Asian equities were largely higher as Japan outperformed and Hong Kong underperformed following declines in US-listed China stocks on Friday.
It will be a busy week with the PBOC, the Fed, and other central banks reporting interest rate adjustments and the last significant trading day of the year on Friday, which will include some Quad Witching (options and futures expiring) along with S&P Dow Jones, FTSE Russell, and Nasdaq indices rebalancing. I suspect things will start to get quiet next week.
The Hang Seng Index momentarily fell in morning trading to below the 16,000 level before rallying off lows.
The Nasdaq rebalance includes the removal of JD.com from the Nasdaq 100 index, which likely explains JD’s Hong Kong shares falling -6% due to the disposal of 39.5 million shares worth $187mm, 4X daily average volume. Founder and CEO Ricard Liu was vocal about the company’s e-commerce market share fall and tepid growth. In the company’s defense, Chinese consumer confidence continues to be improving, though slowly.
JD’s fall seemed to weigh on Hong Kong-listed internet stocks, except for Tencent, which gained +0.52% after buying back 1.32 million shares after early investors Prosus, part of Naspers, sold 513,000 shares on Friday. Not helping the Hong Kong consumer discretionary sector were investors crushing sports apparel maker Li Ning, which fell -15% after announcing the purchase of a building in Hong Kong for their new headquarters. Mainland investors bought a net $384 million worth of the Hong Kong Tracker ETF as Southbound inflow reached $716 million. Buying the dip!
On the macroeconomic front, CNY and the Asia Dollar Index fell versus the US dollar after Friday’s strong jobs report. Meanwhile, November’s consumer price index (CPI) fell year-over-year to -0.5% versus expectations of -0.2% and October’s -0.2% while the PPI fell -3.0% versus expectations of -2.8% and October’s -2.6%. Remember that China’s CPI is driven by pork prices while the PPI fell due to lower oil prices.
Friday’s Politburo meeting, which was presided over by President Xi, failed to inspire investors, although a bank reserve requirement ratio cut is widely anticipated. The post-meeting release stated “We will strengthen the counter-cyclical and cross-cycle regulation of macro policies and continue to implement proactive fiscal policies and prudent monetary policies.” The Central Economic Work Conference (CEWC) dates have not been set, though they should be announced soon.
Shanghai and Shenzhen also opened lower but rallied to close positive on reports that a Mainland-listed ETF saw unusually large trading volumes, indicating an institutional investor (i.e. the National Team, a sovereign wealth fund) was buying. Both Shanghai and Shenzhen are below my “lines in the sand” levels of 3,100 and 1,900. The CEWC should result in further stimulus measures announced. After the close, Mainland media noted that 40 Chinese companies announced recent stock buybacks. If these companies are buying, should we be buying, too?
The Hang Seng and Hang Seng Tech indexes fell -0.81% and -1.06%, respectively, on volume that increased +11.73% from Friday, 93% of the 1-year average. 172 stocks advanced while 305 declined. The Main Board short turnover increased 38.42% from Friday, which is 124% of the 1-year average, as 22% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The value factor and large caps “outperformed” (i.e. fell less than) the growth factor and small caps. The top-performing sectors were technology, which gained +0.58%, utilities, which gained +0.46%, and energy, which gained +0.32%. Meanwhile, consumer discretionary fell -2.45%, and materials and real estate both declined by -0.96%. The top-performing subsectors were semiconductors, healthcare equipment, and household products. Meanwhile, retail, materials, and consumer services were among the worst-performing. Southbound Stock Connect volumes were moderate as Mainland investors bought a net $716 million worth of Hong Kong-listed stocks and ETFs, including the Hong Kong Tracker ETF, which saw moderate-to-large net inflow. Meanwhile, Tencent, Meituan, and Li Ning were small net sells.
Shanghai, Shenzhen, and the STAR Board gained +0.74%, +0.95%, and +1.18%, respectively, on volume that declined -5.2% from Friday, which is 105% of the 1-year average. 3,834 stocks advanced while 1,150 declined. Large caps outpaced small caps while the value and growth factors were mixed. The top-performing sectors were communication services, which gained +1.56%, energy, which gained +1.1%, and consumer discretionary, which gained +1%. Meanwhile, real estate fell -1.24%, consumer staples fell -0.87%, and materials fell -0.14%. The top-performing subsectors were cultural media, coal, and auto parts. Meanwhile, soft drinks, liquor, and precious metals were among the worst-performing. Northbound Stock Connect volumes were moderate-to-high as foreign investors sold a net -$454 million worth of Mainland stocks. CNY and the Asia Dollar Index fell versus the US dollar. Copper and steel advanced.
Upcoming Webinar
Join us on Wednesday, December 13th, at 11:00 am EST for our live webcast:
Post-COP28 Insights: EU Leadership and California’s Market Surge
Please click here to register.
- CNY per USD 7.18 versus 7.17 yesterday
- CNY per EUR 7.72 versus 7.71 yesterday
- Yield on 1-Day Government Bond 1.20% versus 1.22% yesterday
- Yield on 10-Year Government Bond 2.64% versus 2.66% yesterday
- Yield on 10-Year China Development Bond 2.76% versus 2.78% yesterday
- Copper Price +0.93% overnight
- Steel Price +0.05% overnight