Asian equities were mostly higher overnight except for Japan and South Korea as Hong Kong outperformed on the Central Bank governor’s announcement of a cut to banks’ reserve requirement ratio (RRR).
The RRR announcement came from the Central Bank governor Pan Gongsheng, which is rare as such announcements usually come from a representative of the State Council. The RRR, which dictates how much cash banks need to hold on their balance sheets as opposed to lending out, will be cut by 0.50% from 7.4% to 6.9%, down from nearly 10% in 2020. This highlights the PBOC’s attention to this issue and that top level policy is being implemented with gusto. Policymakers also mulled additional credit support for real estate developers, beyond the working capital facility for developers’ to complete unfinished projects.
The National Team was active again overnight as their favorite ETFs saw flows. It is important that authorities are paying attention to offshore markets as historically they have been mostly focused on Mainland markets.
The China Securities Regulatory Commission (CSRC) is also considering reinstating rules that prevent mutual funds from being net sellers in a market session. This may help markets, though it does stops at fully banning the automatic liquidation of “snowballs”, or structured products, at certain index or stock levels.
All sectors in the MSCI China All Shares Index were higher overnight with a slight bias towards value sectors such as Financials and Energy. This tracks with copper and steel, which are tracking higher today, likely due to increased China growth expectations.
A survey released by the German Chamber of Commerce revealed that about 50% of participants plan to scale up their China operations over the next two years.
The Hang Seng and Hang Seng Tech indexes both closed higher by +3.56% and 4.24%, respectively, on volume that increased +4% from yesterday. Short sale volume declined -3% (Remember Hong Kong’s short sale volume includes market makers’ ETF hedging). The top-performing sectors overnight were Utilities, which gained +5.20%, Consumer Discretionary, which gained +5.17%, and Energy, which gained +5.14%. Meanwhile, the worst-performing sectors were Consumer Staples, which gained +1.93%, Heath Care, which gained +2.26%, and Information Technology, which gained +3.12%. Mainland investors sold a net -$69 million worth of Hong Kong stocks via Southbound Stock Connect.
Shanghai, Shenzhen, and the STAR Board all closed higher by +1.80%, +1.25%, and +0.07%, respectively, on volume that increased by +9% from yesterday. The top-performing sectors overnight were Real Estate, which gained +3.36%, Energy, which gained +3.00%, and Financials, which gained +3.00%. Meanwhile, the worst-performing sectors were Information Technology, which gained +0.16%, Consumer Staples, which gained +0.69%, and Health Care, which gained +1.34%. Foreign investors bought a net $254 million worth of Mainland stocks overnight via Northbound Stock Connect.
- CNY per USD 7.14 versus 7.17 yesterday
- CNY per EUR 7.80 versus 7.77 yesterday
- Yield on 1-Day Government Bond 1.60% versus 1.50% yesterday
- Yield on 10-Year Government Bond 2.50% versus 2.50% yesterday
- Yield on 10-Year China Development Bank Bond 2.64% versus 2.64% yesterday
- Copper Price +1.09%
- Steel Price +0.76%