoduo, which noted its investment costs soaring in its latest release, has clouded investors’ view of JD.com among other high-spending E-Commerce companies. Nonetheless, these companies are spending for growth and entering new markets overseas, which would have been unheard of for a Chinese internet player in the not so distant pass. It is remarkable how much this industry has matured, even if valuations do not reflect this maturity, yet.

Baidu outperformed in the internet space, continuing to see momentum following the release of its “ERNIE” chat bot. The company will also launch a cloud integration with the chat bot on March 27^th.

Technology, real estate, and healthcare also rebounded overnight as investors go “risk-on” in China stocks following global bank failures.

China’s President Xi met with Russia’s Vladmir Putin for four hours in Moscow, pushing his Ukraine peace proposal directly to the Russian leader. The US has criticized China’s peace plan for not including the removal of Russian troops from Ukraine. Nonetheless, Xi is positioning himself as a diplomat, underscoring the key diplomatic role that China may inevitably play in future negotiations.

The South China Morning Post (SCMP) had a good article on the Mongolian President Oyun-Erdene calling for a constructive US-China relationship to bolster his country’s economic diversification.

The Hang Seng and Hang Seng Tech indexes gained +1.4% and +1.81%, respectively, overnight, on volume that decreased -20% from yesterday.

Shanghai, Shenzhen, and the STAR Board gained +0.06%, +1.57%, and +0.47%, respectively, overnight on volume that decreased -16% from yesterday.

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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 7.40 versus 7.37 yesterday
• Yield on 10-Year Government Bond 2.86% versus 2.85% yesterday
• Yield on 10-Year China Development Bank Bond 3.02% versus 3.01% yesterday
• Copper Price +1.10% overnight