Key News

Asian equities were largely lower, as Hong Kong and Mainland China posted a strong start to the week while Japan and Australia underperformed the region. According to Microsoft’s
MSFT
Copilot, Indonesia was closed for the Hindu Saka New Year, which is a “Day of Silence” …reserved for self-reflection, meditation, fasting and rest” coinciding with the first day of Ramadan.

Analyst stock upgrades of growth stocks were a factor in both Mainland China and Hong Kong, along with strong inflows into China from Northbound Stock Connect and moderate inflow into Hong Kong-listed stocks and ETFs via Southbound Stock Connect. Mainland China’s most heavily traded stock by value was electric vehicle (EV) battery giant CATL, which gained +14.46% on an analyst upgrade and the announcement of a joint venture with smartphone maker Xiaomi and automaker BAIC.

Real estate was the top-performing sector in Mainland China, where it gained +3.16%, though was in the middle of the pack in Hong Kong, where it gained +1.73%, on financing support from the State Administration for Financial Supervision and Administration (SAFSA) despite the “housing is for living, not speculation” mantra, which was nonetheless reiterated at the “Two Sessions” important policy meetings. Second-hand transactions in the big four first-tier cities increased. While prices are off from a few years ago, they appear to be stabilizing.

The second session of the 14th National People’s Congress ended with several policies being passed and/or adopted, though I do not see much information on the specifics of the 2024 National Economic and Social Development Plan and central and local budgets.

Northbound Stock Connect had a very healthy $1.4 billion worth of net buying as the two ETFs favored by the National Team had moderate/high volumes, especially in morning trading. Both Shanghai and Shenzhen broke out from recent consolidation levels at 3,000 and 1,700. Consolidation levels represent the range at which technical analysts definitively say that the market is uncertain about where to go.

Hong Kong-listed growth stocks had a strong day, led by the most heavily traded stock by value, Tencent, which gained +3.19%, Meituan, which gained +5.31%, Alibaba, which gained +2.18% as the Mainland media noted a new cash and equity program for employees, BYD, which gained +5.00%, and energy giant CNOOC, which fell -3.56%. After last week’s financial results, Bilibili gained +11.63% on an analyst upgrade. JD.com gained +6.43% as Mainland media noted the launch of a new AI tool that can “generate pictures, videos, and live broadcasts.” A famous China hedge fund in talks to buy GDS, a data center company, which might be interpreted as a sign of the bottom in cloud and data centers. The Hong Kong-listed Hang Seng Tech ETF was a beneficiary of Southbound Stock Connect inflows.

February’s consumer price index (CPI) indicated price growth of +0.7% year-over-year (YoY) versus an expected +0.3% and January’s -0.8%, as we predicted based on higher pork prices in February. February’s producer price index (PPI) fell -2.7% YoY versus expectations of -2.5% and January’s -2.5%.

Did anyone catch Donald Trump on CNBC? I will link to the interview once it becomes available on Twitter (@ahern_brendan). My takeaways: Tariffs are a negotiating tool. Work with Chinese companies to bring manufacturing to the US. Don’t ban TikTok.

The Hang Seng and Hang Seng Tech indexes gained +1.43% and +2.86%, respectively, on volume that increased +7.22% from Friday, which is 94% of the 1-year average. 358 stocks advanced, while 125 declined. The Main Board short turnover increased by +15.81% from Friday, which is 88% of the 1-year average, as 16% of turnover was short turnover (remember Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The growth factor and small caps outperformed the value factor and large caps. The top-performing sectors were Communication Services, which gained +2.84%, Consumer Discretionary, which gained +2.82%, and Consumer Staples, which gained +2.74%. Meanwhile, Utilities and Energy were off -0.41% and -1.33%, respectively. The top-performing subsectors were semiconductors, retail, and software. Meanwhile, energy, foodstuffs, and telecom were among the worst-performing sectors. Southbound Stock Connect volumes were high as Mainland investors bought a net $383 million worth of Hong Kong-listed stocks and ETFs, including the Bank of China, which was a large net buy, CNOOC and Li Auto, which were small net buys. Meanwhile, Hang Seng Tech, CCB, and Meituan were small net sells.

Shanghai, Shenzhen, and the STAR Board gained +0.74%, +2.12%, and +1.90%, respectively, on volume that increased +17% from Friday, which is 116% of the 1-year average. 3,856 stocks advanced, while 1,051 declined. The growth factor and small caps outperformed the value factor and large caps. The top-performing sectors were Real Estate, which gained +3.11%; Industrials, which gained +3.03%; and Health Care, which gained +2.52%. Meanwhile, Utilities and Energy were off -0.58% and -2.64%, respectively. The top-performing subsectors were power generation equipment, electric power grid, and fine chemicals. Meanwhile, coal, oil & gas, and construction machinery were among the worst-performing subsectors. Northbound Stock Connect volumes were moderate/high as foreign investors bought a healthy $1.427B, with CATL a very large net buy, and Kweichow Moutai and BYD, which were moderate net buys. Meanwhile, China Merchants Bank, ZTE, and Zhongji Innolight were small net sells. CNY gained versus the US dollar. Treasury bonds were sold off and copper and steel were off.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

  • CNY per USD 7.18 versus 7.19 Friday
  • CNY per EUR 7.84 versus 7.86 Friday
  • Yield on 1-Day Government Bond 1.50% versus 1.48% Friday
  • Yield on 10-Year Government Bond 2.31% versus 2.28% Friday
  • Yield on 10-Year China Development Bank Bond 2.41% versus 2.39% Friday
  • Copper Price -0.54%
  • Steel Price -1.49%

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