Market

Markets Take Breather

Key News

Asian equities were largely lower while India and the Philippines outperformed.

Hong Kong and China were off as recent outbreaks in several cities raise lockdown fears. The pullback weighed on travel related stocks such as hotels, airlines, online travel, and restaurants. Energy, material, commodity stocks, and futures were clobbered overnight with copper off -4.99%.

Time will tell but targeted lockdowns at the neighborhood or district level are more likely rather than city wide lockdowns. Cities can also raise safeguards, such as Beijing’s move for congested public areas where one needs to be vaccinated.

The Shanghai Composite is sitting at the 3,400 level while the Shenzhen Composite is above the 2,200 level. A little breather since the mid-March move isn’t a bad thing. The US government’s pressure on Dutch semiconductor firm ASML to limit sales to China led to a strong rally in Chinese semiconductor names. We’ve had more positive news or at least communication between the US and China recently which is a step in the right direction.

Alibaba HK +1.56% bucked the downdraft in Hong Kong internet names as Hong Kong Exchanges CEO stated more conversions to Hong Kong primary listings are anticipated while specifically mentioning Alibaba. Alibaba has begun its pre-earnings conversations with analysts. Analysts appear to be coming out of those conversations positive. Reuters is reporting that Sequoia Capital China is planning on raising $9B for four new tech-focused private equity funds. Worth noting that they are looking to raise money to buy companies in the space. Interesting right!

The Hang Seng and Hang Seng Tech closed down -1.22% and -1.23% on volume +15.2% from yesterday which is 99% of the 1-year average. 135 stocks advanced while 337 declined within the broad Hang Seng Composite. Hong Kong short sale turnover jumped +23.39% which is 106% of the 1-year average. Value and growth factors were both off today as large caps underperformed small caps. Healthcare and utilities were the only positive sectors up +0.25% and +0.11% respectively, while energy fell -4.11%, materials -2.65%, and financials -1.81%. Online education and power stocks were top sub-sectors while cobalt, coal, and travel related stocks were among the worst. Mainland investors were a rare net sell in Hong Kong stocks today with Tencent and Meituan seeing small net sales.

The Shanghai, Shenzhen, and STAR
AR
Board were diverged posting -1.43%, -1.15%, +0.99% on volume -8.16% from yesterday which is 100% of the 1-year average. 997 stocks advanced while 3,505 stocks declined. Growth factors were mixed while value factors were down as large caps underperformed small caps. Tech was the only positive sector +0.42%, while energy -5.65%, materials -2.52%, and real estate -2.29%. Semiconductor and semi related sub-sectors outperformed while coal, raw materials, and nickel stocks underperformed. Northbound Stock Connect flows were moderate/high as foreign investors sold -$206mm of mainland stocks today.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.71 versus 6.72 yesterday
  • CNY/EUR 6.84 versus 6.89 yesterday
  • Yield on 10-Year Government Bond 2.84% versus 2.83% yesterday
  • Yield on 10-Year China Development Bank Bond 3.08% versus 3.07% yesterday
  • Copper Price -4.99% overnight

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