Reopening Rolls On, Clean Tech Jumps, Week In Review

Week in Review

• Asian equities started 2023 with China outperforming as the country gears up to allow foreign visitors to enter the country quarantine-free starting Sunday.
• On Wednesday, Alibaba’s Ant Group was approved by the China Banking and Insurance Regulatory Commission (CBIRC) to raise the consumer finance group’s capital reserves to RMB 18.5B ($2.7B).
• The CBIRC and People’s Bank of China (PBOC) adjusted loan qualification requirements to make it easier to purchase a home on Thursday.
• US Secretary of State Antony Blinken met with China’s new Foreign Minister Qin Gang on New Year’s Day.

Friday’s Key News

Asian equities ended the week mixed as South Korea posted a strong day and North Asia outperformed South Asia. For the week, the outperformance of Hong Kong and Mainland China stands out, while Japan, India, and Indonesia posted declines.

China’s reopening continues as Hong Kong announced it will allow 60,000 visitors a day from the mainland as covid runs through China. Hong Kong opened higher but slid over the trading day to close lower for the day as Hong Kong’s most heavily traded stocks by value were Tencent, which gained +0.46%, Alibaba, which gained +2.01%, and Meituan, which fell -4.25%.

Hong Kong-listed electric vehicle companies had a rough day as Xpeng fell -6.82%, Li Auto fell -6.55%, NIO fell -4.03%, and BYD fell -2.6% as Tesla’s stock declines weigh on the space amid several broker downgrades. An element of Tesla’s problems is its declining market share in China. More options, especially less expensive ones, mean fewer Tesla sales, which could be an issue as global auto makers ramp up their EV efforts.

Property was a big news item as the new loan qualification requirements were digested by local participants. Hong Kong-listed real estate stocks gained +2.22%, though were off -0.79% on the Mainland. Remember that the stocks could see less upside than the bonds as companies issue more equity to bolster their balance sheets. At the same time, developer bonds should probably go in one’s equity risk bucket due to their volatility compared to the stocks.

Mainland China’s top ten most heavily traded stocks by value included several solar plays on chatter that output could pick up as Longi Green Energy gained +3.9%, Tongwei gained +5.06%, and Sungrow Power rose +5.43%. Amongst the top ten were also other clean tech plays such as battery maker CATL, which gained +2.25%, and Tianqi Lithium, which gained +3.01%. Foreign investors bought another $884 million worth of Mainland stocks today, bringing the weekly total to $2.9 billion. CNY had another strong day versus the US dollar, closing at 6.85. It is worth pointing out that Chinese Treasury bonds have sold off a bit, which may indicate investors are rebalancing from bonds to stocks.

According to a Mainland media source, General MotorsGM
sold 2.3 million cars in China in 2022 versus 2.9 million cars in the country in 2021, which is a decline of 21%. Remember that GM’s sales are not included in official trade data. While China considers these sales a US Export, the US does not because they aren’t put on a boat. This is a critical issue that no one talks about. If you add US goods manufactured and sold in China to the trade data, there is no trade deficit!

The Hang Seng and Hang Seng Tech indexes fell -0.4% and -1.4%, respectively, on volume that decreased -14.86% from yesterday, which is 118% of the 1-year average. 221 stocks advanced while 271 stocks declined. Main Board short selling turnover declined -17.82% from yesterday, which is 104% of the 1-year average as 15% of turnover was short turnover. Value factors edged out growth factors as small caps outpaced large caps. The top performing sectors were real estate, which gained +2.21%, utilities, which gained +1.1%, and materials, which gained +0.44%. Meanwhile, healthcare fell -1.39%, technology fell -1.1%, and consumer staples fell -0.78%. The top performing subsectors were semiconductors, utilities, and materials, while autos, healthcare equipment, and technical hardware were among the worst. Southbound Stock Connect volumes were moderate as Mainland investors sold -$172 million worth of Hong Kong stocks as Tencent, Meituan, and Xpeng were all net sold while Li Auto and Kuaishou were small net buys.

Shanghai, Shenzhen, and the STAR Board gained +0.08%, +0.17%, and +0.77%, respectively on volume that decreased -0.65% from yesterday which is 91% of the 1-year average. Growth factors outpaced value factors as small caps outpaced large caps by a very small amount. The top-performing sectors were materials, which gained +1.59%, energy, which gained +1.43%, and tech, which gained +1.21%. Meanwhile, communication fell -2.38%, real estate fell -0.78%, and healthcare fell -0.61%. The top-performing sub-sectors were power generation equipment, petrochemicals, and household products while media, education, and airports were among the worst. Northbound Stock Connect volumes were moderate/high as foreign investors bought +$884 million worth of Mainland stocks as the top eight companies by value traded were net buys. CNY gained +0.28% versus the US dollar to close at 6.85, Treasury bonds sold off, and copper gained +1.62%.

Major Chinese City Mobility Tracker

Traffic improves again as Guangzhou may have reached peak case numbers.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.85 versus 6.88 yesterday
• CNY per EUR 7.21 versus 7.25 yesterday
• Yield on 1-Day Government Bond 0.92% versus 0.92% yesterday
• Yield on 10-Year Government Bond 2.83% versus 2.83% yesterday
• Yield on 10-Year China Development Bank Bond 2.96% versus 2.95% yesterday
• Copper Price +1.62% overnight