Dirty Harry Challenges Investors As Bilibili’s “Three-Body Problem” Goes Viral

Key News

Asian equities were down today on light volumes and little market-moving news as investors wait for Tuesday’s US CPI release and Wednesday’s US interest rate decision, which could lead to another round of profit-taking by global central bank hikes Thursday. Thailand was closed for Constitution Day.

Hong Kong stocks were hit with a healthy round of profit-taking as stocks and indices hit an assortment of moving averages and big round numbers, such as the Hang Seng Index, which closed just below the 20,000 level. Mainland Chinese stocks were off just a touch. Hong Kong’s most heavily traded stocks by value were Tencent, which fell -2.46%, Meituan, which fell -6.95%, and Alibaba, which fell -3.81%. Hong Kong short sellers increased activity, though short volumes in internet stocks remain low. Remember that a PCAOB audit review decision is due by year-end, which would be a strong catalyst. US and Chinese officials met Sunday and Monday outside of Beijing to discuss several issues in advance of Secretary of State Blinken’s visit next year.

The Western media hammers China for reopening too quickly. Meanwhile, local media is more positive on re-opening and added on Monday that the health code app’s data would be destroyed following re-opening. Also making the news was the Beijing city government’s list of non-prescription domestic and foreign drugs for treating COVID symptoms, along with government officials pointing out Omicron’s low mortality rate. Could foreign prescription drugs be approved in the future? There were 2,171 new covid cases today, along with 6,455 asymptomatic cases. It is worth pointing out the strong uptick in congestion in Shanghai, Shenzhen, and Chengdu.

Real estate stocks were hammered as a number of companies announced stock issuance and selling off assets. Over the weekend, November aggregate financing and new loans came in slightly less than expected, though no one considered the data to be market-moving. Foreign investors sold -$621 million worth of Mainland stocks as Shenzhen growth stocks were net sold though Shanghai value stocks were net bought.

Remember we have China’s big economic meeting, the Central Economic Work Conference starting on Thursday, which could provide another catalyst for bulls. Clint Eastwood’s Dirty Harry would ask investors, “Do you have the guts to buy the dip? Well, do you?”. Bilibli shares were up pre-market, though declined sharply at the market open in the US, after 100 million plays of an animated TV series, taken from the popular Chinese sci-fi novel “The Three-Body Problem,” according to Yicai Global.

The Hang Seng and Hang Seng Tech indexes fell -2.2% and -4.05%, respectively, on volume that decreased -20.4% from Friday, which is 128% of the 1-year average. 137 stocks advanced, while 368 stocks declined. Main Board short turnover increased +1.31% from Friday, which is 123% of the 1-year average, as 17% of turnover was short turnover. Value factors outperformed growth factors, while small caps outperformed large caps. The only positive sector was energy, while real estate fell -6.17% and consumer discretionary fell -4.34%. The top-performing subsectors were food, energy, and telecom, while retail, autos, and real estate were among the worst. Southbound Stock Connect volumes were high/moderate as Mainland investors bought $819 million worth of Hong Kong stocks as Tencent was a small net buy, while Meituan and Kuiashou were small net sells.

Shanghai, Shenzhen, and the STAR Board were diverged to close -0.87%, -0.67%, and +0.29%, respectively, on volume that decreased -9.81% from Friday, which is 96% of the 1-year average. 2,879 stocks advanced, while 2,787 stocks advanced. Value and growth factors were both down today, while small caps “outperformed” large caps. Tech and healthcare were the only positive sectors, gaining +0.57% and +0.54%, respectively, while real estate fell -4.14%, materials fell -2.69%, and financials fell -2.68%. The top-performing subsectors were pharmaceuticals, telecom, and software while household products, precious metals and real estate were among the worst. Northbound Stock Connect volumes were average as foreign investors were net buyers of Shanghai stocks and net sellers of Shenzhen stocks with a combined total net sell of -$621mm. CNY fe,ll versus the US dollar -0.24% to 6.97, Treasury curve flat ended as the short end sold off, and copper fell -0.78%.

Major City Mobility Tracker

China is a big country geographically, so we can’t apply uniform standards to the whole country. There was a strong uptick in traffic in Shanghai, Shenzhen, and Chengdu, while metro usage appears to be picking up too.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.98 versus 6.96 Friday
• CNY per EUR 7.37 versus 7.32 Friday
• Yield on 1-Day Government Bond 1.10% versus 1.12% Friday
• Yield on 10-Year Government Bond 2.89% versus 2.89% Friday
• Yield on 10-Year China Development Bank Bond 3.05% versus 3.04% Friday
• Copper Price -0.78% overnight