Post Holiday Enthusiasm Continues, Short Sellers Set Sights On India’s Adani

Key News

Asian equities were mostly higher overnight on continued exuberance following China’s Lunar New Year holiday. Hong Kong built on its gains from yesterday while India was the only Asian market lower overnight.

Data suggests that cross-border travel rebounded during the Lunar New Year holiday. Macau saw 40,000 visitors from Mainland China on the second day of the week-long holiday, which was the most since the start of the pandemic, according to Bloomberg.

Indian mogul Gautam Adani has become the target of short-selling hedge fund Hindenburg Research, which claims that the extent to which his family of businesses are overleveraged is not reflected in the market value of those businesses. Indian equities have been in focus for emerging markets investors since their rally in 2021. The Adani saga is likely to sour investor confidence in India, at least temporarily, making the pain trade higher for many active emerging markets funds that have been overweight India and underweight China over the past year.

Speaking of active emerging markets managers, Copley Fund Research came out with a report that the average global emerging market fund underperformed the MSCI Emerging Markets Index in 2022. A willingness to trade China’s comeback in Q4 could have eased the pain for these managers, in my opinion.

Semiconductor stocks were lower in Hong Kong overnight as it is being reported that Japan and the Netherlands will be joining the US in curbing China’s supply of foreign-made advanced semiconductors. As we discuss in a recent article, the semiconductor export restrictions imposed by the US, and now some allies, are apt to have a varied impact on China’s semiconductor industry. Starved for advanced chips, semiconductor manufacturers on the Mainland are likely to accelerate research and development efforts to make up for the deficit.

The Ministry of Commerce (MOC) is seeking comment on plans to prohibit the export of certain types of advanced solar wafers.

JP Morgan has increased its stake in China-based battery manufacturer CALB.

The Hang Seng and Hang Seng Tech indexes gained 0.54% and 1.04%, respectively, on volume that decreased -18.66% from yesterday. Short sale turnover also declined by -12.18% from yesterday. The most heavily traded stocks by value were Country Garden Holdings, which gained 6.23%, Bank of China, which gained 0.99%, and China Construction Bank, which gained +0.96%.

Shanghai, Shenzhen, and the STAR Board will reopen from the Lunar New Year holiday on Monday.

Last Night’s Exchange Rates, Prices, & Yields

Mainland bond and currency markets were closed overnight and will reopen on Monday, January 30th.