Meituan Beats, Week In Review

Week in Review

• Asian equities had a decent week on strong volumes as most bank contagion fears subsided and the China internet names came roaring back.
• Pinduoduo and Tencent reported earnings this week. Tencent’s results were strong, while Pinduoduo’s results led to investor concerns about increased marketing expenses.
• Evergrande was back in the news this week with a new restructuring plan for its offshore debt.
• TikTok CEO was grilled by the US Congress on Thursday, making for entertaining television as Congress’ desire for a ban appeared to be a foregone conclusion.

Friday’s Key News

Asian equities curbed their enthusiasm as markets were largely lower, though growth sectors outperformed. The US dollar strengthened overnight as CNY and the Asia Dollar Index fell -0.8% and -0.62%, respectively, versus the US dollar.

It was a quiet night last night as TikTok’s congressional grilling garnered attention. As the Wall Street Journal notes, many US and global executives will be traveling to China for the China Development Forum as business people continue to get along and are getting on planes to meet with one another.

This morning after the Hong Kong close, food delivery and local services giant Meituan reported Q4 financial results, beating on revenue, adjusted net income, and adjusted earnings per share (EPS). The company grew revenue by +21% year-over-year.

Hong Kong’s most heavily traded stocks were Tencent, which gained +0.32%, Meituan, which fell -0.64%, Alibaba, which fell -1.04%, Baidu, which gained +2.32%, and Lenovo, which gained +8.25% as the Hang Seng Tech gained +0.62% versus the Hang Seng Index, which fell -0.67%. Southbound Stock Connect flows were notable as Chinese investors bought $783 million worth of Hong Kong stocks as Tencent was a significant net buy.

There were rumors that China’s Premier was spotted at Tencent’s headquarters, though that has not been confirmed. Mainland China was mixed as well as growth outperformed value. It is interesting that all sectors were down except for technology, which gained +0.36%, though the majority of China’s most heavily traded stocks were higher. Technology stocks continue to benefit from Nvidia’s announcement.

The Hang Seng and Hang Seng Tech indexes diverged to close -0.67% and +0.62%, respectively, on volume that was down -9.74% from yesterday, which is 102% of the 1-year average. 148 stocks advanced while 337 stocks declined. Main Board short sale turnover decreased -17.9% from yesterday, which is 81% of the 1-year average, as 14% of turnover was short turnover. Growth factors outperformed value factors as small caps outpaced large caps. The top-performing sectors were technology, which gained +1.89%, consumer staples, which gained +1.15%, and communication services, which gained +0.65%. Meanwhile, energy fell -2.34%, real estate fell -1.62%, and industrials fell -1.59%. The top-performing subsectors were healthcare equipment, media, and technical hardware. Meanwhile, energy, food, and capital goods were among the worst. Northbound Stock Connect volumes were moderate as Mainland investors bought $783 million worth of Hong Kong stocks as Tencent was a strong net buy, Meituan was a small net buy, and Kuiashou was a small net sell.

Shanghai, Shenzhen, and the STAR Board diverged to close -0.64%, +0.25%, and +0.19%, respectively, on volume that increased +5.55% from yesterday, which is 120% of the 1-year average. 2,018 stocks advanced while 2,595 stocks declined. Growth factors outperformed value factors, while small caps outpaced large caps. Technology was the only positive sector, up +0.27%, while energy fell -2.26%, healthcare fell -1.75%, and utilities fell -1.67%. The top-performing subsectors were internet, computer hardware, and software, while telecom, construction, and construction machinery were among the worst. Northbound Stock Connect volumes were high as foreign investors sold -$34 million worth of Mainland stocks. CNY fell -0.8% versus the US dollar closing at 6.87 versus 6.83 yesterday, while the Asia Dollar Index fell -0.62%. Treasury bonds sold off, while Shanghai copper gained, and steel fell.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.87 versus 6.83 yesterday
• CNY per EUR 7.38 versus 7.40 yesterday
• Yield on 1-Day Government Bond 1.23% versus 1.48% yesterday
• Yield on 10-Year Government Bond 2.87% versus 2.87% yesterday
• Yield on 10-Year China Development Bank Bond 3.03% versus 3.02% yesterday
• Copper Price +0.91% overnight
• Steel Price -0.97% overnight