Key News

Asian equities started the week on a strong note except for Japan, which was off for Marine Day, a national holiday meant to give thanks for the ocean’s bounty. Mainland China and Hong Kong had a strong day driven by policy comments addressing unfinished apartment owners not paying their mortgages and clean energy needs as China experiences a severe heat wave.

Mortgages that have recently gone unpaid represent a tiny percentage of total mortgages and are centered around unfinished projects. Nonetheless, the headlines have clearly driven a policy pivot. Buyers may be given a payment grace period. Real estate was a top performing sector in both Hong Kong, where it gained +0.6{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, and Mainland China, where it gained +3.63{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}.

The People’s Bank of China (PBOC), China’s central bank, injected $1.3 billion worth of liquidity into the financial system overnight. PBOC Governor Yi Gang affirmed the central bank’s commitment to supporting the economy.

Energy stocks rode oil prices higher as the sector gained +4.34{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} in Hong Kong and +4.82{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} in Mainland China. Biden’s Saudi trip has yet to open the spigot, meaning energy prices could remain high in the near term. At the same time, a severe heat wave in China is raising awareness for clean energy policy support as environmental protection, wind, and solar stocks had a strong day.

Hong Kong-listed internet stocks had a strong day despite an off Friday for their US-listed counterparts.

It is worth noting that the city of Beijing is providing RMB 100 million worth of restaurant vouchers to jumpstart the local economy. This direct stimulus is focused on small private businesses.

Volumes were lighter than we would have liked for an up day. At the same time, considering the very high short sale turnover in Hong Kong, it will put a lot of pressure on those shorts if the rally can continue.

The Hang Seng and Hang Seng Tech indexes gained +2.7{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} and +3.02{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, respectively, on volume that decreased -10.4{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} from Friday, which is 82{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} of the 1-year average. 437 stocks advanced while 52 stocks declined. Hong Kong short sale turnover declined -16.45{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} from Friday, which is 100{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} of the 1-year average, as short sale turnover accounted for 19{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} of trading. Value and growth factors did well in today’s broad rally as large caps outperformed small caps. The top performing sectors were energy, which gained +4.34{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, materials, which gained +3.85{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, and real estate, which gained +3.6{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}. All sectors were in the green. The top performing sub-sectors included energy-related industries such as shale gas and oil stocks and precious metals and mining, while e-cigarettes and tobacco stocks were among the worst performing sub-sectors. Southbound Stock Connect volumes were light as Mainland investors were net sellers of Hong Kong-listed stocks, including Tencent, which saw some net inflow, while Meituan, Kuaishou, Li Auto, and China stock ETFs saw some net outflows.

Shanghai, Shenzhen, and the STAR Board diverged to close +1.55{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, +1.48{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, and -0.27{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, respectively, on volume that fell -6.1{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} from Friday, which is 94{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} of the 1-year average. 3,902 stocks advanced while 628 stocks declined. Value factors outperformed growth factors today while small caps outperformed large caps. The top performing sectors were energy, which gained +4.82{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, real estate, which gained +3.63{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, and utilities, which gained +3.45{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}. All sectors were in the green. The top performing sub-sectors were clean energy, especially solar, iron ore, and aluminum. Meanwhile, certain semiconductor names, lithium mining stocks, and healthcare stocks were among the worst performing sub-sectors. Northbound Stock Connect flows were light/moderate as foreign investors bought $527 million worth of Mainland stocks. Treasury bonds rallied, CNY appreciated versus the US dollar to 6.73, and copper gained +1.30{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} in a rare up day.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.74 versus 6.76 Friday
  • CNY/EUR 6.84 versus 6.82 Friday
  • Yield on 1-Day Government Bond 1.21{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} versus 1.21{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} Friday
  • Yield on 10-Year Government Bond 2.78{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} versus 2.79{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} Friday
  • Yield on 10-Year China Development Bank Bond 3.06{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} versus 3.05{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} Friday
  • Copper Price +1.30{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} overnight


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