Asian equities were a sea of red on light volumes following the US equity market’s Friday fall in advance of the Fed’s anticipated 75bps interest rate hike. Hong Kong-listed internet stocks followed their US counterparts’ move on Friday lower overnight.
The Financial Times reported that a three-tier system of data transparency would be applied to US-listed Chinese companies to allow most companies to adhere to the Holding Foreign Companies Accountable Act (HFCAA). The three-tier system is like our recommendation to divide companies between the small number of State-Owned Enterprises (SOEs) that likely have sensitive data and the vast majority of private companies that have nothing to hide. However, the China Securities Regulatory Commission (CSRC), China’s SEC-like financial regulator, denied having studied a three-tier system.
Real estate was the top performer in Hong Kong and Mainland China, gaining +3.1% and +1.74% in both markets, respectively. The roll out of a bailout fund to help distressed property developers finish what they started was a catalyst for the sector. This would enable mortgage holders to pay their mortgages once their apartments are completed.
Mainland-listed home appliance makers including Gree, which gained +0.85%, and Haier, which gained +0.76% on a Ministry of Commerce (MoC) statement supporting energy efficient home appliance purchases.
The clean technology ecosystem was off on the Mainland as electric vehicles (EVs), solar companies, and wind companies were all weak today. It was a bit of a value rally in both Mainland China and Hong Kong today. Companies in Shenzhen are being asked to have non-vital personnel work from home as several big factories will operate under a closed loop system. ZTE, Huawei, and BYD have stated that factory personnel will stay onsite until the COVID flare-up dies down. Meanwhile, Shanghai designated several neighborhoods as high-risk areas, which would prevent non-vaccinated people from being in public spaces. News that government leadership have been vaccinated with local shots is seen as an effort to raise vaccination rates among the elderly. Approximately 25% of those over the age of 65 have not taken a single vaccine dose. Mainland media also noted the first case of monkeypox in Japan. Clearly, officials are taking the situation seriously. However, they are not locking down Shenzhen in the manner that Shanghai was shut earlier this summer.
Shanghai and Shenzhen are sitting at support levels of 3,250 and 2,150, respectively. Meanwhile, the Hang Seng is back near the 20,000 level. Alibaba will reports after the close in Hong Kong next Thursday.
The Hang Seng and Hang Seng Tech indexes were off -0.22% and -1.38%, respectively, on volume that was +4.96% higher than Friday, which is 63% of the 1-year average. 202 stocks advanced while 272 declined. Hong Kong short sale turnover increased +8.6% from Friday, which is 70% of the 1-year average, as short turnover accounted for 18% of turnover in Hong Kong. Value factors outperformed growth factors and small caps outperformed large caps. The top performing sectors on the day were real estate, which gained +3.1%, financials, which gained +0.43%, and energy, which gained +0.24%. Meanwhile, health care fell -2.05%, discretionary fell -1.58%, and communication services fell -1.55%. The top performing sub-sectors were real estate developers and banks. Meanwhile, autos, electric vehicles, retailing, and software were among the worst. Southbound Stock Connect volumes were light as Mainland investors were net buyers of Hong Kong stocks. Tencent, Kuaishou, and Li Auto all saw some net buying while Meituan was sold slightly.
Shanghai, Shenzhen, and the STAR Board were off -0.6%, -0.92%, and -1.03%, respectively, on volume that was down -8.2% from Friday, which is 80% of the 1-year average. 1,316 stocks advanced while 3,149 declined. Value factors outperformed growth factors today while large caps outperformed small caps. The top performing sectors were real estate, which gained +1.8%, energy, which gained +1.18%, and staples, which gained +0.44%. Meanwhile, industrials fell -1.36%, tech fell -1.27%, and consumer discretionary fell -0.78%. The top performing sub-sectors were household appliances, restaurants, and precious metals. Meanwhile, the clean technology ecosystem was among the worst performing sub-sectors as electric vehicles, solar power, and wind stocks were mostly down on the day. Northbound Stock Connect volumes were light as foreign investors sold -$501 million worth of Mainland stocks today. Treasury bonds rallied, CNY was flat versus the US dollar, and copper gained +1.49%.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.75 versus 6.75 Friday
- CNY/EUR 6.91 versus 6.90 Friday
- Yield on 1-Day Government Bond 1.16% versus 1.18% Friday
- Yield on 10-Year Government Bond 2.78% versus 2.79% Friday
- Yield on 10-Year China Development Bank Bond 3.04% versus 3.05% Friday
- Copper Price +1.49% overnight
Originally Posted July 25, 2022 – Rescue Fund Powers Real Estate Rebound
Author Positions as of 7/25/22 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.