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Bilibili Relists in Hong Kong While Alibaba Goes EV

By:

Chief Investment Officer

Key News

Asian markets had a strong day with China and Hong Kong off a touch. After China’s market close yesterday, the reviewed money supply and credit growth figures were released, with the latter coming in a touch light. Central bankers globally, including the PBOC, are not apt to pull the stimulus rug out from under investors in the short run. The release was cited as taking some momentum out of the market and leading to profit-taking in leading sectors.

We also had news that the Sinovac Biotech coronavirus vaccine was only 50% effective in a Brazil study. There is a flareup of coronavirus in three cities in northern China, which are headed to varying degrees of lockdown. The number of cases appears to be small, though it makes sense to try to nip it in the bud.

The Hang Seng Index was off a touch by -0.15%, led by volume leaders Tencent, which rose +1.02% on a strong day of inflows via Southbound Connect, Executive Order banned security China Mobile, which fell -1.82% also had very strong Connect buying, energy giant and EO sanction list CNOOC, which gained +5.48%, Meituan, which fell -1.85%, Alibaba Hong Kong, which rose +1.73% though there are reports after the market close that the company is entering into an EV relationship with SAIC Motor, Ping An, which gained +1.35%, EO sanctioned Semiconductor Manufacturing, which fell -2.96%, Xiaomi, which was off -1.35%, BYD, which was up +1.65%, and Geely Auto, which gained +1.08%. Lenovo had a strong day, gaining +13.64% after announcing that it will relist on the STAR Board. There was a touch of a value comeback today, which saw in Mainland China, with Shanghai off -0.27% and Shenzhen off -1.08%, though MSCI’s definition of Chinese A-shares was off -0.56%. Continued chatter on China’s efforts to meet carbon standards led to a good day for clean technology such as wind and solar, though EV names saw some profit-taking. Bonds rallied while CNY was off a touch.

Yesterday we mentioned that US asset manager State Street was in a pickle as the manager of the Hong Kong Tracker ETF, which is benchmarked to the Hang Seng Index, includes EO sanctioned securities. When State Street said it would freeze/not add to EO sanction stocks in Hong Kong’s largest ETF with $13B, there were calls for the company to removed. Today, the South China Morning Post said that State Street will invest in EO securities. That would be a very clear violation of US laws, so I doubt it!  What a mess! Too bad no one within the entire US financial industry had the guts to stop the EO. It does remind me that the Hang Seng Tracker plays a key role in the real life. The Ugly Americans is an absolutely fantastic book – a great read that also happens to include the gaming of the Hang Seng Tracker’s rebalances in the late 1990s.

The first REIT is coming to the Mainland markets soon. The idea is to allow real estate companies to issue REITs instead of debt. Makes sense to me!

Online video company Bilibili (BILI US) reportedly has filed privately to relist in Hong Kong. Such news usually leads to a nice pop of the US shares. Several noted a jump in Momo (MOMO US) options activity yesterday. I wonder if someone is trying to front-run a Hong Kong relisting announcement. 

Earnings season for US-listed Chinese companies kicks off with TAL Education (TAL US) on January 21st. China’s New Year holiday begins on February 11th until the 18th, which leads many to take the whole week off between Feb 8th and 15th. I suspect that most companies will report post-New Year’s.

H-Share Update

The Hang Seng came off morning highs to close -0.15%/-41 index points to close at 28,235. Volumes were up +1.5%, which is 52% above the 1-year average while breadth saw 25 advancers and 25 decliners. The 197 Chinese companies listed in Hong Kong gained +0.08%, led by energy +5.38%, industrials 2.88%, communication +1.01%, and utilities +0.6%, while staples fell -1.4%, discretionary -1.3%, and health care -0.98%. Southbound Connect volume was strong with another day of Hong Kong buying from Mainland investors.

A-Share Update

Shanghai & Shenzhen were off -0.27% and -1.08% closing at 3,598 and 2,393 respectively. Volumes increased +13%, which is 44% above the 1-year average while breadth saw 1,048 advancers and 2,893 decliners. The 513 Mainland listed Chinese companies within the MSCI China All Shares Index fell -0.56%, led by utilities +2.25%, energy +1.46%, and tech +0.69%, while health care fell -1.9%, financials -1.03%, and discretionary -0.95%. Northbound Stock Connect volumes were high as foreign investors bought $419mm of Mainland stocks.

Originally Posted on January 13, 2021 – Bilibili Relists in Hong Kong While Alibaba Goes EV

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