Markets Take Breather

KraneShares

Contributor:
KraneShares
Visit: KraneShares

By:

Chief Investment Officer

Key News

Asian equities were largely lower while India and the Philippines outperformed.

Hong Kong and China were off as recent outbreaks in several cities raise lockdown fears. The pullback weighed on travel related stocks such as hotels, airlines, online travel, and restaurants. Energy, material, commodity stocks, and futures were clobbered overnight with copper off -4.99%.

Time will tell but targeted lockdowns at the neighborhood or district level are more likely rather than city wide lockdowns. Cities can also raise safeguards, such as Beijing’s move for congested public areas where one needs to be vaccinated.

The Shanghai Composite is sitting at the 3,400 level while the Shenzhen Composite is above the 2,200 level.  A little breather since the mid-March move isn’t a bad thing. The US government’s pressure on Dutch semiconductor firm ASML to limit sales to China led to a strong rally in Chinese semiconductor names. We’ve had more positive news or at least communication between the US and China recently which is a step in the right direction.  

Alibaba HK +1.56% bucked the downdraft in Hong Kong internet names as Hong Kong Exchanges CEO stated more conversions to Hong Kong primary listings are anticipated while specifically mentioning Alibaba. Alibaba has begun its pre-earnings conversations with analysts. Analysts appear to be coming out of those conversations positive.  Reuters is reporting that Sequoia Capital China is planning on raising $9B for four new tech-focused private equity funds. Worth noting that they are looking to raise money to buy companies in the space. Interesting right!

The Hang Seng and Hang Seng Tech closed down -1.22% and -1.23% on volume +15.2% from yesterday which is 99% of the 1-year average. 135 stocks advanced while 337 declined within the broad Hang Seng Composite. Hong Kong short sale turnover jumped +23.39% which is 106% of the 1-year average. Value and growth factors were both off today as large caps underperformed small caps. Healthcare and utilities were the only positive sectors up +0.25% and +0.11% respectively, while energy fell -4.11%, materials -2.65%, and financials -1.81%.  Online education and power stocks were top sub-sectors while cobalt, coal, and travel related stocks were among the worst.  Mainland investors were a rare net sell in Hong Kong stocks today with Tencent and Meituan seeing small net sales.

The Shanghai, Shenzhen, and STAR Board were diverged posting -1.43%, -1.15%, +0.99% on volume -8.16% from yesterday which is 100% of the 1-year average. 997 stocks advanced while 3,505 stocks declined. Growth factors were mixed while value factors were down as large caps underperformed small caps.  Tech was the only positive sector +0.42%, while energy -5.65%, materials -2.52%, and real estate -2.29%.  Semiconductor and semi related sub-sectors outperformed while coal, raw materials, and nickel stocks underperformed. Northbound Stock Connect flows were moderate/high as foreign investors sold -$206mm of mainland stocks today.

MSCI China All Shares Index Average 1-Day Change (%)
Asian Indexes 1-Day Change (%)
Dual Listed US and HK Stocks' HK Share Class 1-Day Change (%)
Hong Kong's Most Heavily Traded by Value Price Change 1-Day Percent
Shanghai and Shenzhen's Most Heavily Traded by Value Price Change 1-Day Percent

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.71 versus 6.72 yesterday
  • CNY/EUR 6.84 versus 6.89 yesterday
  • Yield on 10-Year Government Bond 2.84% versus 2.83% yesterday
  • Yield on 10-Year China Development Bank Bond 3.08% versus 3.07% yesterday
  • Copper Price -4.99% overnight

Originally Posted July 6, 2022 – Markets Take Breather

Author Positions as of 7/6/22 are KBA, KALL, KCNY, KFYP, KCNY, KEMQ, BZUN, HSBC, KWEB, KHYB, LI US

Charts Source: KraneShares

Disclosure: KraneShares

Content on China Last Night is for informational purposes only and should not be construed as investment advice. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results; material is as of the dates noted and is subject to change without notice. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.

This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities. Investing involves risk, including possible loss of principal.

This material contains general information only and does not take into account an individual’s financial circumstances. This information should not be relied upon as a primary basis for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial advisor before making an investment decision.

Forward-looking statements (including Krane’s opinions, expectations, beliefs, plans, objectives, assumptions, or projections regarding future events or future results) contained in this presentation are based on a variety of estimates and assumptions by Krane. These statements generally are identified by words such as “believes,” “expects,” “predicts,” “intends,” “projects,” “plans,” “estimates,” “aims,” “foresees,” “anticipates,” “targets,” “should,” “likely,” and similar expressions. These also include statements about the future, including what “will” happen, which reflect Krane’s current beliefs. These estimates and assumptions are inherently uncertain and are subject to numerous business, industry, market, regulatory, geo-political, competitive, and financial risks that are outside of Krane’s control. The inclusion of forward-looking statements herein should not be regarded as an indication that Krane considers forward-looking statements to be a reliable prediction of future events and forward-looking statements should not be relied upon as such. Neither Krane nor any of its representatives has made or makes any representation to any person regarding forward-looking statements and neither of them intends to update or otherwise revise such forward-looking statements to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying such forward-looking statements are later shown to be in error. Any investment strategies discussed herein are as of the date of the writing of this presentation and may be changed, modified, or exited at any time without notice.

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from KraneShares and is being posted with permission from KraneShares. The views expressed in this material are solely those of the author and/or KraneShares and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.

Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

Disclosure: Forex

There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.

Disclosure: Futures Trading

Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.