Asian equity markets were largely higher as Hong Kong outperformed, Japan underperformed, and the Philippines were off for Bonifacio Day in honor of national hero Andres Bonifacio who helped spark the Philippine Revolution of 1896 according to the Google.
CNY gained +1.06% versus the US dollar overnight closing at 7.08 as the Asia dollar index gained +0.71% versus the dollar. Volumes were high across the region driven by MSCI’s Semi-Annual Index Rebalance which requires passive asset managers to rebalance their ETFs and index funds at today’s market close. Despite opening lower, Hong Kong rallied with an upward acceleration on reports of relaxing mobility restrictions across several cities, including Guangzhou and Beijing. The government’s message of loosening such restrictions is implemented locally so it takes a little time. Our China Mobility Tracker shows that Guangzhou continues to see traffic and subway usage decline though next week will be very interesting to see if a reversal takes place. Markets are forward looking so they are anticipating such a change.
We continue to see positive results in Q3 as Bilibili’s results beat expectations as the Hong Kong share class rose +16.76% overnight. Real estate stocks in both China and Hong Kong were hit with profit-taking as several property developers announced equity issuance following the five policy changes announced by the CSRC. We specifically warned about this yesterday in our preference for real estate bonds over real estate stocks. Hong Kong shorts were fairly quiet as short turnover in Hong Kong internet stocks has gone quiet. Interesting right? Mainland China had a mixed day led by discretionary stocks in a sign that market participants are anticipating further relaxation. Markets didn’t pay any attention to the weak “official” PMIs which were off more than expected. Manufacturing PMI was 48 versus expectations of 49 and September’s 49.2 while the non-Manufacturing was 46.7 versus expectations of 48 and October’s 48.7. Markets also didn’t care about the 4,236 new COVID cases along with 33,376 asymptomatic cases. The Hong Kong and China rally is causing pain as investors are woefully underexposed to our Back to Business thesis IMO. XPeng (XPEV US, 9868 HK) announced mixed results this morning prior to the US open.
The Hang Seng and Hang Seng Tech gained +2.16% and +2.77% on volume +33.18% from yesterday which is 180% of the 1-year average. 398 stocks advanced while 104 stocks declined. Short turnover on the Main Board increased +17.11% from yesterday which is 173% of the 1-year average as 17% of turnover was short turnover. Growth factors edged out value factors while large caps outpaced small caps. Financials were the only off sector off -0.66% while staples gained +4.69%, discretionary finished higher +3.91%, and industrials closed up +3.61%. Top sub-sectors were auto, consumer, and consumer durables/apparel while real estate sub-sectors were off. Southbound Stock Connect volumes were moderate as Mainland investors bought $354 million of Hong Kong stocks with Tencent a small net buy and Meituan a moderate net buy.
Shanghai, Shenzhen, and STAR Board were mixed +0.05%, +0.12%, and -0.22% on volume -3.85% from yesterday which is 97% of the 1-year average. 1,813 stocks advanced while 2,730 stocks declined. Growth factors mostly outpaced value factors while large caps outperformed small caps. Top sectors were discretionary up +4.1%, communication up +3.43%, and energy up +2.1% while real estate closed lower -2.21%. Top sub-sectors were auto, telecom, and auto parts while household products, leisure products, and real estate sub-sectors were among the worst. Northbound Stock Connect flows were moderate/high as foreign investors bought $693 million of Mainland stocks. CNY had a strong day versus the US dollar gaining +1.06% to close at 7.08, Treasuries were flat and copper off -0.11%.
China Major China Mobility Tracker
Subway traffic continues to languish though interesting to note Shenzhen’s city traffic is on the rise. Guangzhou continues to see subway traffic decline.
Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.08 versus 7.16 Yesterday
- CNY per EUR 7.33 versus 7.43 Yesterday
- Yield on 10-Year Government Bond 2.89% versus 2.88% Yesterday
- Yield on 10-Year China Development Bank Bond 3.03% versus 2.99% Yesterday
- Copper Price -0.11% overnight
Originally Posted November 30, 2022 – Reopening Drives Market Higher, Ignoring COVID Cases and PMIs
Author Positions as of 11/30/22 are KBA, KALL, KCNY, KFYP, KCNY, KEMQ, BZUN, HSBC, KWEB, KHYB, LI US
Charts Source: 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.
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.