Regulators’ Internet Symposium Signals Softer Touch

Key News

Asian equities followed the US’ strong Friday performance overnight. China, South Korea, and Taiwan markets were all closed for Lunar New Year while Hong Kong had a half day.

Friday’s Reuters article reporting that Vice Chairman Fang Xinghai of the CSRC, China’s SEC, mentioned there could be a “positive surprise” regarding the HFCAA issue did not garner attention in Asia.

What did garner attention was the Cyberspace Administration of China’s symposium on Friday, which included three regulators (NDRC, MIIT, and SAMR) and 27 companies. JD.com, Kuaishou, and Meituan were given speaking roles. The objective of the symposium was “promoting the healthy and sustainable development of internet companies.” The market interpreted the positive press release as a signal the regulatory cycle is over or, at least, in its late innings.

Hong Kong’s most heavily traded stocks by value were Tencent, which gained +2.61%, Alibaba HK, which gained +3.64%, Meituan, which gained +5.58%, and JD.com HK, which gained +5.11%.

Over the weekend, the “official” and Caixin PMIs for January were released. Not too hot not too cold. The economy is slowing, which will only be exacerbated by the retraction of stimulus globally and monetary tightening, which will reduce demand for China’s exports. The data shows this as export orders slowed in January. It is worth noting that business expectations remain high.

The National Development and Reform Commission (NDRC) had previously mentioned that consumption should be “a more forceful driver of growth this year,” which should be a big theme in 2022. If exports slow, you need to make it up elsewhere. Considering the importance of internet stocks for consumption, the change in regulatory tone makes sense.

Healthcare had a strong day despite Cansino (6185 HK), which provided earning guidance that was below estimates. It is interesting that breadth saw 3 decliners to 1 advancer though large cap names’ outperformance kept indexes up.

With China closed all week and Hong Kong closed until Friday, CLN will publish again on Friday. Happy Lunar New Year!

Last Night’s Exchange Rates, Prices, & Yields

 China’s bond and currency markets were closed overnight.