Asian investors hadn’t forgotten Fed Chair Powell’s less aggressive remarks about Friday’s rate hikes, as stocks got off to a strong start to the week except Indonesia. Hong Kong and mainland China were led by growth sectors, especially Hong Kong-listed internet stocks, with the exception of Tencent, which fell -1.56% at high volumes.
Tencent rose 4.16% as investor Prosus announced it will “sell a small number of common shares of Tencent” to fund a share repurchase program. Prosus also announced that it had already sold the 131 million shares of JD.com (JD US, 9618 HK) it had received from Tencent’s shareholder-friendly spin-off, raising JD.com HK’s share by +6.24. % rose. Mainland investors responded to the news by firing first and asking questions later, as they were net sellers of Tencent through Southbound Stock Connect.
The Hang Seng closed above the 22k level, a large, round, useless number, but Hong Kong’s large warrant market (structured products) could have prompted further purchases.
Electric vehicles (EVs), cars and lithium were largely higher in Hong Kong and mainland China after reports that Beijing’s local government will provide financial aid to buyers of EV cars. Hong Kong Exchanges (388 HK) gained +6.95%, possibly aided by rumor that President Xi could attend Friday’s market holiday event. Xi’s previous trips to Hong Kong have included financial and policy support, which has sparked optimism in the past.
The mainland market shrugged on May’s industrial gains, which fell -6.5% year-on-year, although the year-to-date return is still +1%. The weak release supports further economic policy support. Foreign investors bought a healthy $1.086 billion worth of mainland equities today as inflows were very strong in June. My weekend lecture included a research paper from a major global investment bank that noted that China is -4% underweight emerging market funds. Houston!!! UW, when the market picks up like this tends to draw these investors to the stocks, especially HK internet stocks.
The Hang Seng and Hang Seng Tech indices gained +2.35% and +4.71% respectively, on a volume that was +34.77% higher than Friday, which is 141% from the 1-year average. 394 stocks gained while 96 fell. Short sale revenue in Hong Kong was up +56.35% from Friday, which is 153% from the 1-year average. Growth factors outperformed value factors, while large caps outperformed small caps. The top sectors were technology at +6.78%, consumer discretionary at +4.08% and materials at +3.64%. Meanwhile, utilities and communications were down -1.07% and -0.21%, respectively. Online healthcare and Apple ecosystem stocks performed best, while online education was the worst performer. Southbound Stock Connect volumes were very high as mainland investors were net buyers of Hong Kong shares, while Tencent was sold and Kuaishou, Li Auto and Meituan were bought.
Shanghai, Shenzhen and the STAR Board gained +0.88%, +1.11% and +0.17% respectively on volume that increased +6.16% as of Friday, which is 114% of the 1-year average. 2,524 shares moved up, while 1,811 shares fell. Growth factors outperformed value factors, while large caps outperformed small caps. The top sectors were energy, which gained +3.98%, consumer discretionary, which gained +2.02%, and consumer discretionary, which gained +1.77%, while utilities fell -0.4%. The top sectors were coal, lithium and rare earths, while cement stocks were among the worst. Northbound Stock Connect flows were moderate to high as foreign investors bought $1.1 billion worth of mainland equities today. Treasuries sold off today, CNY rose slightly against the US dollar and copper was hit again.
Last night’s exchange rates, prices and returns
- CNY/USD 6.69 vs 6.69 Friday
- CNY/EUR 7.08 vs 7.06 Friday
- 1-Day Treasury Bond Yield 1.18% vs. 1.17% Friday
- 10-Year Treasury Yield 2.83% vs. 2.80% Friday
- Yield on 10-Year China Development Bank Bond 3.03% vs. 3.01% Friday
- Copper price -1.54% overnight