Tencent’s Cash Dividend Weighs On Meituan

Key News

Asian equity markets were mixed overnight on light volumes as investors worried about financial contagion. Hong Kong had a volatile day as Jack Ma’s visit to China lifted Alibaba and the market, a rally that ran out of out of steam in the afternoon.

Baidu fell -3.17% due to rumors of a delay in its ERNIE chat bot launch. Meituan fell -6.28% and was today’s most heavily traded in Hong Kong by value after the company’s Q4 financial results, which were announced after the close on Friday, beat estimates. The stock’s drop is likely driven by Tencent’s decision to deliver a cash spinoff of Meituan, rather than shares, which obviously requires selling Meituan shares in the open market.

Healthcare was the only positive sector in both Hong Kong and Mainland China after CSPC Pharma’s mRNA Covid-19 vaccine was approved. Mainland markets were off though “outperformed,” i.e. they fell less than Hong Kong as CNY and the Asia Dollar Index eased slightly versus the US dollar.

January/February industrial profits fell -22.9% though the release was not cited as a market mover.

Tim Cook’s attendance at the China Development Forum received media attention and lent itself to a comparison to Congress’ treatment of TikTok’s CEO. Western media largely ignored the fact that many American CEOs attended, including from Qualcomm, Johnson & Johnson, Pfizer, Procter & Gamble, and Abbott Laboratories, while global CEOs in attended included those from Mercedes-Benz, BMW, Shell, Glencore, and Rio Tinto. In China, the event received a great deal of attention as President Xi sent a congratulatory letter to the attendees, while Premier Li Qiang, Minister of Finance Liu Kun, National Development and Reform Commission Head Zheng Shanjie, and IMF Managing Director Kristalina Georgieva all spoke. China is making a full court press when it comes to foreign business. It is too bad that politicians do not appear to be willing to get on airplanes and meet with one another.

The Hang Seng and Hang Seng Tech indexes fell -1.75% and -2.82%, respectively, on volume that increased +3.39% from Friday, which is 105% of the 1-year average. 117 stocks advanced, while 388 stocks declined. Main Board short turnover increased +18.91% from Friday, which is 97% of the 1-year average as 16% of turnover was short turnover. Value factors “outperformed” growth factors, while small caps outpaced large caps. Healthcare was the only positive sector, up +0.49%, while communication services fell -3.36%, materials fell -3.11%, and real estate fell -2.98%. The top-performing subsectors were household products, food, and pharmaceuticals. Meanwhile, software, technical hardware, and materials were among the worst. Southbound Stock Connect volumes were moderate as Mainland investors bought $543 million worth of Hong Kong stocks overnight as Tencent was a large net buy, and Meituan and Kuaishou were small net buys.

Shanghai, Shenzhen, and the STAR Board diverged to close -0.44%, +0.11%, and -0.33%, respectively, on volume that increased +6.12% from Friday, which is 127% of the 1-year average. 1,695 stocks advanced, while 3,010 stocks declined. Growth factors outpaced value factors as small caps outpaced large caps. Healthcare was the only positive sector, gaining +0.8%, while utilities fell -1.73%, real estate fell -1.57%, and consumer staples fell -0.86%. The top-performing subsectors were power generation equipment, software, and chemical fiber, while telecom, office supplies, and household products were among the worst. Northbound Stock Connect volumes were high as foreign investors sold -$100 million worth of Mainland stocks overnight. CNY and the Asia Dollar Index fell -0.22% and -0.16%, respectively, versus the US dollar. Treasury bonds rallied, while Shanghai copper and steel gained.

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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 7.43 versus 7.39 yesterday
• Yield on 1-Day Government Bond 0.98% versus 1.23% yesterday
• Yield on 10-Year Government Bond 2.86% versus 2.87% yesterday
• Yield on 10-Year China Development Bank Bond 3.02% versus 3.03% yesterday
• Copper Price +0.07% overnight
• Steel Price -0.49% overnight