Alibaba Fuels Hong Kong Internet Rally

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What a difference a day can make!

Asian stocks remained strong overnight on better performances by Japan, Hong Kong and India. Internet names listed in Hong Kong took the baton from the US rebound yesterday and continued overnight as Alibaba rebounded +12.24% in Hong Kong versus +10.4% in the US yesterday.

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Brokers pointed to Alibaba’s decision to split the management teams of its domestic and international e-commerce businesses as the catalyst for their shares. Despite shares rallying, CSRC’s Sunday statement in support of the VIE structure and US listing still hasn’t garnered significant media attention. PBOC Bank was helped by reduction in reserve requirement and strong export/import data. China continues to make strides to support the economy, which will please investors. Hong Kong/US Internet names are clearly a value game compared to global technology counterparts. It’s worth noting JD.com’s underperformance as the long JD.com/short Alibaba trade has turned upside down. America’s political boycott of China did nothing to stop the market rally for the first time in nine months that the space overcame a negative news headline. A good sign!

Hang Seng Tek rebounded by +4.21%. Real estate rose +4.49% as PBOC and policymakers guide Evergrande into a slow wind-down versus a complete default, despite continued (and consistently incorrect) Western media narrative. The broader Hang Seng Composite saw an 8 to 1 advisor to decline, although volume was slightly below the 1-year average.

Mainland investors were buyers of both Tencent and Meituan through Southbound Stock Connect. Mainland had price bias as Shanghai fell +0.16%, Shenzhen fell -0.72%, and Star Board fell -1.16%. One culprit was weakness in the electric vehicle (EV) space as EV battery makers were down -4.3%, despite news that they would be manufacturing Ford’s EV batteries. The three largest sectors by number of stocks, materials/industry/tech were closed, although all other sectors were positive. Foreign investors were active buyers in Mainland securities purchasing $1.248B through Northbound Stock Connect.

Last Night’s Exchange Rates, Prices and Yields

  • CNY/USD 6.37 vs. 6.38 Yesterday
  • CNY/EUR 7.17 vs 7.21 Yesterday
  • Yield on 10-year government bonds 2.85% vs 2.82% yesterday
  • Yield on 10-year China Development Bank bonds 3.09% versus 3.08% yesterday
  • Copper price +0.27% overnight

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