Asian equities were mixed overnight on light volumes as investors wait for todayâs Fed policy meeting and Jerome Powellâs press conference.
Northern China is bracing for a significant drop in temperature as snowstorms make for a winter wonderland. Mainland China and Hong Kong fell as investors were left uninspired and underwhelmed by the Central Economic Work Conference (CEWC) release. If one believes the stock market is a barometer of investor confidence in the economy, todayâs Mainland China underperformance should be disconcerting for policymakers. The releaseâs emphasis on industrial policy over consumption stimulus and not stronger language on addressing real estate woes were primarily cited as the culprits.
I am surprised investors were hoping for a pivot in previous policies as the government clearly believes the economy is incrementally rebounding post-zero COVID policy removal. Policymakers clearly want to avoid creating inflation and increasing debt through massive stimulus. In a meeting with investors yesterday, real estate was far more of a significant topic of concern than I had anticipated. Duly noted, as weâll do more work there.
Overnight, Country Garden paid off the bond mentioned yesterday that was close to default, according to a Bloomberg News article after the marketâs close. Real estate was one of the worst sectors in both Hong Kong and Mainland China, falling -3.30% and -2.71%, as traders sold after yesterday’s strong performance, with the CEWC cited as a reason.
Despite it being a quiet day pre-Fed and Fridayâs big trading day due to S&P Dow Jones, Nasdaq, and FTSE Russell index rebalances as well as Quad Witching (stock and index futures and options expiration), foreign investors sold a healthy -$1.366 billion of Mainland stocks via Northbound Stock Connect. Hong Kongâs most heavily traded were Tencent -1.41%, Meituan -2.84%, and Alibaba -1% for no particular reason.
After the close, November aggregate financing and new loans missed expectations, with the former coming in at RMB 2.45 trillion versus expectations of RMB 2.595 trillion, though up from Octoberâs RMB 1.85 trillion. The latter was RMB 1.09 trillion versus expectations of RMB 1.30 trillion, though also up from Octoberâs RMB 738 billion. The release gives some credence to the CEWC release skepticism though it also reinforces the government’s view as month over month the readings increased. Once again, investor expectations are off as my wife often tells our kids to âread the room.â I heard some chatter that tax loss selling of stocks and mutual funds is weighing on the space though not quantifiable.
The Hang Seng and Hang Seng Tech indexes fell -0.89% and -1.18%, respectively, on volume that decreased -12.9% from yesterday, which is 71% of the 1-year average. 88 stocks advanced, while 403 declined. Main Board short turnover declined -16.03% from yesterday, which is 88% of the 1-year average as 17% of turnover was short turnover (remember Hong Kong short turnover includes ETF short volume, which is driven by market makersâ ETF hedging). Large caps âoutperformedâ/fell less than small caps, while growth and value factors were both off. Tech and healthcare were the only positive sectors, gaining +0.8% and +0.47%, while real estate -3.3%, materials -2.76%, and discretionary -1.62% were the worst performing. The top sub-sectors were technical hardware, media, and food/staples, while auto, healthcare equipment, and materials were the worst. Southbound Stock Connect volumes were light as Mainland investors bought $109 million of Hong Kong stocks and ETFs, with the HS Tech ETF, YSB, and China Mobile seeing small net buys while Tencent and CNOOC were moderate net sells.
Shanghai, Shenzhen, and the STAR Board fell -1.15%, -1.21%, and -1%, respectively, on volume that decreased -2.45% from yesterday, which is 88% of the 1-year average. 1,327 stocks advanced, while 3,534 declined. Large caps âoutperformedâ/fell less than small caps, while growth and value factors were both off. All sectors were down, with staples -3.03%, real estate -2.73%, and materials -1.99%. The top sub-sectors were water, pharmaceuticals, and gas, while liquor, restaurants, and airports were the worst. Northbound Stock Connect volumes were light/moderate as foreign investors sold a healthy -$1.336 billion of Mainland stocks, with BYD, Mindray, and FYG seeing light net buying while Wuliangye, Kweichow Moutai, and Changan Auto were large/moderate net sells. CNY and Asia dollar index were off versus the US dollar. Treasury bonds rallied while copper and steel were off.
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- CNY per USD 7.17 versus 7.17 yesterday
- CNY per EUR 7.74 versus 7.74 yesterday
- Yield on 10-Year Government Bond 2.63% versus 2.63% yesterday
- Yield on 10-Year China Development Bond 2.76% versus 2.76% yesterday
- Copper Price -0.00% overnight
- Steel Price -0.00% overnight