Powell’s Pessimistic Press Conference Panics Vacation Packing Investors

Key News

The timing of Powell’s hawkish press conference couldn’t be worse for Asian markets as many investors have exited for vacation or are packing their bags for Chinese New Year’s. Investors were unnerved by Powell’s comments on the possibility of interest rates rising at each of the seven Fed meetings versus the consensus for three or four hikes. 

Asia equity markets were universally risk off less Indonesia and the Philippines’ small gain. South Korea was hit hard as the Kospi -3.5% (-13% YTD) overnight while the growth geared Kosdaq -3.73% (-18.74% YTD). Taiwan chose the right day to be on vacation.

With Southbound Stock Connect closed, the Hang Seng lacked the buying support of Mainland investors as it slid -1.99% led lower by internet/tech/growth sectors. Volume was up 1% from yesterday which is only 84% of the 1-year average while decliners outpaced advancers 10 to 1. Hong Kong’s most heavily traded by volume were Tencent -2.24%, Alibaba HK -7.19%, and Meituan -6.93%. Analysts have been very conservative on Alibaba’s next financial release which should occur after Chinese New Year’s. Usually, the calendar year Q4 is strong due to Singles Day so we shall see. Reuters is reporting that Tencent is pushing to take online gaming company Douyu (DOYU US) private. 

The Mainland market was not immune to the downdraft as Shanghai -1.78%, Shenzhen -2.87%, and STAR Board -2.81% as turnover increased +3.83% from yesterday which is only 78% of the 1-year average. Breadth was awful as only 240 stocks advanced while 4,102 declined. Today was the last day for Northbound Connect trading as foreign investors pulled -$2.296B from Mainland stocks. Take a low-volume day and throw in the big foreign investor pullback as contributors to the market action. 

Six large Mainland mutual fund families announced they would be taking stakes in their own mutual funds as a sign of confidence for their shareholders. The investment amounts range from two firms putting in a mere $8mm while one firm invested a healthy $157mm. 

The Mainland’s most heavily traded stock was Kweichow Moutai which gained +0.51% after announcing it will build another factory to make their fiery alcohol. December industrial profits increased 4.2% year over year versus November’s +9%. In 2021, industrial profits increased 34.3% though the release was clearly non-market moving. Premier Li noted that China’s exports are apt to slow which will require policy adjustments. Job #1 should be raising household consumption which has been weak due to the draconian covid measures. Treasury bonds sold off, CNY declined to 6.36 from 6.32 as the US $ rallied and copper gained +0.58%.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.37 versus 6.32 yesterday
• CNY/EUR 7.11 versus 7.13 yesterday
• Yield on 10-Year Government Bond 2.73% versus 2.71% yesterday
• Yield on 10-Year China Development Bank Bond 2.99% versus 2.96% yesterday
• Copper Price +0.58% overnight