Asian equities rebounded yesterday, with yesterday’s worst performers among today’s best performers as Taiwan gained +2.51% and South Korea gained +1.84%. China and Hong Kong were both off in the morning before rebounding in the afternoon on the Ministry of Finance report extending electric vehicle tax exemption which was set to expire at year-end and supporting auto sales generally. All things EV ecosystem and clean tech ecosystem ripped higher, especially in the Mainland. The Mainland’s most heavily traded were EV battery maker CATL (300750 CH) +5.26%, Congqing Changan Auto (000625 CH) +8.14%, EV bus and battery maker BYD (002594 CH) +3.95%, Qinghai Salt Lake (000792 CH) +4.38% and Sungrow Power (300274 CH) +20%. Interesting that in Hong Kong, traditional autos fared better than EV makers as Li HK (2015 HK) -1.35%, XPeng HK (9868 HK) -0.4%, and Nio HK (9866 HK) -3.53%. Boosting auto sales makes sense as the many inputs help a wide range of industries.
Hong Kong internet stocks were off, but less than the US ADRs fell during US trading yesterday, which should cause a pop today. Tencent (700 HK) bucked the fall, gaining +1.15%, which was announced after the close the company repurchased shares for the 7th day in a row. After the market’s close, Bloomberg reports that China’s Ministry of Finance will allow local governments to issue RMB 1.5 trillion ($220B) of infrastructure bonds. The article sourced “people familiar with the discussions,” though it aligns with the monetary and fiscal easing trajectory. The key is to remember this occurred after the market’s close, which should give another boost to US-listed China ADRs. Healthcare was off in both markets as the government’s drug procurement program started a seventh-round despite its limited scope.
Mainland media source Yicai Global reported that well-respected private equity firm Hillhouse Capital is launching its first China-focused carbon neutrality fund with $598mm of AUM. We are big fans of the clean technology ecosystem, EV ecosystem, and companies undergoing carbon business model transformations. It looks like we are in good company!
Mainland media source Shine reported the China retail prosperity index rebounded to 50.2. The index is a survey of retail operation managers indicating “retailers’ expectations for consumption recovery has strengthened as government policies to stabilize the economy took effect.”
The Hang Seng and Hang Seng Tech diverged +0.26% and -0.45% on volume -20.67% from yesterday, which is 79% of the 1-year average. 220 stocks advanced while 245 stocks declined. Hong Kong short sale turnover declined by -30.95% from yesterday, which is 73% of the 1-year average. Value factors outperformed growth factors as large caps outperformed small caps. Top sectors were industrials +1.74%, utilities +1.37% and staples +1.15% while healthcare -1.13% and real estate -0.85%. Top sub-sectors were auto, power companies, EV, and airline stocks, while healthcare subsectors were off and cobalt. Southbound Stock Connect volumes were light from recent high volumes as Mainland investors were small net sellers of Hong Kong stocks; though Tencent and Li Auto saw small net buys, Meituan saw its fourth straight day of net selling small.
Shanghai, Shenzhen, and STAR
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.70 versus 6.71 yesterday
- CNY/EUR 6.83 versus 6.84 yesterday
- Yield on 10-Year Government Bond 2.84% versus 2.84% yesterday
- Yield on 10-Year China Development Bank Bond 3.09% versus 3.08% yesterday
- Copper Price +0.64% overnight