Party Congress Speech Prioritizes The Economy

KraneShares

Contributor:
KraneShares
Visit: KraneShares

By:

Chief Investment Officer

Key News

Asian equities were largely higher overnight though Japan, Taiwan, and Australia were down.

The key news was President Xi’s two-hour Sunday speech, which kicked off the week-long Party Congress. Check out our own Dr. Xiaolin Chen’s analysis of the opening speech here.

The key takeaway for investors was the emphasis on economic development. The seeds of policy change may have been planted as we’ve seen a number of pro-economic policy tweaks in the past few weeks. Yes, the speech included the success of zero covid in curtailing deaths, though we’ve seen a clear change since the Shanghai lockdown.

Both Hong Kong and Mainland China opened lower but grinded higher to close in the green. Internet names were off despite e-commerce companies being a beneficiary of pro-consumption policies. However, they were not down nearly as much as their US-listed counterparts were on Friday. I am somewhat surprised that Xi’s pro-consumption speech did not give the space a lift.

Pro-fertility comments helped lift healthcare stocks in addition to last week’s equipment-buying policies.

Mainland investors bought a healthy net $706 million worth of Hong Kong stocks as Tencent saw another strong net buy, Meituan was a moderate buy, while BYD and Li Auto were small net buys. Hong Kong shorts increased their bets overnight as 20% of Main Board turnover was short. CNY was off slightly versus the US dollar despite the Asia dollar index’s gain versus the US dollar. Onshore China outperformed offshore China as mainland investors appeared to notice the pro-economic element of Xi’s speech. The 1-year medium-term lending facility rate was left unchanged at 2.75% as September economic data will be delayed until after the Party Congress.       

The Hang Seng and Hang Seng Tech Index diverged to close +0.15% and -0.2%, respectively, on volume that decreased -6.06% from Friday, which is 77% of the 1-year average. 281 stocks advanced, while 195 stocks declined. Main Board short sale turnover increased +4.56% from Friday, which is 91% of the 1-year average, as 20% of the Main Board turnover was short. Value and growth factors were both off, as small caps outperformed large caps. The top performing sectors were financials, which gained +0.82%, technology, which gained +0.82%, and industrials, which gained +0.8%. Meanwhile, communications fell -1.21%, utilities fell -0.61%, and real estate fell -0.43%. The top-performing subsectors were technology hardware, healthcare equipment makers, and biotech. Meanwhile, auto parts, software, and semiconductors were among the worst. Southbound Stock Connect volumes were moderate as Mainland investors bought a healthy net $706 million worth of Hong Kong stocks.

Shanghai, Shenzhen, and the STAR Board gained +0.42%, +0.68%, and +0.87%, respectively, on volume that was down -6.6% from Friday, which is 81% of the 1-year average. 3,627 stocks advanced, while 930 stocks declined. The top performing sectors were tech, which gained +1.01%, communication services, which gained +0.53%, and healthcare, which gained +0.43%, while staples fell -0.97%, real estate fell -0.95%, and utilities gained +0.72%. The top-performing subsectors were education stocks, shippers, and military stocks. Meanwhile, gas, coal, and liquor were among the worst. Northbound Stock Connect volumes were light/moderate as foreign investors sold a net $618 million worth of Mainland stocks. Treasury bonds were off slightly while CNY was flat, and copper gained +0.41%.

Asian Countries Average 1-Day Change %
MSCI China All Shares Index Average 1-Day Change %
US & Hong Kong Dually Listed 1-Day Change %
Hong Kong's Most Heavily Traded By Value 1-Day Change (%)
Shanghai and Shenzhen's most heavily traded by value

Last Night’s Exchange Rates, Prices, & Yields

  • CNY per USD 7.19 versus 7.19 Friday
  • CNY per EUR 7.04 versus 6.01 Friday
  • Yield on 1-Day Government Bond 1.21% versus 1.20% Friday
  • Yield on 10-Year Government Bond 2.70% versus 2.70% Friday
  • Yield on 10-Year China Development Bank Bond 2.87% versus 2.87% Friday
  • Copper Price +0.41% overnight

Originally Posted October 17, 2022 – Party Congress Speech Prioritizes The Economy

Author Positions as of 10/17/22 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.