Asian stocks recovered yesterday, with yesterday’s worst performers among today’s best performers as Taiwan gained +2.51% and South Korea gained +1.84%. China and Hong Kong were off in the morning before recovering in the afternoon with the Finance Ministry’s report extending the tax exemption on electric vehicles that was due to expire at the end of the year and generally supporting car sales. Everything related to the EV ecosystem and the cleantech ecosystem has risen higher, especially in the mainland. The most heavily traded on the mainland were EV battery maker CATL (300750 CH) +5.26%, Congqing Changan Auto (000625 CH) +8.14%, EV bus and battery maker BYD (002594 CH) +3, 95%, Qinghai Salt Lake (000792 CH) +4.38% and Sungrow Power (300274 CH) +20%. Interestingly, in Hong Kong, traditional cars outperformed EV makers such as Li HK (2015 HK) -1.35%, XPeng HK (9868 HK) -0.4% and Nio HK (9866 HK) -3 .53%. The increase in car sales makes sense because the many inputs help a wide range of industries.
Internet stocks in Hong Kong were lower, but less than US ADRs fell in US trading yesterday, which should lead to a jump today. Tencent (HK700) bucked the decline, gaining +1.15%, which was announced after the close as the company bought back shares for a 7th straight day. After the market closed, Bloomberg reported that China’s Ministry of Finance would allow local governments to issue RMB 1.5 trillion ($220 billion) in infrastructure bonds. The article comes from “people familiar with the discussions,” although it is in line with the trajectory of monetary and fiscal easing. The key is to remember that this happened after the market closed, which should give US-listed ADRs in China another boost. Healthcare was excluded in both markets as the government’s drug procurement program began its seventh round, despite its limited scope.
Mainland media source Yicai Global reported that respected private equity firm Hillhouse Capital has launched its first China-focused carbon neutral fund with $598 million AUM. We are big fans of the cleantech ecosystem, the EV ecosystem, and companies going through carbon business model transformations. Looks like we’re in good company!
Mainland media source Shine reported that China’s retail prosperity index returned to 50.2. The index is a survey of retail operations managers that shows “retailers’ expectations of a recovery in consumption have strengthened as government policies to stabilize the economy have taken effect.”
Hang Seng and Hang Seng Tech diverge +0.26% and -0.45% on volume -20.67% since yesterday, which is 79% of the 1-year average. 220 stocks advanced while 245 stocks declined. Hong Kong’s short selling turnover decreased by -30.95% from yesterday, which is 73% of the 1-year average. Value factors outperformed growth factors as large caps outperformed small caps. The best sectors were Industrials +1.74%, Utilities +1.37% and Basics +1.15%, while Healthcare -1.13% and Real Estate -0.85%. The leading subsectors were autos, energy companies, electric vehicles and airline stocks, while health care subsectors were excluded and cobalt. Southbound Stock Connect volumes were weak from recent high volumes as mainland investors were small net sellers of Hong Kong stocks; although Tencent and Li Auto posted small net purchases, Meituan recorded its fourth consecutive day of small net sales.
Shanghai, Shenzhen and STAR Board gained +0.27%, +0.93% and +0.9% on volume -2.95% from yesterday, which is 97% of the 1-year average. 2555 stocks advanced while 1805 stocks declined. Growth factors outperformed today as large caps outperformed small caps by a narrow margin. Leading sectors are Industrials +2.71%, Discretionary +2.68% and Energy +0.71%, while Healthcare -1.49%, Communications -0.76% and Real Estate -0.67%. The best performing subsectors are all clean technology ecosystems, with EVs, batteries, wind and solar performing better, while all healthcare subsectors are the lowest performers. Northbound Stock Connect volumes were weak as foreign investors bought $82 million in mainland stocks through Northbound Stock Connect. Bonds were flat, with the CNY gaining very slightly against the US dollar and copper gaining +0.64%.
Exchange rates, prices and yields from last night
- CNY/USD 6.70 vs. 6.71 yesterday
- CNY/EUR 6.83 vs. 6.84 yesterday
- 10-year Treasury yields 2.84%, up from 2.84% yesterday
- China Development Bank 10-year bond yields 3.09%, up from 3.08% yesterday
- Copper price +0.64% overnight