Asian equities had a tough Monday, less so for India and Singapore as Lionel Messi turned the world into soccer fans (at least temporarily!) with Argentina’s thrilling victory over France.
Volumes were light regionally as Friday marked the last trading/liquidity event of the year for institutions. Both Hong Kong and China opened higher but slipped during the trading day despite the Central Economic Work Conference’s strong pro-growth/pro-domestic release, which emphasized internet companies, electric vehicles and the real estate sector. In addition to the CEWC’s pro-consumer statement highlighting the importance of Internet companies, a senior regional government official visited Alibaba’s headquarters.
Hong Kong Internet stocks outperformed today, as evidenced by Hong Kong’s most traded stock: Tencent +1.14%, Alibaba HK +0.69%, Meituan and Kuaishou +1.15%. Following the Hong Kong shutdown, it was announced that eligibility for Northbound and Southbound Stock Connect will be expanded in three months, which should allow for more dual-listed stocks with the addition of a primary Hong Kong listing. The issue that has weighed on Hong Kong and to a greater extent on Shanghai and Shenzhen is the spread of COVID in China. Remember that investing in stocks is for your excess savings. Therefore, if you are cautious, you will probably reduce your stock.
Our main China mobility tracking shows that both traffic and use of the subway have dropped significantly in recent weeks. Although the government is relaxing the rules, people are clearly worried about getting sick. While this trend may worsen in the near term, there is light at the end of the tunnel as today’s WSJ noted the sharp increase in domestic air travel. The risk averse sentiment can be seen in the healthcare sector, arguably a COVID beneficiary, it has been the worst performing sector in both Hong Kong and China. Trading should be light over the next couple of weeks, although professional investors will need to position themselves in light of PCAOB news regarding the Holding Foreign Companies Accountable Act and the reality of a reopening of China in 2023. Position yourself accordingly!
The Hang Seng and Hang Seng Tech lost -0.5% and -0.58% respectively on volume -26% since Friday, which is 81% of the 1-year average. 110 stocks advanced while 395 declined. Main Board’s short revenue was down -30.11% from Friday, which is 64% of its 1-year average, as 14% of revenue was short billed. Value factors outperformed growth factors as large caps outperformed small caps. Top sectors were Communications +0.78%, Consumer Staples +0.26% and Consumer Discretionary +0.11%, while Healthcare was down -3.92%, Utilities -3 .54% and industry -2.67%. The top sub-sectors were software, retail and food/beverage, while pharmaceuticals, health care equipment and staple foods were among the worst performers. Southbound Stock Connect volumes were modest as mainland Chinese investors sold -$54 million of Hong Kong shares with Tencent, Meituan and Kuaishou, all small net buys.
Shanghai, Shenzhen and the STAR Board were down -1.92%, -1.78% and -2.27% in volume -0.22% compared to Friday, or 81% of the yearly average. 518 stocks advanced while 4,216 stocks declined. Growth factors “outperformed” value factors, while large caps outperformed small caps. All sectors fell with industry -1.07% and healthcare -3.28%. The only positive sub-sector was education, while pharmaceuticals, telecommunications and biotechnology were among the worst performers. Northbound Stock Connect volumes were modest as foreign investors sold -$213 million of Continental stock. The CNY fell slightly against the US dollar to 6.97, the Treasury market was up and copper was down -0.23%.
Leading Chinese mobility tracker
Current usage slowdown trend.
Show last night
Last night’s exchange rates, prices and yields
- CNY for USD 6.97 versus Friday’s 6.97
- CNY for EUR 7.39 versus 7.40 on Friday
- 10-year government bond yield 2.86% versus 2.88% on Friday
- Yield on 10-year China Development Bank Bond 3.02% vs. 3.04% on Friday
- Copper price -0.23%