Hong Kong’s gains pared after profit-taking, mainland China mixed

Key news

Asian stocks were mixed overnight on light volumes and news.

Hong Kong was hit by profit-taking after yesterday’s very strong advance in growth/internet stocks following strong results from JD.com’s 618th e-commerce sales event and +18.96% move in Bilibili following an analyst upgrade. Hong Kong rose following yesterday’s news about capital market reforms and the national team purchasing mainland-listed ETFs with Hong Kong stocks for the first time. Traders were quick to take profits with Bilibili -4.5% today, although the Hong Kong market recorded a net gain on both days. It’s fair to say that today’s decision implies that recent policy announcements have disappointed investors.

The most traded stocks in Hong Kong by value were Tencent -0.36%, CNOOC +3.52%, Meituan -1.24%, Kuaishou -5.17% with no news and ICBC +0.66%. Semis and high dividend games had a good day, while healthcare was weak. Mainland Chinese investors bought $964 million worth of Hong Kong stocks and ETFs today, bringing the weekly total to $2.502 billion in net purchases, $9.44 billion since beginning of the month and $40.433 billion since the beginning of the year. Shipping companies had a good day for news in the Red Sea. The Houthis have sent the Tutor bulk carrier to Davey Jones’ locker, indicating that shipping rates will be higher for longer.

Real estate underperformed by -2.92% in China and -2.4% in Hong Kong as investors rejected the People’s Bank of China’s decision to leave the prime lending rate unchanged as expected at 1 and 5 years old. China was in bad shape, except for the STAR Board, which benefited from yesterday’s eight market reform measures. People’s Bank of China Governor Pan Gangsheng introduced the idea that the central bank could start buying/selling bonds in the secondary market to manage monetary policy. However, many deny that this implies that quantitative easing is coming to China.

The RMB and Asian dollar index fell slightly against the US dollar as the People’s Bank of China appears to believe US interest rates have been higher for longer, indicating RMB weakness. The Shanghai closed just above the 3,000 level while the Shenzhen closed below 1,680, which acted as support. Foreign investors have been net sellers for the past nine straight days, although a change in how the data is disseminated has posed a problem: no sign of the national team in their preferred ETFs. The Hang Seng and Hang Seng Tech broke through their support signs in a positive move.

The Hang Seng and Hang Seng Tech fell -0.52% and -1.68% on volume of -8.16% from yesterday, or 101% of the 1-year average. 110 stocks rose, while 371 fell. Main Board short turnover increased +4.69% from yesterday, or 99% of the one-year average (Hong Kong short turnover includes ETF short volume , driven by market maker ETF coverage). Large caps and value stocks “outperformed”/fell less than small caps and growth. The top sectors were energy +1.74%, utilities +0.79% and materials +0.59%, while healthcare -2.81%, real estate -2.4% and basic products -2.2%. The top subsectors were energy, telecommunications and semi-manufactures, while food/staples/media and pharmaceuticals were the worst. Southbound Stock Connect volumes were moderate/light as mainland investors purchased $964 million worth of Hong Kong stocks and ETFs, with the Hong Kong Tracker ETF seeing a significant net purchase.

Shanghai, Shenzhen and STAR Board were mixed -0.42%, -1.88% and +0.46% on volume +2.51% compared to yesterday, or 86% of the one-year average. 830 stocks rose, while 4,179 fell. Large caps and value stocks outperformed small caps and growth. Energy and utilities were the only positive sectors, +1.57% and +0.77%, while real estate -2.02%, communication -1.74% and health -1, 51%. The top subsectors were shipping, education and coal, while forestry, internet and retail were the worst. Northbound Stock Connect volumes were moderate/medium, with foreign investors net sellers with small net purchases of LXJM, CATL and PetroChina, while Midea and Yili were small/moderate net sellers and Kweichow Moutai were small net sellers. The CNY and the Asian Dollar Index were slightly lower against the US dollar. Treasury bills were stable. Copper gained while steel fell.

New content

Read our latest article:

How to buy the same stocks as Chinese sovereign wealth funds

Please click here to read

Last night’s performance

Last night’s exchange rates, prices and yields

• CNY per USD 7.26 compared to 7.25 yesterday
• CNY per EUR 7.78 against 7.79 yesterday
• Yield on 10-year government bonds 2.24% compared to 2.24% yesterday
• Yield on 10-year Chinese Development Bank bonds 2.35% compared to 2.35% yesterday
• Copper Price +1.30%
• Steel price -0.61%