Xpeng Rises, Low Inflation Signals More Easing, Week In Review

Week in Review

• Asian equities were mixed but mostly higher for the week on hopes for a US Fed pause at the upcoming meeting as Hong Kong and Japan outperformed while Mainland China was slightly lower on the week.
• The Caixin Services PMI was released on Monday, indicating above-expectations expansion in the services sector with a reading of 57.1.
• China’s accommodative monetary policy was on display this week as the People’s Bank of China (PBOC), China’s central bank, lowered the rate that banks must pay on their deposits, freeing up more capital for lending and setting the stage for another reserve requirement cut.
• News surfaced on Tuesday that US Secretary of State Antony Blinken may travel to China as soon as next week, another green shoot for US-China relations.

Friday’s Key News

Asian equities were mostly higher overnight except for Thailand, India, and the Philippines. It was a quiet night on the news front.

Internet names were slightly higher in Hong Kong overnight. Meanwhile, we saw short volume fall again after a rise last week. E-Commerce earnings have been stellar, which is contributing to the slow comeback in the names. Shorts are getting squeezed by better-than-expected results, especially from Trip.com on the recovery of travel in China.

Electric vehicle manufacturer Xpeng’s stock gained +5% in Hong Kong overnight as pre-sales began for its G6 smart coupe. The model debuted at the Shanghai Auto Show earlier in the year. Other EV names including NIO were mostly flat.

China’s consumer prices rose a measly +0.2% year-over-year in May, a strong indication that more easing is on the way.

The State Council released its 2023 Legislative Work Plan this week, which includes national level regulations for the generative artificial intelligence (AI) industry. In other AI news, ByteDance, owner of TikTok, may roll out its own AI chat bot service.

Liquor giant Kweichow Moutai has announced a product expansion into desserts and other non-alcoholic food and beverage options to gain more young fans of the brand. Interesting!

Real estate saw some profit taking after its impressive run over the past two weeks on anticipation of increased policy support. Some of the policies being discussed include the lowering of down payments in some areas to encourage sales.

The Hang Seng and Hang Seng TECH indexes closed higher by +0.47% and +1.03%, respectively, overnight on volume that increased +3% from yesterday. The top-performing sectors were Communication Services, Healthcare, and Energy. Meanwhile, Real Estate, Financials, and Consumer Staples were the worst-performing sectors. Mainland investors sold a net -$160 million worth of Hong Kong stocks last night via Southbound Stock Connect.

Shanghai, Shenzhen, and the STAR Board closed higher by +0.55%, +0.71%, and +2.53% overnight on volume that increased +15% from yesterday. The top-performing sectors were Communication Services, Utilities, and Information Technology. Meanwhile, Real Estate, Financials, and Consumer Staples were the worst performing sectors. Foreign investors sold a net -$183 million worth of Mainland stocks via Northbound Stock Connect.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.13 versus 7.11 yesterday
• CNY per EUR 7.68 versus 7.67 yesterday
• Yield on 1-Day Government Bond 1.34% versus 1.40% yesterday
• Yield on 10-Year Government Bond 2.67% versus 2.68% yesterday
• Yield on 10-Year China Development Bank Bond 2.82% versus 2.83% yesterday
• Copper Price +0.74% overnight