Markets Rise on Epic Foreign Influx as Internet Stocks Climb Wall of Worry, Week in Review

a week in review

• China CPI for December was released at +1.8% vs +1.6% in November, meeting expectations of 1.8%.
• On Wednesday, the World Bank halved its global GDP growth forecast for 2023, though it expects China’s GDP growth to be ahead of the pack.
• The China Passenger Vehicle Association released sales data for December and 2022 showing that 4 million electric vehicles were sold in China in 2022, 5 times more than the United States.
• Jack Ma has given up most of his stake in fintech giant Ant Group, paving the way for the final regulatory rubber stamp as well as a possible initial public offering.

Friday Home News

Asian stocks ended the week higher, with the exception of Japan and Thailand, while Hong Kong, China and the Philippines outperformed.

Global equities have had a strong year-to-date (hit wood) performance. Lots of news overnight! What did the China news risk gauge do? Remember, we use China’s currency as a measure of risk to understand if the ‘news’ is impactful/something we should be concerned about. The Chinese Yuan rose +0.17% against the dollar, closing at 6.72! All the negative headlines of the Western media? The stock market didn’t care as Hang Seng rose +1.04%, Hang Seng Tech closed +1.51% higher, Shanghai finished +1.01%, Shenzhen rose +0.9%, and STAR Board rose +0.01%.

Just before opening in Hong Kong, the Financial Times published an article titled “China Moves to Take ‘Golden Shares’ in Alibaba and Tencent Units”. The source of the article was not revealed until several paragraphs later in the article. Is “Separate Persons Being Briefed” a reliable source? I don’t have any proof, but the key is, the market didn’t care at all Although the Western media paid for the FT article. I don’t see any mention of this in the mainland media FYI. If this is true, then there is an argument and a sign that corporations are in the interest of the government because their success will benefit them as well. I think we could see the local counties supporting the companies though we will find out.

Hong Kong was steady, although a bit choppy at the open, but rallied later in the session as Reuters reported that “delivery ride-hailing app Didi Global and other apps are back on local app stores as soon as next week.” A source from Reuters? five sources told Reuters, in another sign of the end of their two-year regulatory crackdown on the technology sector.

Trade data was released for the month of December, which showed that both exports and imports fell year-on-year, though not as deeply as expected. Remember that we must anticipation China’s exports are slowing as global factory demand slows. The export data is also an indication of a slowdown in the global economy unfortunately. Import data was weak although the decline in commodity prices is one of the factors, for example, crude oil imports increased, but the value of oil imports decreased due to the drop in oil prices.

The most heavily traded Hong Kong by value was Alibaba HK, which rose +1.71% on news that it will work on smart car technology with Geely Automobile (175 HK), which fell -0.98%, Tencent +2.03% on net buying from investors. Mainland, and Meituan up -1.04% as listed companies on the US Internet and electric vehicles (EV) along with economic growth experienced a strong day. The reopening of Hong Kong plays such as Macau casinos and airlines was a good day. All sectors in Hong Kong were positive, less so while advanced utilities outpaced declining stocks by nearly 4 to 1. Hong Kong’s healthcare sector rose +4.6%, led by Wuxi Biologics Cayman (2269 HK), lifting two of Analysts rated/priced targeting. The main body’s short volume increased to 17% of the volume with Alibaba’s short volume accounting for 23% of the total volume, NetEase 32%, and Tencent 17%. All sectors rose in China today as value factors outperform.

In China, talk of the People’s Bank of China (PBOC) injecting liquidity into the financial system ahead of the Chinese New Year helped general sentiment. The most heavily traded on the mainland were CATL + 1.38%, Kweichow Moutai + 2.89%, Wuliangye Yibin + 2.68%, Ping An Insurance + 2.83%, East Money + 3.08%, LONGi Green Energy + 0.02%, BYD + 0.46%. These are growth stocks that are favored by domestic and foreign investors although I would argue that you don’t need an active manager to buy them! Overseas investors bought $1.984 billion in mainland shares via Northbound Stock Connect for a weekly total of $6.519 billion. Semis companies were strangely held back from the day as US meetings with Japan and the Netherlands to limit technology exports to China took a toll on the space. Strong day and week!

Two Chinese airlines have said they will be delisted from the New York Stock Exchange. Sounds bad, right? wrong! The two companies are state-owned companies that contain sensitive information that could be disclosed in an audit review by the PCAOB. The PCAOB is part of the SEC, meaning the US government, in a move we’ve seen from other state-owned companies. It shows that private companies are allowed to comply with the HFCAA. This is good news!!!

The Hang Seng and Hang Seng Tech indices were up +1.04% and +1.51% respectively, in volume terms down -16.65% from yesterday, which is 106% from the first-year average. 388 shares rose, while 104 shares declined. Short volume on the main board is down -11.56% from yesterday, which is 103% from the one-year average where 17% of volume was short. Growth factors outperformed value factors, while small companies outperformed large companies. The best performing sectors were Healthcare +4.6%, Commodities +2.26%, Telecom +2.12% while utilities were the only negative sector at 0.32%. The best performing subsectors were pharmaceuticals/biotechnology, healthcare equipment, and media, while the subsectors were food/essential, and utilities. Southbound Stock Connect volumes were light as mainland investors bought $261 million in Hong Kong shares, with Tencent moderately buying, BYD a small net buy, and Meituan and Li Auto being a small net sell.

Shanghai, Shenzhen, and Starboard gained +1.01%, +0.9%, and +0.01% respectively, in terms of volume which increased +3.27% from yesterday, which is 77% from the first-year average. 2,796 shares rose, while 1,808 shares fell. Value factors outperform growth factors as caps barely outperform small businesses. All sectors were positive, with consumer staples +3.33%, healthcare +3.01%, and financials +2.17% with technology +0.36%. The first sub-sectors were soft drinks, household products, and diversified finance while power generation equipment, gas industry, and communications equipment. Northbound Stock Connect volumes were light/moderate as foreign investors bought $1.984 billion in mainland stocks. The Chinese Yuan had a strong move against the US Dollar, +0.17% to close at 6.72, Treasuries sold off, and Shanghai Copper rose +0.26%.

Major Chinese City Mobility Tracker

The trend continues to improve. Although traffic in Shanghai and Chengdu has flipped, metro usage remains steady in both cities. The Spring Festival/Chinese New Year trip is starting to pick up, although the market is open as a mainland media source pointed out, 37.88 million people traveled on the fifth day alone. COVID cases continue to increase rapidly in many counties.

last night’s performance

Currency exchange rates, rates, and returns

• CNY per US dollar 6.72 vs. 6.75 yesterday
• CNY 7.26 each against 7.27 yesterday
• The yield on 10-year government bonds is 2.90% versus 2.88% yesterday
• The yield on the CDB’s 10-year bond is 3.03%, up from 3.00% yesterday
• Copper price +0.26% overnight