Key News
Asian equities were a sea of red, except for Mainland China, which was a rare positive equity market overnight.
The US Ten Year Treasury increased from 4.44% last Monday to 4.56% today, leading to a stronger dollar. The Philippine Peso was off the most regionally, with a decline of -0.81%.
Volumes were light as investors wait for Friday’s MSCI
MSCI
Today was a total washout for Hong Kong as outperformers were clipped, less auto, as BYD gained +5.32% in Hong Kong and +8.35% in Mainland China after announcing a hybrid powertrain allowing for 1,250 miles/2,000 kilometers without a charge nor refuel. The new powertrain will be fitted in the new Qin L and Seal 06 sedans, costing under $13,800/RMB 100,000. Bloomberg News notes the range is “the equivalent of New York to Miami, Munich to Madrid, or Beijing to Guangzhou on a single charge and full tank of gas.” Sign me up!
Hong Kong’s breadth, similar to the region’s, was ugly, with only 83 advancing stocks and 405 decliners with volume higher and Mainland investors buying the dip with a healthy $867 million of Hong Kong stocks and ETFs. Lenovo (992 HK) fell -1.69% after Saudi Arabia’s sovereign wealth fund invested $2B in a zero coupon convertible deal as the computer maker will set up shop locally. Mainland China eased off intra-day highs, though it ended in the green on mixed breadth and light volumes. Kweichow Moutai gained +0.56% as the company hosted its shareholder meeting, which was compared to the Berkshire Hathaway
BRK.B
Real estate was up +0.55% in Mainland China, though off -1.67% in Hong Kong, despite yesterday’s news of Guangzhou lowering the minimum down payment and interest rate for first and second-home buyers. The IMF raised their GDP target to 5% from 4.6% for 2024 and 4.5% from 4.1% for 2025. Ministry of Finance reported YTD through April, SOE revenues have increased +3.2% year-over-year. The State Council released focused energy conservation and carbon reduction limited clean energy plays like solar. Again, fairly quiet as folks wait.
Commodity prices have grinded higher, with conspiracy theorists arguing China’s commodity stockpiling is a sign of a Taiwan invasion. As noted by mainland China media coverage, the real culprit is the rise in shipping/freight rates due to continued avoidance of the Red Sea due to Houthi attacks from Yemen. April volume through the Suez Canal is off -66% year over year as 3,395 ships have avoided the Red Sea, which normally accounts for 12% of global trade. The Red Sea situation is having a knock-on effect globally as a ’40 foot container from Asia to the US has risen by $1,000 to $4,333, while from Asia to Europe, it is up to $5,495. It’s interesting how little this situation has garnered attention from the US, in my opinion.
A long-running, unscientific sign of tops and bottoms in the ETF industry is new ETF launches versus ETF liquidations. From about a year ago, the number of US-listed China-focused exchange-traded funds has dropped from 61 to 34 today.
The Hang Seng and Hang Seng Tech fell -1.83% and -2.32% on volume +26.01% from yesterday, which is 121% of the 1-year average. 83 stocks advanced, while 405 declined. Main Board short turnover increased by +27.69% from yesterday, which is 108% of the 1-year average, as 16% of turnover was short turnover (HK short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). All factors were negative. Energy and materials were the only positive sectors, up +0.4% and +0.14%, while healthcare -2.72%, discretionary -2.67%, and communication -2.24%. The top sub-sectors were auto, energy, and materials, while retailing, software, and pharmaceuticals were the worst. Southbound Stock Connect volumes were light as mainland investors bought a healthy $867mm of mainland stocks and ETFs, with Agricultural Bank a moderate net buy, CNOOC and Tencent a small net buy, and HK Tracker ETF a moderate net sell.
Shanghai, Shenzhen, and STAR Board were mixed +0.05%, +0.3%, and -0.07% on volume -4.45% from yesterday, which is 83% of the 1-year average. 2,322 stocks advanced, while 2,469 declined. The growth factor and small caps outpaced the value factor and large caps. The top sectors were materials +1.18%, discretionary +1.09%, and energy +0.8%, while financials -0.55%, healthcare -0.2%, and communication -0.16%. The top sub-sectors were auto, precious metals, and base metals, while construction machinery, insurance, and household appliances were the worst. Northbound Stock Connect volumes were moderate, with Zijin Mining, BYD, and Longi small net buys, while Gree, Kweichow Moutai, and ICBC were small net sells. CNY and the Asia dollar index were off small versus the US dollar. Treasury bonds rallied. Copper gained while steel fell.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.24 versus 7.24 yesterday
- CNY per EUR 7.86 versus 7.88 yesterday
- Yield on 10-Year Government Bond 2.27% versus 2.29% yesterday
- Yield on 10-Year China Development Bank Bond 2.39% versus 2.40% yesterday
- Copper Price +0.19%
- Steel Price -0.74%
Read the full article here
