Real Time Data Show Holiday Consumption Rebound, Week In Review

Week in Review

• Asian equities had a surprisingly strong week, both on an absolute basis and relative to the US and Europe, though Hong Kong and Mainland China had short weeks due to the May Day holiday.
• China’s May Day travel numbers were released this week and indicated strong demand for travel with many metrics up 2 to 3 times from 2022 levels following China’s reopening and significantly higher than even 2019 levels.
• It was announced this week that Alibaba may spin off its international E-Commerce segment in a separate US listing.
• In this week’s video update, Xiabing Su takes us to the floor of the Shanghai Auto Show.

Friday’s Key News

Asian equities were mixed overnight. India underperformed on an MSCI index decision though Japan, South Korea, and Thailand were on holiday. The Asia Dollar Index and CNY gained versus the US Dollar this week.

China’s adoption of mobile payments allows for real time consumption data similar to the real time data on Labor Day holiday travel. Tencent’s WeChat Pay and Alibaba’s Alipay reported strong consumption data, according to the South China Morning Post. Alipay reported travel-related purchases increased +70% from 2019 and 3X 2022’s levels. WeChat Pay reported that average daily transactions for transport-related spending tripled from 2019 levels while hotels and tourist attraction transactions were up +93%. If you are traveling, you need to eat, sleep, and maybe do some shopping.

With outbound air travel coming back online slowly, the top international destinations were Hong Kong, Thailand, Japan, and Malaysia, while WeChat Pay noted average daily spending in Hong Kong and Macau increased +137% versus 2019 levels. Hat tip to the South China Morning Post!

Overnight, we also had April’s Caixin Services PMI release of 56.4 versus expectations of 57 and March’s 57.8. Pretty good, right? Though, Apple’s China data was down quarter-over-quarter, which seems strange to me.

All sectors were positive in Hong Kong on strong breadth as the Hang Seng Index closed above 20,000 for the first time in a week. Hong Kong’s most heavily traded stocks were Tencent, which gained +1.48%, China Construction Bank, which gained +1.31% as the company dethroned Tencent as Southbound’s most heavily traded stock, though it was a net sell, Ping An, which gained +1.35%, Meituan, which gained +2.73%, and Alibaba, which gained +1.18% on chatter that its international unit will be spun off via a US IPO. I like the idea of a US IPO as making money solves a lot of problems!

Hong Kong short sale turnover came down, though a few internet names had high short turnover percentages including Trip.com 25%, Baidu 21%, along with Li Auto at 23%. If I were these companies, I would recommend highlighting their buyback in Hong Kong and/or announcing some good news.

Mainland China was off as the Caixin report was viewed as a “miss,” though, won’t that prompt stimulus/support? Real estate was the top performing sector in both Hong Kong and Mainland China on April sales numbers. Longi Green Energy fell -2.73% on US solar tariffs (inflation!) though foreign investors were net buyers via Northbound Stock Connect on a likely Biden veto. Foreign investors were net sellers of Mainland stocks today. Treasury bonds had a strong rally.

As I mentioned on Twitter yesterday (@ahern_brendan), the strong dollar has been a headwind to non-US risk assets including emerging markets and China. Most would say the balloon took the air out of the China rally, though the rally stalled in late January when investors started taking the Fed’s hiking seriously. Less the Fed pause debate, the debt ceiling issue creates an interesting situation as usually when markets go risk-off they run up currencies such as the Yen, Franc, Euro, Pound and, most importantly, the dollar. In a debt ceiling crisis, wouldn’t you avoid US Treasuries, not buy them? Hopefully, cooler heads prevail and find a solution. (The solution is easy, of course: stop spending money you don’t have!).

The Hang Seng and Hang Seng Tech indexes gained +0.5% and +1.03%, respectively, on volume that decreased -6.66% from yesterday, which is 82% of the 1-year average. 337 stocks advanced while 149 stocks declined. Main Board short turnover declined -14.12% from yesterday, which is 68% of the 1-year average as 14% of turnover was short turnover. Growth factors outperformed value factors, though momentum was off while small caps outperformed large caps by a small margin. All sectors were positive with the top sectors were real estate +2.9%, communication +1.65% and discretionary +1.38%. Top sub-sectors were household products, retail and software while semis, insurance and capital goods were the worst. Southbound Stock Connect volumes were light as mainland investors sold -$124mm of HK stocks with China Construction Bank the top volume name as a large sell, Tencent was a small net sell while Meituan and Kuiashou were small net buys.

Shanghai, Shenzhen, and the STAR Board were off -0.48%, -0.81% and -1.42%, respectively, on volume that was off -9.27%, which is 117% of the 1-year average. 1,295 stocks advanced while 3,396 stocks declined. Value factors outperformed growth factors as large caps outperformed small caps. The top-performing sectors were real estate, which gained +3.93%, financials, which gained +1.11%, and consumer staples, which gained +0.53%. Meanwhile, healthcare fell -1.49%, technology fell -1.43%, and communication services fell -1.28%. The top-performing subsectors included education, real estate, and diversified financials, while power generation equipment, computer hardware, and internet were the worst. Northbound Stock Connect volumes elevated as foreign investors bought $91 million worth of Mainland stocks as Ping An, Kweichow Moutai, and Longi Green Energy were all net buys. CNY gained versus the US dollar as the Asia Dollar Index made a small gain as well. Treasury bonds had another strong day while steel and copper were off.

Upcoming Event

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Please note the above link is for the virtual registration page. For those who will be in San Francisco on May 11, 2023, there are still a limited number of seats available for the in-person conference. Click here to register. Registration for the in-person event is open to financial professionals only.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.91 versus 6.92 yesterday
• CNY per EUR 7.62 versus 7.64 yesterday
• Yield on 10-Year Government Bond 2.73% versus 2.76% yesterday
• Yield on 10-Year China Development Bank Bond 2.90% versus 2.93%
• Copper Price -0.60%
• Steel Price -1.59%