Asian equities followed yesterday’s strong move in US equities higher. Japan missed out on the fun as it was on holiday for Mountain Day, which according to Wikipedia, provides “opportunities to get familiar with mountains and appreciate blessings from mountains.” I am going to take that advice myself!
What a difference a day makes, as yesterday’s Asia market action was fairly awful while today’s was glorious. If US inflation continues to moderate/fall, the Fed isn’t likely to hike as much (Check out our fixed income guru colleague Nancy Davis for more on this). This is a good thing for non-US $ denominated assets as ADXY (Asian currency index, DXY is the global currency index) appreciated +0.41% yesterday versus the US $ after a long slide. Remember, interest rate differences between countries mainly move currencies.
Overnight CNY, China’s currency, appreciated a healthy +0.23% to 6.73 from 6.75 versus the US $. This will be a key trend to watch (ADXY and CNY). Foreign investors bought a healthy $1.973 billion worth of Mainland stocks via Northbound Stock Connect. The Mainland was led higher by foreign investor stock favorites, Apple ecosystem stocks, and stock brokerage stocks. A Mainland analyst believes the iPhone 14 price will increase 15% though demand is high, which benefits stocks like Airpod maker Goertek (002241 CH) +9.99%. I am not an Apple expert, as an FYI. The Mainland market move was on high volume as trading turnover was over RMB 1 trillion for the first time in 5 trading days. The PBOC’s 2nd overview release shows a keen watching of the economy and supportive policies.
Hong Kong had a strong move led by internet stocks as Hong Kong’s most heavily traded were Alibaba HK +4.32% as investors are starting to understand Softbank’s derivative sale is already baked into the stock, Tencent +2.71%, Meituan +4.01% and JD.com HK +1.28%. Healthcare rebounded in a strong move after being crushed yesterday for no reason. Hong Kong volumes weren’t as strong as we would like to see. Hong Kong short sale turnover collapsed by -24% as an element of the move may have been short covering. Mainland investors were more positive on Hong Kong stocks buying a decent +$121mm of Hong Kong stocks today. The Hang Seng did close above 20k today at 20,082.
The Hang Seng and Hang Seng Tech gained +2.4% and +3.67% on volume, down -7.35% from yesterday, which is 61% of the 1-year average. 437 stocks advanced while 46 declined. Hong Kong short sale turnover fell by -24.32% from yesterday, which is 55% of the 1-year average. Growth factors were, for the most part, higher than value as large caps outperformed small caps. All sectors were green, with healthcare +4.66%, tech +4.6%, and discretionary +3.72%, while real estate was the laggard at +0.76%. The top sub-sectors were Apple ecosystem stocks, sporting goods, and contract research organizations (pharma companies that work for other companies), while lottery stocks were down. Southbound Stock Connect volumes were light as Mainland investors bought +$121mm of Hong Kong stocks today with Tencent, Meituan, Li Auto, and Tianqi Lithium net buys.
Shanghai, Shenzhen, and STAR Board gained +1.6%, +1.66%, and +1.47% on volume +10.54% from yesterday, which is 100%. 3,476 stocks advanced, while 1,046 stocks declined. Growth and Value factors were mixed as small caps outperformed large caps. All sectors were positive as the top sectors were financials +3.49%, communication +3.12%, and healthcare +3.09%, while energy lagged at +0.85%. Top sub-sectors were stock brokers, electronics, and the Apple ecosystem, while solar, auto parts and precious metals were laggards. Northbound Stock Connect volumes were moderate/light as foreign investors bought a healthy $1.973B of Mainland stocks with Kweichow Moutai, China Merchants Bank, and Longi Green Energy net buys, while Tongwei was a net sell. Treasury bonds rallied, CNY appreciated +0.23% versus the US $, and copper gained +1.22%.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.74 versus 6.76 yesterday
- CNY/EUR 6.97 versus 6.92 yesterday
- Yield on 10-Year Government Bond 2.73% versus 2.74% yesterday
- Yield on 10-Year China Development Bank Bond 2.91% versus 2.91% yesterday
- Copper Price +1.22% overnight