Economic And Corporate Profit Rebound Lifts Markets

Key News

Asian equities were largely lower following a decline in US stocks, though China and Hong Kong had a strong day. Shanghai, Shenzhen, and Hong Kong all opened lower but grinded higher across the trading day.

One morning catalyst was chatter that January loan growth will be stronger than anticipated as the PBOC injected liquidity into the financial system. Hong Kong’s most heavily traded by value were Tencent +3.51% on new game enthusiasm, Alibaba HK +3.96% on their AI efforts and securing a partnership with a Saudi Arabian investment deal, Meituan +0.26%, and Baidu HK -3.58% on AI profit taking. MGM’s Q4 financial results included statements on Macau’s rebound which lifted the casino stocks but likely had a spillover effect on the broad market.

President Biden was balanced about China post-balloon nonsense as Treasury Secretary Yellen stated, “I do think it’s important to improve communication…. I still want to be able to visit China and meet with economic peers”. Also helping were foreign investors buying a very healthy $1.785 billion of Mainland stocks today via Northbound Stock Connect. Hong Kong short turnover increased to 17% of Hong Kong turnover though there has been chatter about hedge funds dialing back their shorts. CNY posted a small gain versus the US dollar as the Asia dollar index gained +0.21%.

The Hang Seng and Hang Seng Tech gained +1.6% and +3.16% respectively on volume +12.45% from yesterday which is 93% of the 1-year average. 362 stocks advanced while 111 stocks declined. Main Board short selling volume increased 12.45% from yesterday which is 90% of the 1-year average as 17% of the turnover was short turnover. Growth and value factors were mixed as small caps outpaced large caps. Top sectors were tech up +5.27%, discretionary gaining +2.64%, and communication closing higher +2.44%, while energy was off -0.08%. Top sub-sectors were technical hardware, consumer services, and semis while energy, banks, and food were among the worst. Southbound Stock Connect volumes were light as Mainland investors sold -$104 million of Hong Kong stocks with Tencent a small net buy while Meituan and Kuiashou were small/moderate sells.

Shanghai, Shenzhen, and STAR Board were +1.18%, +1.54%, and +2.59% respectively on volume +11% from yesterday which is 99% of the 1-year average. 3,890 stocks advanced while 667 stocks declined. Growth factors outpaced value factors as small caps outperformed large caps. Top sectors were tech +2.79%, staples +2.09%, and communication +1.93% while utilities were -0.15%. Top sub-sectors were computer hardware, communication equipment, and semis while airports and leisure products were down. Northbound Stock Connect volumes were moderate as foreign investors bought a healthy +$1.785 billion of Mainland stocks. CNY gained +0.2% versus the US dollar, Treasury bonds rallied while Shanghai copper and steel gained +0.41% and +1.34%.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.77 versus 6.78 yesterday
• CNY per EUR 7.29 versus 7.29 yesterday
• Yield on 10-Year Government Bond 2.89% versus 2.89% yesterday
• Yield on 10-Year China Development Bank Bond 3.05% versus 3.06% yesterday
• Copper Price +0.41% overnight
• Steel Price +1.34% overnight