Key News
Asia was down again despite the US 10-year Treasury yield retreating back below 4.60% and the US dollar was slightly lower overnight.
Hong Kong and Mainland China were off overnight heading into tomorrow’s main event: MSCI’s
MSCI
China’s weight declined less than 0.5% within the MSCI Emerging Markets Index, which adds up to +$1 billion in net selling. Again, it is not a big number, but it is not insignificant. The evidence of this selling would be that Hong Kong’s large caps have recently underperformed small caps. Kweichow Moutai, which was down -1.49% on net selling via Northbound Stock Connect, is the largest Mainland stock within MSCI indices.
The big positive news overnight was that Semiconductor Conductor International Corporation (SMIC), which gained +4.68% in Hong Kong and +5.71% in Mainland China, reported developing 3-nanometer chips after previously only being able to produce 5-nanometer chips. There was limited news from Mainland media sources, but this would be big news indicating the broadening of their capabilities.
A strike at Samsung Electronics helped semiconductor stocks, while higher iPhone sales benefited Apple’s
AAPL
It was an off day for the real estate sector as it underperformed despite Vanke making progress on a loan deal. Real estate concerns are policy support, and money isn’t enough, though we continue to see real estate policy amplification. Hong Kong’s most heavily traded stocks by value were Tencent, down -0.81%; Meituan, trading lower by -3.37%; Alibaba HK, down -0.65%; CCB, down -1.58%; and HKeX, down -2.88%. BYD gained +0.83% in Hong Kong and +1.41% in Mainland China after yesterday’s release of new hybrid sedans with 1,250 miles on a fuel charge and tank.
Clean energy stocks were in focus as I underestimated yesterday’s news on government policies to reduce carbon emissions. A commodity researcher’s note on limiting steel and aluminum products to reduce pollution could lead to higher prices. This will be combined with efforts to restrict solar production. Interesting! More work to come on this. Trip.com reported robust international summer travel data from Chinese travelers, up +150% YoY. A positive sign!
The Hang Seng and Hang Seng Tech indexes fell -1.34% and -0.33%, respectively, on volume that increased +1.88% from yesterday, which is 123% of the 1-year average. 112 stocks advanced, while 363 declined. Main Board short turnover increased by +2.98% from yesterday, which is 111% of the 1-year average, as 16% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). All factors were negative, with growth and small caps falling less than value and large caps. Information Technology and Utility stocks were the only positive sectors, gaining +0.5% and +0.18%, while Materials fell -3.11%, Real Estate fell -2.63%, and Energy fell -2.1%. The top-performing subsectors were semiconductor stocks, Business Services, and Technical Hardware, while Materials, Energy Utilities, and Transportation were the worst. Southbound Stock Connect volumes were moderate/light as Mainland investors bought a net $563 million worth of Hong Kong-listed stocks and ETFs.
Shanghai, Shenzhen, and the STAR Board were mixed, closing -0.62%, -0.46%, and +1.14%, respectively, on volume +2.07% from yesterday, which is 85% of the 1-year average. 1,811 stocks advanced, while 3,149 declined. The growth factor and small caps fell less than the value factor and large caps. The top-performing sectors were Technology, up +1.05%; Consumer Discretionary, up +0.21%; and Industrials, flat/0.0%, while Real Estate fell —2.26%, Energy fell -1.81% and Materials fell -1.33%. The top-performing subsectors were Semiconductor stocks, Aerospace/Military, and Electronic Components, while Precious Metals, Shipping, and Education were the worst. Northbound Stock Connect volumes were moderate/average as Chalco, BYD, and Will Semiconductor were small net buys, while Kweichow Moutai had moderate/large net sell, and CMB and Midea were small net sells. CNY managed a small gain versus the US dollar. Treasury bonds were off. Copper fell while steel gained.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.23 versus 7.24 yesterday
- CNY per EUR 7.82 versus 7.86 yesterday
- Yield on 10-Year Government Bond 2.28% versus 2.27% yesterday
- Yield on 10-Year China Development Bank Bond 2.40% versus 2.39% yesterday
- Copper Price -1.28%
- Steel Price +0.88%
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