Investors Wait For US CPI & Internet Earnings

Key News

Asian equities were mixed on light volumes in advance of today’s US CPI release as markets appear to have caught onto the Fed’s focus on inflation.

Despite a strong rally in US ADRs, Hong Kong internet stocks failed to follow through as investors tapped the brakes on risk assets as evidenced by volume falling -13% while Main Board short turnover fell -41%. Hong Kong’s most heavily traded were Tencent -2.07%, Alibaba HK -1.44%, Meituan -0.34%, and HK -1.83%. Internet earnings season kicks off next week with Alibaba, Baidu, and NetEase all reporting.

Link REIT fell -1.37% after yesterday’s fall of -12.82% after announcing issuing more stock. Worth noting Link REIT is part of MSCI Hong Kong which is part of developed markets and not MSCI China. Remember Hong Kong Exchange, AIA, and Macao casino stocks are technically not Chinese companies due to their corporate domicile being in Hong Kong.

Hang Seng closed above the 21k level as value sectors had a strong day in both markets. News that US Secretary of State Antony Blinken may meet with his Chinese counterpart Wang Yi at the Munich Security Conference was a non-factor though it would be a good first step. Also, a non-factor was Ford’s EV battery partnership announcement with CATL (300750 CH) -1.95% which is a bit surprising. Worth noting, we are one of the top US owners of the Shenzhen listed stock, even more than one of the five largest US asset managers. Shanghai managed a small gain +0.28% while the Shenzhen slipped -0.08% as value sectors outperformed in China as well. Northbound Stock Connect volumes were light as well with $87 million of net buying. In Chinese financial media, prominent economist Lian Ping stated that China’s real estate market could bottom up by the second quarter due to government policy support.

The Hang Seng and Hang Seng Tech fell -0.24% and -1.01% respectively on volume -12.85% from yesterday which is 77% of the 1-year average. 201 stocks advanced while 272 stocks fell. Main Board short turnover fell -41.92% from yesterday which is 52% of the 1-year average as 12% of turnover was short turnover. Value factors outperformed growth factors as large caps outpaced small caps. Top sectors were utilities gaining +1.28%, materials closing higher +0.71%, and real estate up +0.58% while healthcare fell -1.77%, communication closed lower -1.74%, and discretionary finished -0.99%. Top sub-sectors were food/staples, household products, and utilities while pharma/biotech, software, and retailing were among the worst. Southbound Stock Connect volumes were light as Mainland investors sold -$478 million of Hong Kong stocks with Tencent a moderate/large sell, Meituan a large buy, and Kuaishou a small net buy.

Shanghai, Shenzhen, and STAR were mixed +0.28%, -0.08%, and -0.13% respectively on volume -6.6% from yesterday which is 101% of the 1-year average. 2,149 stocks advanced while 2,412 stocks declined. Value factors outpaced growth factors while small caps edged large caps by a small percentage. Top sectors were materials +1.18%, energy +0.63%, and financials +0.56% while communication a negative Wayne Gretzky -0.99%, staples -0.35%, and industrials -0.14%. Top sub-sectors were petrochemical, chemical fiber, and soft drinks while catering tourism, telecom, and internet were among the worst. Northbound Stock Connect volumes were light as foreign investors bought $87 million of Mainland stocks. CNY gained +0.04% versus the US dollar, Treasury bonds rallied, while copper and steel diverged.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

  • CNY per USD 6.81 versus 6.82 yesterday
  • CNY per EUR 7.33 versus 7.30 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 +0.54% overnight
  • Steel Price -0.62% overnight