Asian equities had a strong day despite the US equity market’s weakness Friday and increased lockdowns in Europe. Meanwhile, Japan announced the easing of travel restrictions for several countries in the region. The Wall Street Journal noted the out-performance of stock markets in Asian countries that have largely contained the virus’ spread versus the US, where equity markets are hoping the coronavirus can be controlled. After having gone several months without knowing anyone who has contracted coronavirus, four people in my social/kids’ sports/school ecosystem have tested positive in the last week in a worrisome sign.
Takeaway: The “official” PMIs were released Saturday morning China time while the Caixin/”private” PMI was released Monday prior to the market’s open. By way of background, the “official” PMIs are a broad survey of large companies while “private”/Caixin is a smaller sample size of private companies with IHS Markit
The Hang Seng Index had a strong day gaining +1.46%, albeit on low volumes as Hong Kong’s GDP grew +3% in Q3 year over year, ending a streak of five quarters of negative GDP growth. Alibaba’s
Hong Kong’s volume leader overnight was Tencent, which gained +1.78% as the stock benefits from re-rating due to Ant Group’s IPO, strong online gaming numbers, and talk of tracking Prosus’ share buyback plan. Tencent had another monster day of buying from Mainland investors via the Southbound Connect trading platform. There is broker chatter that Bytedance competitor Kuaishou, in which Tencent invested, is going to file for a Hong Kong IPO as soon as next week.
Geely Auto ripped +13.57% on high volumes as electric vehicle policies take center stage in the new Five year Plan. Meituan Dianping gained +2.22% while Xioami gained +0.45% and EV bus maker BYD gained +12.72%. Macau casino stocks had a decent day as October gaming data improved off a low base.
It is interesting to note that healthcare was off a touch despite the increase in global coronavirus cases. Shanghai and Shenzhen diverged, gaining +0.02% and +1.15%, respectively, as growth names outpaced value names and mid and small caps outpaced large caps. The new Five Year Plan’s emphasis on innovation likely helped lift growth names. Mega caps were off on the day as banks were weak on worries of an increase in loan defaults though brokers were very strong on IPO rules being amended.
Alibaba (BABA US) will report quarterly results on Thursday. The choice of Thursday is interesting as it coincides with the Ant Group IPO. The conspiracy theorist would say an in-line result might be overshadowed by Ant Group’s IPO. It is hard to say, though we’ll know soon enough. Strong economic data especially online retail sales would mitigate that concern.
South Korea’s Damwon Gaming team won this weekend’s League of Legends world championship. I haven’t been able to find the prize amount though it was hard not to notice the tournament’s high profile sponsors such as Red Bull, Louis Vuitton and smartphone maker Oppo.
This past weekend’s Investor’s Business Daily highlighted 5G smartphone shipments by region. Greater China had just over 150 million 5G phones produced in 2020, accounting for 62% of global shipments. In 2021, that number is estimated to double to over 300 million though the percentage of market share will decline as other regions play catch up.
The Hang Seng opened higher and kept going to close +1.46%/+352 index points at 24,460. Volume plunged -23% from Friday, placing it below the 1-year average while breadth was positive with 35 gainers and 14 decliners. The 204 Chinese companies within the MSCI
Shanghai and Shenzhen had a choppy session but rallied later in the session to close +0.02% and +1.15% at 3,225 and 2,223, respectively. Volume was off -6.9%, placing it just above the 1-year average while 1,834 advancers and 1,914 decliners. The 518 Mainland stocks within the MSCI China All Shares Index gained +0.7% led by utilities +2.53%, discretionary +2.5%, industrials +1.55%, materials +1.44%, and tech +0.95%. Meanwhile, healthcare and financials fell -0.38% and -0.25%, respectively. Northbound Stock Connect volumes were moderate as foreign investors bought $460 million worth of Mainland stocks as Northbound Connect trading accounted for 5.8% of Mainland turnover.
Last Night’s Exchange Rates & Yields
- CNY/USD 6.70 versus 6.69 Friday
- CNY/EUR 7.78 versus 7.82 Friday
- Yield on 1-Day Government Bond 1.91% versus 2.05% Friday
- Yield on 10-Year Government Bond 3.18% versus 3.18% Friday
- Yield on 10-Year China Development Bank Bond 3.65% versus 3.67% Friday
Krane Funds Advisors, LLC is the investment manager for KraneShares ETFs. Our suite of China focused ETFs provide investors with solutions to capture China’s importance as an essential element of a well-designed investment portfolio. We strive to provide innovative, first to market strategies that have been developed based on our strong partnerships and our deep knowledge of investing. We help investors stay up to date on global market trends and aim to provide meaningful diversification. Krane Funds Advisors, LLC is majority owned by China International Capital Corporation (CICC).