Asian stocks were mixed as the Hang Seng outperformed, gaining +1.31%, led by internet stocks, while the Hang Seng TECH Index gained +2.62%.
Meituan (3690 HK) was up +11.56% after posting better-than-expected financial results after Hong Kong’s close on Friday. Meituan’s unsponsored ADR with the ticker MPNGY fell -0.35% in US trading on Friday, as US-based investors pushed ADR down while Asian investors bought today based on the same information. Meituan along with Tencent saw some purchases from mainland investors through Southbound Stock Connect.
Widespread publication in mainland financial media China Securities Journal stated that the China Securities Regulatory Commission (CSRC), the Chinese SEC, conducted a video call with Chinese internet companies about dissolving the Holding Foreign Companies Accountable Act (HFCAA). The details of the call have not been released, although they could inform the companies of the disclosures they may have to make.
On Friday, biotech company Beigene (BNE US, 6160 HK) announced it would switch its auditor from Ernst & Young China to Ernst & Young US to be HFCAA compliant. We don’t know if the PCAOB and SEC agree that this will fix the problem, but we’ll be keeping an eye on it.
Deputy Prime Minister Liu He’s speech last week marked a major policy change for underlying regulators and government agencies to study. However, we must be patient, because a supertanker does not turn a cent. Nevertheless, the captain ordered the crew to do a 180.
Tencent got back into the buyback game Friday, buying 838,000 shares and another 818,000 shares today. Buybacks are a signal from the companies that China’s regulatory cycle is over.
Volumes in HK were -8.99% lower than Friday, which is 90% of the 1-year average as 215 stocks rose and 268 fell. JD.com HK fell -1.75% after Tencent’s stock spin-off to shareholders on Friday, which may put pressure on JD stocks based on investors unable/unwilling to hold Hong Kong stock. Energy was the best-performing sector in Hong Kong, gaining +4.93%, while the sector gained +4.32% in the mainland, led by coal stocks, while commodities underperformed in Hong Kong, with a decline of – 0.81% in Hong Kong and -1.87% in the mainland.
Mainland markets bounced across the room in a choppy session as Shanghai pulled a James Bond and gained +0.07%. Shenzhen was down -0.82% and the STAR Board was down -1.46% on volume which was -5.33% lower than Friday, which is 82% off the 1-year average. There were 1,812 advances and 2,473 descenders.
The recent covid outbreak in China leads to massive testing in Shanghai. At the moment it doesn’t look like there will be a Q1 2020 lockdown, although the outbreak is clearly being taken very seriously.
Lithium and battery stocks such as CATL, which fell -3%, and Tianqi Lithium, which fell -5.69%, were lower overall amid supply chain concerns over raw materials from Russia. The PBOC provided liquidity, although likely due to needs at the end of the next quarter. Foreign investors today bought $789 million worth of mainland stock through Northbound Stock Connect, after five consecutive days of selling last week. Chinese bonds were flat, CNY was flat against the US dollar and copper fell -0.72%.
There’s been a lot of talk about Singapore-based e-commerce/gaming company Sea getting its “Shoppee” e-commerce unit from India. India has protected domestic platforms at the expense of foreign players.
EV maker Xpeng (XPEV US, 9868 HK) announced profits before the US open this morning. Sales outperformed, although the company reported a loss and issued weak Q1 guidance.
Last week we mentioned that Alibaba has replaced a retiring board member with the executive chairman of alternative asset manager PAG, Wijian Shan. PAG has just applied for a listing in Hong Kong with a preliminary 521 page prospectus. The company has three business lines: Credit & Markets $21 billion AUM, Private Equity $17 billion AUM and Real Assets $9 billion AUM. AUM has increased 6x in the past decade. While not necessarily a household name in the US, the company has a strong reputation. One to watch!
Kuaishou (1024 HK) reports tomorrow!
Last night’s exchange rates, prices and returns
- CNY/USD 6.37 vs 6.37 Friday
- CNY/EUR 6.98 vs 7.01 Friday
- One Day Treasury Bond Yield 1.61% vs 1.56% Friday
- 10-Year Treasury Yield 2.79% vs. 2.79% Friday
- Yield on 10-Year China Development Bank Bond 3.04% vs. 3.06% Friday
- Copper price -0.72% overnight