Quiet Night As Hong Kong Volumes Drop

Key News

Asian equities were broadly higher on light volumes as South Korea’s growth stock exchange the KOSDAQ +3.02% though down -42% YTD. Hong Kong traders returned to their holiday after yesterday’s strong move as volumes plummeted and stocks posted small declines on profit-taking.

Hong Kong’s most heavily traded by value were Tencent -0.43%, Alibaba HK -1.25%, Meituan +1.26%, and AIA -0.21%, followed by EV battery maker CALB’s IPO was flat, which many took as a win. Tencent usually trades between HK $8 to $10B but today traded HK $2.87B. Even shorts went back to the beach as short sale volume dropped -45% from yesterday to just 56% of the 1-year average. Meituan saw a short volume increase to 38% of total volume from yesterday’s 35%, Alibaba 25% from 18%, JD.com HK 34% from 31%, and Tencent’s fell to 9% from 12%. Remember, Hong Kong has lacked support from Southbound Stock Connect trading which tends to be net buying.

Travel stocks had a good day, including Trip.com HK +4.51% as Mainland Chinese tourism appears strong. Troubled real estate developer CIFI was off another -15% as the company’s market cap is now US $866mm from $7B back in February. Many of these real estate companies will be dropped from global indices once they rebalance later this year. The US dollar has strengthened overnight though the Asia dollar index gained versus the US dollar. China’s offshore currency stayed at 7.06 after appreciating from 7.17 to 7.06 over the last week (US $/CNY, so a decline is appreciation).

Bloomberg News has an article on Boeing’s declining airline sales to China due to US-China political tensions. Shocking! Not really. Obviously, it takes two to tango, as Europe’s Airbus appears to be the big beneficiary. The key is this is the first genuine article that brings attention to how connected economically the US and China are and how well many US multinational companies are doing in China. The article is about Boeing, but if you step back, it could be written about many companies.

To fight inflation, i.e., high oil prices, the US government will allow Venezuelan oil imports but aren’t willing to take down China tariffs?!

The Hang Seng and Hang Seng Tech declined -0.42% and -0.67% as volume decreased -40.74% from yesterday, which is 50% of the 1-year average. 159 stocks advanced, while 321 stocks declined. Main Board short sale turnover declined -45.79% from yesterday, which is 56% of the 1-year average, as 19% of shares traded were short. For the most part, growth factors outperformed value factors as large caps outpaced small caps. The only positive sectors were materials +0.27% and energy +0.19%, while healthcare -1.93%, real estate -1.68%, and utilities -1.16%. Top sub-sectors included education, aviation, and food, while auto, biotech, and retailers were among the worst. Southbound Stock Connect was closed.

Shanghai, Shenzhen, and STAR Board are closed for the remainder of the week.

Last Night’s Exchange Rates, Prices, & Yields

Mainland China’s fixed-income and currency markets were closed overnight.