Asian stocks were mostly higher as Hong Kong and mainland China outperformed while Thailand was on holiday for the late King Bhumibol Adulyadej’s birthday. The continued rollback of COVID rules in multiple cities, especially Shanghai, led to another strong day in Hong Kong, China and especially Hong Kong-listed internet stocks.
Mainland media highlighted an expert from the Beijing Institute of Respiratory Diseases, who said that “the pathogenicity and toxicity of Omicron mortgages…were significantly weakened compared to the original strain and Delta.” With the omicron variant less lethal than the original covid and delta, it makes sense to ease the restrictions as well as the frustration of the population in almost three years of stringent policies. This is despite the 4,247 new covid cases along with the 25,477 asymptomatic cases reported today.
Over the weekend, Chinese internet stocks were named the ‘best reopening game China’ due to companies’ exposure to e-commerce and online travel booking along with ‘distressed’ ratings, highlighted by an analyst covering the space. As my colleague, Jonathan Shelon so eloquently put it, “Chinese Internet stocks are the driving engines for domestic consumption as well as online.” At our investor conference last week, Alibaba’s head of investor relations, Robert Lin, spoke about the company’s pivotal role in retail sales.
The shorts covering their positions have led to several very outsized artists today, including Bilibili, which earned +28% and Xpeng, which earned +26%. Hong Kong’s top-traded stocks by value were Tencent, which gained +6.08%, Alibaba HK, which gained +9.26% and Meituan, which gained +3.75%.
The Politburo meets tomorrow, which could give us indications on the economic policies coming out of the next Central Economic Work Conference (CEWC) in ten days.
A bank’s global strategist put China overweight for the first time after holding it at the same weight for two years. As a result, investors who are underweight in China may have to chase names.
Mainland China had a good day, except for semiconductor stocks. The top-traded stocks by value on the mainland were Shijiazhuang Yiling Pharmaceutical, which gained 8.29%, brokerage East Money, which gained 4.97%, and Ping An Insurance, which gained +5.96%, and Sungrow Power, which fell -9.58% on weak European demand. Financials had a good day on the continent, gaining 4.95% as financial regulators’ policies allow banks to prop up struggling property developers. Foreign investors bought $848 million worth of mainland China stock today. The CNY had a strong day, gaining +1.48% against the US dollar to close at CNY 6.96 to the USD, while the Asian dollar index gained +0.47%.
The Hang Seng and Hang Seng Tech Indices gained +4.51% and +9.27%, respectively, on volume that was up +56.18% from Friday, or 181% of the year-over-year average. 470 stocks advanced, while 41 stocks declined. Main Board’s short selling revenue increased 46.31% since Friday, or 148% of its 1-year average, as 14% of revenue was short billed. Growth and value drivers were mixed as small caps outperformed large caps. All sectors were positive as Consumer Discretionary was up 7.9%, Technology was up 6.96% and Communication Services was up 6.93%. The best performing sub-sectors in Hong Kong were healthcare equipment, retail and hardware equipment, while semiconductors remained off. Southbound Stock Connect volumes were high as mainland investors sold Hong Kong stocks at a net value of -$182 million. Tencent was a large net sell on the trading schedule, while Meituan was a light net buy, Kuaishou was a moderate net buy, and Xpeng was a moderate net sell.
Shanghai, Shenzhen and STAR Board closed +1.76%, +0.88% and -0.45% respectively, on volume that decreased by -22.35% compared to yesterday, or 111% of the annual average . 3,286 stocks advanced, while 1,366 stocks declined. Value factors outpaced growth factors, as large caps outperformed small caps. All sectors were positive as communication services gained 6.34%, financials gained 4.9% and energy gained 3.13%. The best performing sub-sectors on the continent were telecommunications, diversified financials and construction. Meanwhile, power generation equipment, motorcycles and chemicals were among the worst performers. Northbound Stock Connect volumes were moderate to high as overseas investors bought $848 million in net worth of Continental stock. The CNY gained more than 1% since Friday against the US dollar to close at 6.96 from 7.05 on Friday, Treasuries sold off slightly and copper gained 0.59%.
Last night’s exchange rates, prices and yields
- CNY for USD 7.96 versus Friday’s 7.05
- CNY to EUR 7.34 versus 7.37 on Friday
- 1-day government bond yield 1.10% versus 1.20% on Friday
- 10-year government bond yield 2.89% versus 2.87% on Friday
- 10-Year China Development Bank Bond Yield 3.02% vs. 3.00% on Friday
- Copper price +0.59% overnight