Investors Inhale CanSino Biologics’ Return Today As China’s Big Three Regulators Address Concerns

Key News

Asian equity markets were mixed in advance of today’s Fed decision to raise interest rates another +0.75% with China and Hong Kong outperforming.

Yesterday’s rumor that zero COVID policies will be dialed back kept the momentum going despite the Hong Kong market closing early around 2pm local time due to a typhoon hitting the city. Helping the momentum was CanSino Biologics (6185 HK) which gained +63.38% after the company reported more than a dozen cities have signed on for its inhalable COVID vaccine. The stock has gained +170% over the last eight trading days according to Bloomberg as healthcare stocks in Hong Kong +7.32% and China +1.35%.

The Global Financial Leaders Investment Summit, which began overnight in Hong Kong, included not only many global bank CEOs but also top Chinese financial regulators from the China Securities Regulatory Commission (CSRC), China’s SEC, the People’s Bank of China, China’s central bank, and the China Banking and Insurance Regulatory Commission (CBIRC). My favorite comment was from CSRC’s Vice Chairman. He said that foreign media “doesn’t understand China very well!” Representatives from all three agencies reiterated the Chinese government’s focus on opening up financial markets. “Reform and open-door policy will continue,” remarked PBOC Governor Yi Gang, who also said that “We hope the housing market can achieve a soft landing.” “In general, the property sector, I think, is stable,” commented a representative from the CBIRC. Reuters is one of the only places you can read about this meeting, which is where I pulled these quotes from. I’ll post the article on Twitter (ahern_brendan). PBOC Governor Yi Gang’s comments were front-page news in China as he addressed many issues. Remember, stability is always job #1, so the government seeks to prevent financial crises before they occur.

Mainland investors noticed the regulators’ comments driving Shanghai higher +1.15% and Shenzhen up +1.33% while buying a healthy $977 million of Hong Kong stocks via Southbound Stock Connect. Tencent had another strong net buy day while Meituan and Kuaishou were also net buys. Hong Kong short volume was only 11% of total turnover, similar to yesterday’s light short volumes. Hong Kong internet stocks had a strong day. Foreign investors must have missed the regulators’ Hong Kong comments as they sold a healthy -$1.041 billion of Mainland stocks. A Mainland media source noted that the Foxconn factory dealing with a COVID outbreak represents just 7% of iPhone production as Nio reported two factors closing due to outbreaks. CNY eased slightly versus the US dollar as the Asia dollar index made a small gain versus the US dollar. Troubled real estate developer Longfor (960 HK) +18.85% reported they will make a bond payment which is a positive for the sector.

The Hang Seng and Hang Seng Tech gained +2.41% and +2.65% respectively on volume -31.07% from yesterday which is 86% of the 1-year average. 443 stocks advanced while 53 stocks declined. Main Board short turnover declined -52.16% from yesterday which is 57% of the 1-year average as 11% of turnover was short turnover. Growth and value factors were mixed as small caps outpaced large caps. All sectors were positive with healthcare closing+7.32%, staples +4.55%, and real estate +4.47% while utilities lagged +0.17%. Top sub-sectors were consumer services, pharma/biotech, and healthcare equipment. Southbound Stock Connect volumes were high as Mainland investors bought +$977 million of Hong Kong stocks with Tencent seeing another strong net buying day, Meituan had a good net buy, and Kuiashou a small net buy.

Shanghai, Shenzhen, and STAR Board gained +1.15%, +1.33% and +1.24% on volume +7.49% from yesterday which is 108% of the 1-year average. 3,597 stocks advanced while 922 stocks declined. Growth and value factors were mixed while small caps underperformed large caps. Leading sectors were communication +4.52%, discretionary +3.17%, and energy +2.69% while utilities and financials lagged -0.01% and -0.04%. Top sub-sectors were telecom, auto parts, and marine/shipping while insurance, computer hardware, and aerospace/military were among the worst. Northbound Stock Connect volumes were moderate as foreign investors sold -$1.041 billion of Mainland stocks today. Treasury bonds sold off, CNY eased -0.02% versus the US dollar to 7.28, and copper popped +1.37%.

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.28 versus 7.26 yesterday
• CNY per EUR 7.21 versus 7.21 yesterday
• Yield on 10-Year Government Bond 2.69% versus 2.66% yesterday
• Yield on 10-Year China Development Bank Bond 2.87% versus 2.86% yesterday
• Copper Price +1.37% overnight