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Key News
Asian equities were largely higher as South Korea, Taiwan, and Hong Kong all posted +1% returns, while Southeast Asian equities were off slightly.
Today’s biggest headline came after the market close as Shanghai issued nine changes to home purchase policies in a release titled “Notice on Optimizing Policy Measures for the Stable and Healthy Development of the Real Estate Market”. The nine points each contain multiple adjustments. The most important ones include lowering the interest rate for first-time home buyers, reducing the down payment ratio, and increasing the amount of home loans banks can offer. We can assume real estate stocks will be tomorrow’s best performer due to Shanghai’s prominence. This is not a “subtle sign”!
Another catalyst today was April’s industrial profits, which increased by +4% from March’s -3.5% in a good sign for China and the global economy.
19 government agencies and related entities are contributing RMB 344 billion ($47.5B) to the National Integrated Circuit Industry Investment Fund Phase 3 Co., Ltd (i.e. the “Big Fund Phase 3”) in order to “increase investment in core technologies and key components as well as semiconductors and the industrial chain”. It is worth noting that Big Fund 1 was established in September 2014 and focused on integrated circuit chip manufacturing many years in advance of today’s geopolitics tensions. The announcement led the semiconductor sub-sector to be a top performer in both Mainland China, where it gained +2.87% and Hong Kong, where it gained +5.06%.
China’s Premier Li, Japan’s Prime Minister Fumio Kishida and South Korea’s President Yoon Suk Yeol met for the first time since 2019 to “promote trade and economic cooperation between their countries”.
After last week’s downdraft, Hong Kong’s most heavily traded stocks were Alibaba, which gained +1.41%, CNOOC, which gained +4.23%, Meituan, which gained +2.06%, and China Construction Bank, which gained +0.34%.
Mainland financial media noted Friday’s post-close State Council release titled “Opinions on Expanding Cross-border E-Commerce Exports and Promoting Overseas Warehouse Construction,” with the news impacting several companies, though not garnering much attention from our trading counterparties.
Mainland investors bought a healthy $566 million worth of Hong Kong-listed stocks today. Mainland China posted gains, as foreign investors bought a net $373 million worth of Mainland-listed stocks. Mainland and Hong Kong indices have pulled back from their highs as the end of January rally takes a breather. Hong Kong desks appear to be warming to the rally, though there remains a great deal of skepticism from their US-based counterparts. As we saw today, the policy support amplification continues to increase.
The Hang Seng and Hang Seng Tech indexes gained +1.17% and +1.71%, respectively, on volume that decreased -6.2% from Friday, which is 117% of the 1-year average. 376 stocks advanced, while 107 declined. Main Board short turnover declined -12.21% from Friday, which is 80% of the 1-year average, as 12% of turnover was short turnover (remember Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). All factors were positive as growth and large caps outpaced value and small caps. The top-performing sectors were Materials, which gained +3.92%, Utilities, which gained +2.60%, and Technology, which gained +2.57%. The top-performing subsectors were semiconductors, media, and materials. Meanwhile, household products were the only negative subsector. Southbound Stock Connect volumes were moderate/high as Mainland investors bought a healthy net $566 million worth of Hong Kong-listed stocks and ETFs, including China Mobile, which was a large net buy, and Meituan and CNOOC, which were small net buys. Meanwhile, WuXi Biologics, Tencent, and ICBC were small net sells.
Shanghai, Shenzhen, and the STAR Board gained +1.14%, +0.75%, and +1.57%, respectively, on volume that increased +1.56% from Friday, which is 91% of the 1-year average. 2,457 stocks advanced while 2,431 declined. All factors were positive with the value and large caps outperforming growth and small caps. All sectors were positive with energy +2.11%, utilities +1.46% and tech +1.38%. Top sub-sectors were marine/shipping, semis and computer hardware while building materials, motorcycle and forest were the worst. Northbound Stock Connect volumes were moderate as foreign investors bought $373mm of mainland stocks, with CATL a moderate/small net buy, Kweichow Moutai and Foxconn small net buy, while Weichai Power was a moderate/small net sell, HR and LXJM were small net sells. CNY was off small versus the US dollar. Treasury bonds rallied. Copper and steel were off.
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