Game On For Tencent & NetEase Amid New Game Approvals

Key News

North Asia was off except for Hong Kong, while South Asia posted small gains on light volumes. Hong Kong opened higher for the first time since last Friday, closing up +1.56%, though off intra-day highs of +2.59%. The index went over the 20,000 level in morning trading, though faded in the afternoon.

Online games and video companies had a strong day on the announcement of new approvals of games by developers, including Tencent, which gained +1.87%, and NetEase, which gained +1.15%. Meanwhile, Bilibili gained +2.79%, and Kuaishou gained +3.75%, benefitting from the positive sentiment surrounding game approvals. Tencent’s Hong Kong shares saw strong buying via Southbound Stock Connect compared to its historical average as the company’s new Valorant video game is apparently a big hit outside of China. Hong Kong-listed internet stocks did not rise as much overnight as their US-listed counterparts did yesterday. Alibaba gained +1.39% in Hong Kong overnight versus a whopping +4.21% in the US yesterday, while JD.com gained +1.14% in Hong Kong compared to a +4.18% gain in the US yesterday.

Reopening plays had a good day in both Hong Kong and Mainland China as travel restrictions continue to be dialed back and investors gear up for the 0+3 quarantine policy set to start on January 8^th.

Tesla’s weakness weighed on electric vehicles (EVs), and auto plays as CATL (Ticker: 300750 CH) was off -2.37% and BYD (Ticker: 1211 HK) was off -0.57%. China-based global EV manufacturer NIO (Ticker: 9866 HK) was hit with a -10.8% loss on weak guidance, which did not help the industry. Meanwhile, Xpeng (Ticker: 9868 HK) fell -9.69%, and Li Auto (Ticker: 2015 HK) fell -6.66%.

Mainland traders were active overnight after three up days in Shanghai, Shenzhen, and the STAR Board led them to book profits on little news. Meanwhile, foreign investors picked up the slack, making net purchases of $561 million worth of Mainland stocks.

The Hang Seng and Hang Seng Tech indexes gained +1.56% and +2.14%, respectively, on volume that increased +52.52% from yesterday, which is 98% of the 1-year average. 351 stocks advanced, while 142 stocks declined. Main Board short selling turnover increased +67.3% from yesterday, which is 105% of the 1-year average as 19% of total turnover was short. Growth factors edged out value factors as large caps outpaced small caps. The top-performing sectors were utilities, which gained +7.43%, tech, which gained +4.5%, and healthcare, which gained +3.34%, while real estate was the only down sector, declining by -0.62% overall. The top-performing subsectors were utilities, semiconductors, and technical hardware. Meanwhile, autos, telecom, and real estate were among the worst performing. Southbound Stock Connect volumes were light as Mainland investors made net purchases of $263 million worth of Hong Kong-listed stocks as Tencent saw the lion’s share of buying along with Tencent and Meituan, though at lower volumes.

Shanghai, Shenzhen, and STAR Board were off -0.26%, -0.95%, and -0.61%, respectively, on volume that decreased -2.78% from yesterday, which is 70% of the 1-year average. 905 stocks advanced, while 3,752 stocks declined. Value factors outperformed growth factors as large caps outpaced small caps. The top-performing sectors were utilities, which gained +2.03%, real estate, which gained +0.48%, and healthcare, which gained +0.39%. Meanwhile, consumer discretionary fell -2.04%, communication fell -1.37%, and industrials fell -1.2%. The top-performing subsectors were the power industry, insurance, and banking, while education, autos, and aviation were among the worst-performing. Northbound Stock Connect volumes were light as foreign investors bought $561 million worth of Mainland stocks. CNY eased versus the US dollar by -0.22% to 6.98, the Treasury yield curve flattened, and copper gained +0.29%.

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Traffic trend is improving rapidly while metro usage coming off the lows as people learn to live with the virus.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.98 versus 6.96 yesterday
• CNY per EUR 7.43 versus 7.41 yesterday
• Yield on 1-Day Government Bond 0.80% versus 0.80% yesterday
• Yield on 10-Year Government Bond 2.85% versus 2.87% yesterday
• Yield on 10-Year China Development Bank Bond 3.03% versus 3.03% yesterday
• Copper Price +0.29% overnight