May retail sales beat as BYD’s Seagull takes flight

Key news

Asian stocks fell overnight, with Japan significantly underperforming and closing almost -2% lower, although volumes in the region were light due to market holidays. India, Indonesia, Malaysia, Pakistan, the Philippines and Singapore celebrated Eid al-Adha, the festival of sacrifice, which is the second of the two main Islamic holidays.

After Friday’s close, May’s overall financing and new loan data beat expectations, weighing on Friday’s performance of U.S.-listed Chinese ADRs. Mainland China and Hong Kong rebounded today on light volumes despite mixed economic data released mid-morning, although markets arguably showed some resilience. Growth stocks performed much better than value stocks in Hong Kong and mainland China.

May Industrial production increased by +5.6% year-on-year (yoy), compared to 6.7% in April, compared to a forecast of 6.2%. Retail sales in May increased +3.7% year-on-year, compared to 2.3% in April and a forecast of 3%. Looking at retail sales data, year-to-date online retail sales are up +12.4%, while online retail sales of physical goods are up +11.5 %, representing 24.7% of total retail sales of social consumer goods. Better-than-expected retail sales, particularly online retail sales, were likely helped by JD.com’s e-commerce event on June 18 (618) and Alibaba’s strong pre-sales.

Hong Kong’s most traded stocks by value were Tencent, up +0.37%, Meituan, up +1.83%, Alibaba HK, down -0.41%, China Mobile, down by -1.22%, and BYD, up +1.74%, as the company reported. sold 35,370 Seagulls, its low-cost electric car, in May despite Berkshire Hathaway reducing its position by 1.35 million shares (cut its stake from 7.02% to 6.9%). Mainland investors bought $483 million worth of Hong Kong stocks and ETFs today. Much media attention has been paid to China’s potential retaliation against the EU’s “preliminary” tariffs on electric vehicles focused on European pork. As expected, the Chinese government acknowledges that Spain, Italy and France were the main sponsors since their domestic automakers have little sales or no manufacturing in China.

Guess who is the EU’s largest pork exporter? According to Reuters, Spain exported 560,000 tonnes, or 20% of its pork exports to China in 2023. Suddenly, Spain asked to pump the brakes because I imagine Spanish farmers are important voters. Even with all the EV “overcapacity” in China, vehicle stocks were one of the best sectors in mainland China and Hong Kong, with Brilliance Auto (1114 HK) gaining +18.79% after announcing a dividend special of $4.30 from Hong Kong, representing a +50% return after the stock’s jump. The company paid a special dividend of HK$1.50 last month. The real estate sector was weak in both markets, with a decline of -1.19% in Hong Kong and -2.07% in mainland China, as sales of new and second-hand homes in May declined compared to april. Data from the People’s Bank of China showed the rate of new housing loans fell to 3.64% in May, from 3.7% in April and -0.53% a year ago. It’s arguably still early days since the so-called New Property Rules of May 17, 1751, driven by bottom-up, city-driven policies, reducing loan rates and minimum down payment ratios. Premier Li is currently in Australia after visiting New Zealand, which we believe is a positive sign.

Reuters published a very good article on June 14^th titled “U.S. Industry Groups Request Hearing to Learn About Biden’s Hiking China Tariffs.” » 173 American trade associations, not companies but trade associations, have written to the United States Trade Representative Office to request an extension of the public comment period on the proposed tariff increases. The groups involved ranged from semiconductor, solar, beer and retail trade associations to auto and truck parts trade associations. We know it’s an election year, so swing states like Michigan and Wisconsin will receive many TLC candidates like the other 6 swing states. It is astonishing that the media gives attention to just one anti-EV automotive trade group while the other 173 trade associations receive no media attention other than Reuters.

The Hang Seng and Hang Seng Tech indices were mixed -0.03% and +0.05%, respectively, on volume of -17.12% compared to Friday, or 94% of the one-year average. 112 stocks rose, while 374 fell. The Main Board’s short turnover decreased by -12.23% from Friday, representing 88% of the year-over-year average, with 16% of the turnover being made up of short turnover. short (Hong Kong short turnover includes ETF short volume, which is determined by market makers’ ETF coverage). . All factors were negative, with large caps and growth stocks falling less than small caps and value stocks. Leading sectors were financial services, up +0.29%, communications services, up +0.24%, and consumer discretionary, up +0.18%, while utilities , down -3.27%, energy, down -1.87% and real estate, down -1.18%. %. The top subsectors were food, semiconductors and automotive, while energy, telecommunications and real estate were the worst. Southbound Stock Connect volumes were light/moderate as mainland investors purchased $483 million worth of Hong Kong stocks and ETFs. Tencent was a Moderate/Small Net Buy, while Brilliance Auto was a Small Net Sell.

Shanghai, Shenzhen and STAR Board were in a mix of -0.55%, +-0.05% and +0.38% respectively, on a volume of -11.27% compared to yesterday, or 89% of the average over a year. 1,538 stocks rose, while 3,393 fell. Growth stocks and small caps generated positive returns, while value stocks and small caps posted negative returns. The leading sectors were technology, up +1.37%, industrials, up +0.46%, and consumer discretionary, up +0.26%, while real estate, up down -2.07%, energy, down -1.87% and materials, down -0.89%. . The top subsectors were motorcycles, automobiles and semiconductors, while coal, forestry and steel were the worst. Northbound Stock Connect volumes were light as foreign investors were net sellers of mainland stocks. The CNY and the Asian Dollar Index remained virtually stable. Treasuries fell. Copper and steel were down.

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Last night’s performance

Last night’s exchange rates, prices and yields

• CNY per USD 7.25 compared to 7.25 on Friday
• CNY per EUR 7.77 against 7.76 on Friday
• Yield on 10-year government bonds 2.26% compared to 2.25% on Friday
• Yield on 10-year bonds of the Chinese Development Bank 2.37% compared to 2.37% on Friday
• Copper price -1.00%
• Steel price -0.60%