Dual Sessions: People & Policies Propel Markets Higher

major news

Asian equities were mixed as mainland China and Hong Kong outperformed, Taiwan and South Korea posted smaller gains, while Japan, India and Thailand declined by more than -1% each.

Several positive developments rose after the conclusion of the “dual session” meetings of Mainland China and Hong Kong 14^th National People’s Congress. In light of Silicon Valley Bank’s unfortunate meltdown, it is not surprising how little Western media is paying attention to these developments.

President Xi’s closing speech was viewed positively as he emphasized self-reliance and “high-quality development”, with an emphasis on science, technology and national defence. The Wall Street Journal is reporting that President Xi will speak with Ukrainian President Zelensky before traveling to Russia.

Li Qiang took over from the retiring Premier Li, after running Shanghai during a period of consecutive openings. During his tenure as the city’s party secretary, Shanghai saw the construction of Tesla’s Gigafactory and the launch of Star Board. His press conference was pro-economy and pro-trade, with an emphasis on US-China relations. Specifically, he said his focus would be on the people because “they care more about housing, employment, income, education, medical treatment and the ecological environment. The second is to focus on promoting high-quality development.” The third is to unswervingly deepen reform and opening up.” There will be challenges as “the world economic situation is not optimistic this year” as the focus will be on stability, high-quality growth, reform and innovation.

Yi Gang will continue in his role as governor of the People’s Bank of China (PBOC), providing a strong signal that China’s reform and opening up will continue. Yee, a seasoned banker with significant international experience and relationships, joined PBOC in 1997 and took up his current role in March 2018. There was less turnover than expected in key roles as many senior economic advisors continued in their roles.

Mainland China and Hong Kong The Asia Dollar Index and the renminbi CNY both gained +0.62% and +0.80%, respectively, in response to these developments, as the US dollar fell and US Treasury yields edged lower on confidence that the Fed could bail out many banks. Prevent rate increase after failures. The most traded Hong Kong stocks by value were Tencent, which gained +3.98%, Alibaba, which gained +2.59%, and Meituan, which gained +1.26%, as Mainland investors were net buyers of Hong Kong stocks.

Bilibili gained +10.66% as Mainland investors were net buyers on the company’s first day at Southbound Stock Connect.

Hong Kong volume was significantly higher, at 117% of the 1-year average, although lower than Friday’s volume. The closure of Silicon Valley Bank (SVB) hit many Hong Kong technology and biotech stocks with ties to the bank, although the risk appears limited, as HSBC bought SVB’s UK branch.

Mainland China also focused on the positives coming from the conclusion of the double sessions. I’m diving into a white paper released titled “China’s Green Development in the New Era”. Shanghai stayed above technical support as SOE reform and self-reliance were the themes of the double sessions. Tomorrow, the March lending rate will be announced along with industrial production, retail sales and fixed asset investment (FAI).

Confirmation bias is “the tendency to interpret new evidence as confirmation of one’s existing beliefs or theories.” Barron’s had a nice interview with Vincent Clarke, CEO of global shipper AP Moller-Maersk, who must have a strong insight into the state of the global economy. The interview debunks or, at least challenges ideas that tend to roll off the lips, such as deglobalization. It’s worth reading.

The Hang Seng and Hang Seng Tech indexes gained +1.95% and +2.89% respectively, down -12.78% from Friday, or 117% of their 1-year average. 333 stocks advanced while 169 declined. Main board short sell turnover fell -8.9% from Friday, to 115% of its 1-year average, as short turnover accounted for 17% of turnover. Value and growth factors were mixed as large caps outperformed small caps comfortably. The top performing sectors were energy, which gained +4.32%, communications services +3.93%, and materials +3.13%. Meanwhile, real estate and healthcare were off -0.64% and -0.73%, respectively. The top performing sub-sectors were Telecom, Energy and Software, with no negative sub-sectors. Southbound Stock Connect volumes were moderate as mainland investors bought $43 million worth of Hong Kong stocks as Tencent was a moderate/strong net buy, and Meituan and Bilibili were small net buyers.

The Shanghai, Shenzhen, and Star bourses are up +1.2%, +0.44%, and +0.54%, respectively, up +3.99% from Friday, or 93% of their 1-year average. 1,912 scrips advanced, while 2,751 scrips declined. Value factors outperformed growth factors as large caps outperformed small caps. All sectors were positive as communications grew by +4.23%, energy by +3.66% and consumer staples by +2.7%. The top performing sub-sectors were telecommunications, precious metals and software, while auto, power generation equipment and electric power grid construction were the worst. Northbound Stock Connect volumes were moderate as foreign investors bought $401 million worth of mainland stocks overnight. The CNY rose +0.43% against the US dollar, closing at 6.88 CNY per USD compared to Friday’s 6.95, as Treasury bonds sold off, while Shanghai Copper fell and Steel gained.

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last night’s performance

Last Night’s Exchange Rates, Prices and Returns

• CNY per USD 6.85 vs yesterday 6.92
• CNY per EUR 7.34 vs 7.36 yesterday
• Yield on 1-day government bond 1.65% against 1.55% yesterday
• 10-year government bond yield at 2.87% as against 2.86% yesterday
• The yield on the 10-year China Development Bank bond yesterday 3.06% versus 3.06%
• Copper price -0.25% overnight
• Steel Price +0.53% Overnight