Asian stocks had a mixed week. A ‘soft’ US inflation reading and the US Fed holding rates steady boosted sentiment, but rumors that the Biden administration may further restrict Chinese companies’ access to AI chips weighed on the feeling.
On Wednesday, Wuxi Biologics gained +14.21% in Hong Kong, and WuXi AppTec gained +8.45% in Hong Kong, as the Biosecure law did not include provisions to restrict the use of the companies’ services.
May’s overall funding increased to RMB 14.8 trillion from April’s RMB 12.73 trillion, although it was lower than expectations of RMB 15.08 trillion.
New loans in May increased to RMB 11.14 trillion from RMB 10.18 trillion in April, although they slightly exceeded expectations of RMB 11.13 trillion.
Key news
Asian stocks were mixed overnight on poor news and volumes as the 10-year US Treasury yield rallied along with the US dollar.
The biggest news out of China overnight was coverage of Tesla’s shareholder meeting. Hong Kong saw a choppy session on light volumes, ultimately succumbing to gravity on the close, with the Hang Seng closing just below 18,000. EU tariffs on Chinese electric vehicles (EVs) weighed on confidence and on automobile stocks, although these rights are “preliminary”, and Vice-Premier Ding Xuexiang goes to Brussels to negotiate.
The China Automobile Manufacturers Association reported that automobile sales in May increased +1.5% year-on-year (y-o-y) to 2.417 million, as new energy vehicles (NEV), which include both electric vehicles and hybrids, increased by +33.33% year-on-year to reach 955,000 vehicles. . 39.5% of total automobile sales were NEVs. For all the talk about China’s “overcapacity”, production of new cars and NEVs was still LESS than sales. With “only” 40% of sales, NEVs have a significant market share to take from vehicles with internal combustion engines or gasoline vehicles.
There has been some talk that the US Treasury was looking into Chinese banks’ Russian transactions, which hasn’t helped sentiment, but nothing tangible so far. The Hong Kong market lacks a strong catalyst, although the 6:18 a.m. online sales event could provide some fuel ahead of the third plenum in July. Alibaba’s results (6.18) have been good so far, with average first day sales up +30% year-over-year. President Xi said economic reforms would focus on “planning and implementing a series of important measures to comprehensively deepen reform.” Policies supporting domestic consumption and “high development” are expected.
Hong Kong growth stocks were down. The most traded stocks in Hong Kong by value were Tencent, which closed flat/0%; Meituan, down -1.71%; Alibaba, down -2.28%; AIA, down -1.94%; and BYD, down -1.46%. US-China ADRs performed well yesterday, although Hong Kong could not replicate today’s positive day, as Bilibili HK only rose +0.26% against a +7 gaining ADR .71% yesterday thanks to the success of a new game. Mainland investors bought the Hong Kong dip today with a healthy net buying amount of $743 million, bringing the holiday-shortened weekly total at $3.451 billion. Real estate was the leading sector in Hong Kong with a rise of +1.14% and also gained +1.86% in mainland China, with reports that property transactions in Shanghai picked up following the easing restrictive rules on the purchase of housing on May 28. Shanghai and Shenzhen both managed small gains.
After the close, new loans in May increased to RMB 11.14 trillion from RMB 10.18 trillion in April, although a slight deviation from expectations of RMB 11.13 trillion. In May, overall financing increased to RMB 14.8 trillion from RMB 12.73 trillion in April, although it also missed expectations of RMB 15.08 trillion. A nice gain from one month to the next! Much attention was paid to industrial production, retail sales and capital investment from Monday to May. Enjoy the weekend!
The Hang Seng and Hang Seng Tech fell -0.94% and -0.84% ​​respectively, on a volume of +8.29% compared to yesterday, or 113% of the one-year average. 230 stocks rose, while 243 fell. Main Board short turnover increased by +3.3% from yesterday, or 100% of the one-year average, as 15% of turnover was short turnover . The value factor generated a positive return while growth underperformed the market. The leading sectors were real estate, up +1.14%, materials, up +0.50%, and financial services, up +0.22%, while consumer discretionary was in down -1.55%, energy down -0.88% and healthcare down -0.57%. . The top subsectors were food/staples, healthcare equipment, and media, while retail, pharmaceuticals/biotech, and semiconductors were the worst. Southbound Stock Connect volumes were moderate/light as mainland investors purchased $743 million worth of Hong Kong-listed stocks and ETFs.
Shanghai, Shenzhen and the STAR Board diverged to close +0.12%, +0.37% and -0.62% respectively, on volume which increased by +13.1% compared to yesterday, or 100% of the one-year average. 2,323 stocks rose, while 2,524 fell. Values ​​and large caps outperformed growth stocks and small caps. The leading sectors were real estate, up +1.86%, information technology, up +1.41%, and financial services, up +1.35%, while utilities fell -2.26%, energy -0.92% and healthcare -0.57%. The top subsectors were communications equipment, securities and electronic components, while soft drinks, energy and biotechnology were the worst. Northbound Stock Connect volumes were light, with foreign investors being net sellers of mainland stocks, CATL being a large/moderate net buy, Zhongji Innolight and Mindray being moderate net buys, while Cypc, WuxiAppTec and Bank of Communications were significant net sales.
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Last night’s performance
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Last night’s exchange rates, prices and yields
CNY per USD 7.25 compared to 7.25 yesterday
CNY per EUR 7.76 against 7.82 yesterday
Yield on 10-year government bonds 2.25% versus 2.27% yesterday
Yield on 10-year Chinese Development Bank bonds 2.37% compared to 2.38% yesterday
