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Asian equities were mixed on a quiet night as Pakistan was closed for a holiday. It was fairly quiet overnight as Mainland China and Hong Kong bounced around the room to end mixed.
October inflation data was deflationary, with CPI year-over-year (YoY) at -0.2% versus expectations of -0.1% and September’s 0%, while the producer price index (PPI) fell -2.6% versus expectations of -2.7% and September’s -2.5%. The mid-morning release may have weighed on sentiment as the CPI highlights slack in consumer demand. If one looks at the data you would see that food, which is really comprised of pork prices, fell -4% while non-food was up +0.7%, and ex-food and energy were both up +0.6%. Food prices fell -0.8% in October, led by pork’s fall -30.1% YoY after increasing +0.3%. Who wouldn’t want a cheaper trip to the grocery store?
Mainland investors bought today’s dip with a healthy $645 million worth of Hong Kong stocks and ETFs, with the Hong Kong Tracker ETF saw a large net inflow. Hong Kong’s most heavily traded stocks by value were Tencent, which fell -0.52%, Ping An Insurance fell -1.3%, despite denying a Reuters report of the insurance giant buying Country Garden, Xiaomi, which gained +2.35%, Alibaba, which fell -0.42% despite Singles Day being 48 hours away, and Meituan, which was flat. A Mainland media source is reporting that “Taobao Tmall Hong Kong, China recorded a double-digit year-on-year growth in gross merchandise volume (GMV) for the first wave of the sales period.” It sounds promising, though expectations for Singles Day are low, so we shall see.
Online real estate broker KE Holdings, which operated the “Beike” real estate platform, beat Q3 expectations, though, unsurprisingly, it had a weak forecast, which weighed on the stock. Electric vehicle (EV) maker Li Auto gained +3.75% after beating estimates on Q3 earnings as revenue grew +271.2% year-over-year (YoY) to RMB 34.68 billion ($4.75 billion) from RMB 9.34 billion while non-GAAP net income increased +27.1% YoY to RMB 3.47 billion ($475.2 million) from a loss of RMB 1.24 billion. Impressive!
Foreign investors sold a net -$8 million, not a typo, though investors leaned toward Shenzhen growth stocks while selling Shanghai growth stocks. There is chatter on the China Securities Regulatory Commission (CSRC) tightening short-selling rules, though nothing like the outright ban in South Korea. The government wants the market higher, so I would be afraid to be short Mainland equities. There were no updates from sovereign wealth fund Central Huijin, though it couldn’t hurt sentiment.
The Hang Seng and Hang Seng Tech indexes diverged to close -0.33% and +0.08%, respectively, on volume that decreased -20% from yesterday, which is 68% of the 1-year average. 132 stocks advanced, while 351 stocks declined. Main Board short turnover increased by +0.96% from yesterday, which is 82% of the 1-year average, as 20% of turnover was short turnover (remember Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The value factor and large caps outpaced the growth factor and small caps. The top sectors were energy +0.86%, tech +0.38%, and utilities +0.27%, while real estate -4.18%, staples -1.37% and healthcare -1.16%. The top sub-sectors were auto, telecom, and energy, while food/staples, consumer services, and pharmaceuticals were the worst. Southbound Stock Connect volumes were light as Mainland investors bought $645 million of Hong Kong stocks and ETFs, with the Hong Kong Tracker ETF seeing a large net buy, Hang Seng and H Share ETFs moderate net buys, Ping An and Tencent very small net buys.
Shanghai, Shenzhen, and the STAR Board diverged to close +0.03%, -0.47%, and -0.65%, respectively, on volume that decreased -7.14% from yesterday, which is 110% of the 1-year average. 1,346 stocks advanced, while 3,446 declined. The value factor and large caps outpaced the growth factor and small caps. The top sectors were energy +2.14%, utilities +0.62%, and materials +0.27%, while communication -1.36%, healthcare -1.22%, and discretionary -0.59%. The top sub-sectors were coal, power generation equipment, and highway, while insurance, cultural media, and pharmaceutical. Northbound Stock Connect volumes were light for Shanghai stocks and moderate for Shenzhen stocks as foreign investors sold -$8 million of Mainland stocks, with Changan Auto a small/moderate net buy, Wanhua and HR small net buys while Ping An a moderate net sell, Wuliangye and ZTE small net sells. CNY and the Asia dollar index were off small versus the US dollar. Treasury bonds were basically flat as the curve steepened slightly. Copper was off while steel gained.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.28 versus 7.28 yesterday
- CNY per EUR 7.78 versus 7.77 yesterday
- Yield on 10-Year Government Bond 2.64% versus 2.64% yesterday
- Yield on 10-Year China Development Bank Bond 2.72% versus 2.72% yesterday
- Copper Price -0.24% overnight
- Steel Price +1.42% overnight
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