STAR Market Shines, Yellen To Visit China

Key News

Asian equities were largely lower overnight on little news and low volumes as Thailand was closed for Eid al-Fitr, which marks the end of the month-long dawn-to-sunset fasting of Ramadan, according to Google. Fed officials delivered some tough talk on fighting inflation, which weighed on sentiment as the US dollar strengthened, which sent the Asia Dollar Index lower by -0.3%.

China’s economic data release failed to give support to the market as both Mainland and Hong Kong markets were lower overnight on dollar strength and concerns about global growth. Nonetheless, the release was overwhelmingly positive, and internet and E-Commerce companies are likely to benefit the most from China’s consumer recovery, which is now evident.

Janet Yellen has been increasingly vocal about visiting China and working together with her economic colleagues in the country. The Treasury Secretary now has a trip planned in the coming months. She will deliver remarks on the issue this Thursday and I think all China watchers would do well to tune in. “Secretary Yellen will underscore that in its bilateral relationship with China, the United States proceeds with confidence about the enduring fundamental strength of our economy,” according to the Treasury.

The STAR Market bucked the trend in Asia overnight as the STAR 50 Index closed higher on the day and is up over +18% year-to-date. STAR Market names and Mainland-listed technology generally has been a bright spot this year on policy support. This is an interesting space, especially considering that the IPO market in the US has dried up, with new listings down by over two-thirds in 2022. It will be interesting to see what China does in terms of new listings this year, considering the recovery and removal of COVID restrictions.

In Shanghai, engineering service company Jiangsu Hengshang Energy Conservation surged 59% to 25.32 yuan on its first day of trading on Wednesday.

On Tuesday, Anta Sports Products, China’s biggest sportswear maker, announced it is seeking to raise US $1.5 billion from a stock placement at a discount to the market price to help pare debt. The stock fell the most it has in 6 months.

The Hang Seng and Hang Seng Tech indexes fell -1.37% and -2.39%, respectively, on volume that declined -8.95% from yesterday, which is 82.5% of the 1-year average. 111 stocks advanced while 384 fell. Main Board short turnover increased +0.19% from yesterday, which is 75% of the 1-year average as 15% of turnover was short turnover. Growth underperformed/fell more than value factors as large caps did better than small caps. Materials was the only positive sector gaining +0.17% while real estate fell -2.91%, communication closed lower -2.28%, and tech finished down -2.09%. Top sub-sectors were consumer services, materials, and media while software, technical hardware, and auto were the worst performers. Southbound Stock Connect volumes were light as Mainland investors bought $377 million of Hong Kong stocks today with Tencent a small/moderate net sell, Kuaishou a moderate net sell, Meituan and SMIC were small net buys.

Shanghai, Shenzhen, and the STAR Board were mixed -0.68%, -0.57% and +0.41% on volume +2.07% from yesterday which is 118% of the 1-year average. 1,623 stocks advanced while 3,049 declined. Value and growth factors were both off while small caps outperformed large caps. All sectors were negative with real estate falling -2.69%, discretionary closing down -1.48%, and industrials finishing lower -1.37%. Top sub-sectors were computer hardware, media and shipping while telecom, household products and building materials were the worst. Northbound Stock Connect volumes were moderate/high as foreign investors sold -$132 million of Mainland stocks with CATL, Sungrow, and Kweichow Moutai small net buys while China Merchants Bank, Ping An, and Sevenstar were small net sells. CNY was off versus the US dollar closing at 6.89.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.89 versus 6.87 yesterday
• CNY per EUR 7.53 versus 7.54 yesterday
• Asia Dollar Index -0.30% overnight
• Yield on 10-Year Government Bond 2.83% versus 2.83% yesterday
• Yield on 10-Year China Development Bank Bond 3.02% versus 3.01% yesterday
• Copper Price -0.06% overnight
• Steel Price -0.30% overnight