China Reopening Plays Rise As Pinduoduo Beats In Q3 Financial Results

Key News

Asian equities were largely lower though off their intra-day lows, except for India and the Philippines, which managed small gains while Malaysia was closed for a holiday.

Protests across China garnered significant media attention following an apartment building fire that killed ten with claims that COVID barriers slowed firefighters’ response. The protests are apt to garner significant attention from the government, which is not tone-deaf to the effect zero COVID has had on citizens. At the same time, the government has outlined a dynamic zero COVID plan aimed at protecting the elderly, as 3,748 new COVID cases and 36,304 asymptomatic cases were reported overnight. There will be no official end to zero COVID, but what choice does the government have after these protests? Remember, the push for EVs only occurred after the public became fed up with pollution. I would suspect a slow, unofficial unwind as after the close in Hong Kong Sinopharm (1099 HK) announced its COVID nasal spray was approved for clinical trials.

It is worth noting that reopening plays were strong overnight in Mainland China as the top sub-sectors included restaurants, airports, and retailers. US-listed Chinese stocks opened higher after Pinduoduo (PDD US) reported before the US open, beating on the big three: revenue, adjusted net income, and especially adjusted EPS. Meituan (3690 HK) gained +2.05%, while other Hong Kong-listed internet stocks were off following Friday’s drawdown in US-listed China stocks.

After the close on Friday, the PBOC cut the bank reserved requirement ratio (the amount of deposits needed to be held by banks) by 0.25% to 7.8%.

Although real estate stocks were off overnight, there continues to be policy support as online real estate company KE Holdings is up big pre-market. The six Macau casino operators received renewals to operate for the next ten years.

As the media has largely ignored Taiwan’s history of flip flopping between the KMT and DPP parties, it is worth noting that as current President Tsai’s DPP party fared poorly, leading to her resignation from the party, though she retains her post.

The Hang Seng and Hang Seng Tech indexes fell -1.57% and -1.93%, respectively, on volume that increased +23.78% from Friday, which is 96% of the 1-year average. 158 stocks advanced, while 348 declined. Main Board short sale turnover increased +78.83% from Friday, which is 100% of the 1-year average, as 18% of turnover was short turnover. Growth factors slightly outpaced value factors on a decidedly mixed day, while large caps “outperformed” small caps. Consumer staples and healthcare were positive, gaining +1.34% and +0.36%, respectively, while real estate fell -4.03%, financials fell -2.61%, and energy fell -2.31%. The top-performing sub-sectors were food, transport, and healthcare equipment, while insurance, real estate, and banks were among the worst. Southbound Stock Connect volumes were moderate/light as Mainland investors bought $849 million worth of Hong Kong stocks and Tencent was a moderate net sell, and Meituan was a moderate net buy.

Shanghai, Shenzhen, and the STAR Board fell -0.75%, -0.51%, and -0.72%, respectively, on volume that increased +2.81% from Friday, which is 79% of the 1-year average. 1,421 stocks advanced, while 3,171 stocks declined. Growth factors outpaced value factors, while small caps edged out large caps by a small margin. All sectors were negative as financials fell -2.33%, energy fell -2.07%, and real estate fell -2.05%. The top-performing sub-sectors included restaurants, airports, and oil and gas, while education, insurance, and construction were among the worst. Northbound Stock Connect volumes were moderate as foreign investors sold -$522 million worth of Mainland stocks. CNY was off versus the US dollar to close at 7.21 versus 7.17 on Friday.

China City Mobility Tracker

COVID’s spread is leading to increased anti-spread measures as indicated in slumping traffic and subway usage.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.21 versus 7.17 Friday
• CNY per EUR 7.52 versus 7.44 Friday
• Yield on 1-Day Government Bond 1.00% versus 0.99% Friday
• Yield on 10-Year Government Bond 2.86% versus 2.83% Friday
• Yield on 10-Year China Development Bank Bond 2.97% versus 2.87% Friday
• Copper Price -0.71% overnight