Key News
Asian equities were off overnight as profit-taking ruled the day regionally. Outperforming markets, sectors, and stocks were sold.
Although Fitch’s downgrade of the US and the Trump indictment were publicized in Asia, heavy rains in Northern China, a typhoon approaching Taiwan and Mainland China, and economic policy support measures dominated headlines.
The Cyberspace Administration of China (CAC) proposed limiting minors’ exposure to mobile phones from 10 pm to 6 am and cutting total mobile phone times fairly dramatically. It is easy to say that was the culprit in the weakness in Hong Kong-listed internet stocks, though growth stocks and sectors were hit broadly across the region. Korea’s Kosdaq was smoked, falling -3.18%, for example. The recent policy pivot to supporting internet companies to facilitate domestic consumption means this agency hasn’t gotten the message, which makes the proposal unlikely to be fulfilled. Remember, policies take time to filter down through the government bureaucracy.
Concerns about US investors’ exposure to China are grossly exaggerated as China represents 3.11% of the MSCI All Country World Index versus the US’ 62.06%. Apple’s
AAPL
market cap, supported by its China revenue, is potentially larger than all US investor exposure to Chinese stocks!
Reuters might have been the only Western media outlet to note the invitation extended to Foreign Minister Wang Yi to visit the US. As Reuters noted the invitation took place at a meeting between the US State Department and China’s Foreign Ministry. Maybe more is happening behind the scenes as diplomats should take a page from the corporate world and visit one another. Both sides can benefit from one another, as Starbucks’ very strong China results highlight (China sales +46% Year over Year, though remember Q2 2022 was the Shanghai lockdown). We had a typical foreign freakout with Hong Kong off while Mainland China was off significantly less. The Hang Seng did close below 20k though Shanghai and Shenzhen stayed above 3,200 and 2,000.
The Hang Seng and Hang Seng Tech fell -2.37% and -3.29%, respectively, on volume that decreased -16.15% from yesterday, which is 100% of the 1-year average. Only 79 stocks advanced, while 413 stocks declined. Main Board short turnover fell -24.48% from yesterday, which is 96% of the 1-year average, as 16% of turnover was short turnover. Growth and value factors were mixed as small caps “outperformed” large caps. All sectors were negative led healthcare -3.9%, communication -3.07%, and discretionary -2.91%. Business/professional services were the only positive sub-sectors, while pharma, healthcare equipment, and retailing were the worst. Southbound Stock Connect volumes were high as Mainland investors sold -$467 million of Hong Kong stocks and ETFs, with XPeng a large net sell, Tencent a moderate/large net sell, and Meituan a small net sell.
Shanghai, Shenzhen, and the STAR Board fell -0.89%, -0.28%, and -0.13%, respectively, on volume that declined -12.62% from yesterday, which is 93% of the 1-year average. 1,766 stocks advanced, while 2,860 declined. The growth factor outperformed the value factor, while small caps outpaced large caps. All sectors were negative, with energy -2.89%, healthcare -1.64%, and communication -1.22%. The top sub-sectors were motorcycles, construction machinery, and retail, while oil/gas, banking, and chemicals were the worst. Northbound Stock Connect volumes were moderate as foreign investors sold -$699 million of Mainland stocks with China Merchants Bank, Kweichow Moutai, and Jiangsu Hengrui Pharmaceutical small/moderate net sells. CNY was a small net gain over the US dollar, while copper and steel were off.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.17 versus 7.17 yesterday
- CNY per EUR 7.87 versus 7.85 yesterday
- Yield on 10-Year Government Bond 2.65% versus 2.66% yesterday
- Yield on 10-Year China Development Bank Bond 2.75% versus 2.76% yesterday
- Copper Price -0.99% overnight
- Steel Price -0.60% overnight
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