Key News
Asian equities were higher today on US rate cut expectations and a weak US dollar, as Mainland China, Hong Kong, and Taiwan outperformed the region. India was the only negative performer.
China and Hong Kong grinded higher all day on the news the CSRC is making Mainland stock short selling more difficult by raising the margin requirements to a minimum of 80% to 100% starting today. In contrast, China Securities Financial Corp, the largest lender of stocks, announced it would stop lending today and remove current stock loans by September.
We should assume that an element of today’s move was short covering as Hong Kong growth stocks followed the Mainland market higher. This is a clear signal from the CSRC and its new head, previously nicknamed the broker butcher for his corruption crackdown in his first tenure, to get the market higher. The Shanghai index is just below 3,000, and Shenzhen is back to 1,600 after bottoming in January, although the rally has stalled/slid since mid-May. There could be further policy support from next week’s Third Plenum as the top leadership meets to discuss economic policy.
Baidu was up +2.26% after yesterday’s +10.15% on eleven cities, including Beijing, Shanghai, and Wuhan, utilizing the company’s “Radish Quick Run” robo-taxis, sold for only RMB 200,000. Mainland media noted the strong demand for robot taxis, utilizing Baidu, which is “Apollo’s sixth generation intelligent system solution.” After hitting a 52-week low on July 2nd in Hong Kong, shares are up nearly 20%, though the US ADR is still 70% from its all-time high in February 2021.
Hong Kong’s most heavily traded by value were Tencent +1.91% on employee-friendly salary and benefit changes, Alibaba +3.21%, Meituan +1.04%, China Construction Bank +1.84%, and AIA +4.33% after buying 1.3mm shares today. Tencent announced after the close it had repurchased 2.61mm shares today. Apple’s ecosystem gained on the company’s goal of selling 90mm iPhone 16. EVs and auto had a strong day with BYD +1.94%, Li Auto +7.07%, XPeng +11.66% and NIO +5.39%.
Mainland reports of increased government buying of solar sent Mainland listed Longi Green Energy +4.87%. A Mainland media source noted that Beijing, Shanghai, Guangzhou, and Shenzhen reported that the number of “commercial residential buildings” in square meters sold increased month over month and year over year. Improving Tier 1 cities’ real estate prices would help consumer confidence and the stock market’s “animal spirits.” I assume Tier 2 and Tier 3 prices are still in the doldrums, though this is a start.
The Hang Seng and Hang Seng Tech gained +2.06% and +2.67% on volume -1.92% from yesterday, 97% of the 1-year average. 440 stocks advanced, while 51 declined. Main Board short turnover declined -16.07% from yesterday, which is 90% of the 1-year average, as 16% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Growth and small caps outperformed value and large caps. All sectors were positive, with healthcare +3.33%, tech +3.13%, and real estate +2.61%. All sub-sectors were positive, led by pharmaceuticals, technical hardware, and semiconductors. Southbound Stock Connect volumes were moderate as Mainland investors bought $60mm of Hong Kong stocks and ETFs with Meituan a small buy, Tencent and XPeng small net sells.
Shanghai, Shenzhen, and STAR Board gained +1.06%, +2.35%, and +1.08% on volume +16.17% from yesterday, 96% of the 1-year average. 4,709 stocks advanced, while 310 declined. Growth and small caps outperformed value and large caps. All sectors were positive, led by materials +3.12%, healthcare +2.49%, and staples +2.14%. The top sub-sectors were catering/tourism, soft drinks, and construction machinery, while banking, insurance, and telecom were the only negative sub-sectors. Northbound Stock Connect volumes were moderate as foreign investors were small net buyers of Mainland stocks, with Kweichow Moutai and Changan Auto both small/moderate net buys, while Foxconn and Zhongji Innolight were small/moderate net sells. CNY and the Asia dollar index gained versus the US dollar. Copper and steel both gained.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.26 versus 7.28 yesterday
- CNY per EUR 7.88 versus 7.88 yesterday
- Yield on 10-Year Government Bond 2.26% versus 2.27% yesterday
- Yield on 10-Year China Development Bank Bond 2.35% versus 2.36% yesterday
- Copper Price +0.18%
- Steel Price +0.37%
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