Asian equities were down following the Fed’s 75 basis point interest rate hike as the US dollar surged overnight and the Asia dollar index hit a 52-week low.
Thailand and Indonesia managed small gains. Japan was closed for Culture Day while Hong Kong was hit with profit-taking as the Hong Kong Monetary Authority (HKMA) raised interest rates by 75 basis points. With the Hong Kong dollar pegged to the US dollar, it requires the HKMA to follow the Fed. Hong Kong was hit with profit-taking following the rebound this week though there was little news. Hong Kong shorts were relatively quiet, which is one positive, as we’ve seen them double down on previous rallies. Only 9% of Alibaba’s turnover was short turnover, Tencent’s had 4%, Meituan was 18%, and JD.com HK 25%.
Mainland investors bought $968 million of Hong Kong stocks, with Tencent seeing another strong day along with Meituan. This is the third day of +$900 million net buying of Hong Kong stocks versus the year-to-date average of $250 million of daily net buying. A lot of media headlines looking to crush the rumor that zero COVID policy will be dialed back in March 2023. Zero COVID hasn’t gone away, the path for a slow dial back is apt to occur. Several cities announced visitors don’t need a COVID test prior to visiting. Worth noting mRNA vaccine maker BioNtech’s CEO is joining the German government and business delegation visiting China later this week. YUM China kicked off Q3 earnings yesterday beating expectations though they did caution about zero COVID’s lingering effect. This morning, online car seller Autohome (ATHM US, 2518 HK) beat expectations as well. October EV sales increased 87% year over year to 680,000. BYD sold 217,518, Tesla sold 71,704, and GM’s China joint ventures sold 52,086. Mainland China was off a touch in choppy trading though semiconductors had a strong day. Foreign investors were net sellers of Mainland stocks as CNY was off versus the US dollar.
The Hang Seng and Hang Seng Tech fell -3.08% and -3.84% respectively on volume -6.95% from yesterday which is 80% of the 1-year average. 110 stock advanced while 387 stocks declined. Main Board short volume increased 18.47% from yesterday which is 67% of the 1-year average as 15% of turnover was short. Value and growth factors were mixed while small caps outperformed large caps. Utilities was the only positive sector closing +0.36% while finishing lower were discretionary -4.9%, communication -4.42%, and real estate -3.97%. The only positive sub-sector was food as retailers, durables/apparel, and software were among the worst. Southbound Stock Connect volumes were moderate/high as Mainland investors bought a healthy $968 million of Hong Kong stocks with Tencent and Meituan both having moderate net buys.
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Shanghai, Shenzhen, and STAR Board were mixed -0.19%, -0.04%, and +1.05% on volume -15.92% from yesterday which is 91% of the 1-year average. 2,165 stocks advanced while 2,354 stocks declined. Growth factors outperformed value factors as small caps outpaced large caps. All sectors were negative with tech off the least falling slightly -0.13% while finishing lower were real estate -2.5%, communication -1.95%, and staples -1.93%. Top sub-sectors were semiconductors, heavy machinery, and power generation equipment while underperforming were software, liquor, and telecom. Northbound Stock Connect volumes were higher/moderate as foreign investors sold -$623 million of Mainland stocks. Treasury bonds rallied, CNY fell -0.35% versus the US dollar to 7.32, and copper was off -0.27%.
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.32 versus 7.28 yesterday
- CNY per EUR 7.13 versus 7.21 yesterday
- Yield on 10-Year Government Bond 2.68% versus 2.69% yesterday
- Yield on 10-Year China Development Bank Bond 2.79% versus 2.87% yesterday
- Copper Price -0.27% overnight