Key News
Asian equities were largely higher overnight as Taiwan outperformed and Mainland China underperformed.
Summer doldrums might be setting in as volumes were thin, leading to more volatility on very light news. Hong Kong could not maintain yesterday’s strong bounce following the interest rate cuts and post-Third Plenum resolution piece as investors want tangible stimulus policies. Growth stocks and sectors in both Mainland China and Hong Kong underperformed, as many of the semiconductor and computer companies bought yesterday were sold today.
There was a fair amount of commentary on the light (below average) volumes in the National Team’s favored ETFs as the Shanghai, Shenzhen, Hang Seng, and HS Tech fell to early July lows. Hong Kong’s breadth, similar to Mainland China’s, was poor, as Hong Kong’s most heavily traded stocks by value were Tencent, down -1.88%, Meituan, down -2.64%, Alibaba, down -0.87%, energy giant CNOOC, down -0.49%, and China Construction Bank, up+1.11%. Even Southbound Stock Connect buying in Hong Kong was light today.
The US-China Business Council hosted a delegation of US multinationals in Beijing led by FedEx President and CEO Raj Subramaniam. The delegation met with Vice-Premier He Lifeng and Foreign Minister Wang Yi. This is another sign of China’s continued openness to foreign corporations and investors.
The Hang Seng and Hang Seng Tech indexes fell -0.94% and -1.82%, respectively, on volume that declined -8.13% from yesterday, which is 83% of the 1-year average. 78 stocks advanced, while 405 declined. Main Board short turnover fell -11.7% from yesterday, which is 86% of the 1-year average, as 18% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Value and large-cap stocks “outperformed”/fell less than growth and small-caps. The financial sector was the only positive sector as it closed higher by +0.62%, while materials fell -3.41%, consumer staples fell -2.69%, and real estate fell -2.1%. The top sub-sectors were banks, telecommunication services, and business/professional services, while materials, semiconductors, and food/beverage were the worst. Southbound Stock Connect volumes were light as Mainland investors bought $12 million of Hong Kong stocks and ETFs with Tencent a small net buy while the HK Tracker ETF was a large net sell.
Shanghai, Shenzhen, and the STAR Board fell -1.65%, -2.58%, and -4.11%, respectively, on volume that increased a slight +0.84% from yesterday, which is 81% of the 1-year average. 991 stocks advanced, while 3,895 declined. The utility sector was the only positive sector as it gained +0.14%, while materials fell -4.11%, technology fell -3.52%, and consumer staples fell -3.41%. The top sub-sectors were banking, water, and marine/shipping, while precious metals, semiconductors, and base metals were the worst. Northbound Stock Connect volumes were moderate, with foreign investors net sellers of Mainland stocks as BYD was a small/moderate net buy, Cambricon and Ag Bank were small net buys, while Kweichow Moutai, Wuliangye and Zhongji Innolight were small net sells. The Treasury curve steepened. CNY was off small versus the US dollar. Copper and steel fell.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.27 versus 7.27 yesterday
- CNY per EUR 7.90 versus 7.91 yesterday
- Yield on 10-Year Government Bond 2.23% versus 2.25% yesterday
- Yield on 10-Year China Development Bank Bond 2.29% versus 2.31% yesterday
- Copper Price -1.18%
- Steel Price -0.98%
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