Inquiring Minds Want To Know Why 5+3=0 & What Spiked +412% Day Over Day On Trip.com

Key News

Asian equity markets had a positive day on light volumes following a good day Monday for the small number of markets that were open (China, Taiwan, South Korea, and Japan).

Hong Kong and Australia remain closed today. Inbound visitors to China will no longer be required to quarantine for five days at a government facility, instead it will be three days at home beginning on January 8th according to the National Health Commission. US listed China ADRs are apt to appreciate this morning on the news as zero-COVID policies have weighed on foreign investor sentiment in another confirmation of our Post Party Congress Policy Pivot on the Big Three (US China political relationship and real estate being the other two). The National Health Commission downgraded COVID to a class B disease from A while reiterating the need for the elderly to vaccinate and stockpile drugs.

Online travel website C-Trip (TCOM US, 9961 HK) reported a +412% day over day increase in outbound airplane ticket purchases. The charts from our Major Chinese City Mobility Tracker show a significant uptick in traffic over the last several days in a strong indication of reopening. It is worth noting that there are likely to be setbacks as China is a big country geographically. Many industries are facing worker shortages including food delivery companies as people call in sick. We are in the worst of it, but this shall pass, and investors should remember markets are forward looking while headlines are backward looking. Shanghai, Shenzhen, and STAR Board gained +0.98%, +0.88%, and +1.2% today following yesterday’s gain of +1.04%, +1.73%, and +3.75%. The National Bureau of Statistics announced profit estimates for industrial companies decreased -3.6% year over year through November. Oil, natural gas, and mining increased 113% YoY, power/heat production +47.2% YoY, and coal mining +47% while auto manufacturing +0.3%. The report noted COVID’s effect on the economy. We’ve noted that the pain trade is higher due to global investors’ overweight to US equities and underweight to China.

The Hang Seng and Hang Seng Tech were closed. Southbound Stock Connect was closed as well.

Shanghai, Shenzhen, and STAR Board gained +0.98%, +0.88%, and +1.26% on volume +7.48% from yesterday which is 62% of the 1-year average. 2,836 stocks advanced while 1,738 stocks declined. Growth factors outperformed value factors as large caps outpaced small caps. All sectors were positive with financials +2.06%, energy +1.86%, and staples +1.73%. Top sub-sectors were chemical industry, power generation equipment, and port industry while education, pharma, and comprehensive industry were among the worst. Northbound Stock Connect was closed. CNY closed today at 6.9647 versus 6.9627 Monday and Friday’s close of 6.99. Treasury bonds sold off on the stock rally while copper gained +0.84%.

Major Chinese City Mobility Tracker

Over the last several days we are seeing a significant increase in traffic conditions across multiple cities. Clearly, reopening is occurring! Subway usage is picking up albeit at a slower pace which isn’t surprising.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.96 versus 6.99 Friday
• CNY per EUR 7.41 versus 7.41 Friday
• Yield on 10-Year Government Bond 2.86% versus 2.83% Friday
• Yield on 10-Year China Development Bank Bond 3.03% versus 2.99% Friday
• Copper Price +0.84% overnight