Asian equity markets were closed overnight despite an impressive intraday reversal from the Nasdaq as Japan came back from a holiday, while India, Malaysia and Thailand posted moderate gains. Global price rotation affected South Korea as the Kospi rose +0.02%, although for every 1 advance, it saw 4 declines, although the growth-oriented Kosdaq -1.07%. Hang Seng had a choppy session, closing -0.03% lower, while Hang Cent Tech closed -0.1%, while Tencent gained +1.5%, Meituan +0.68%, JD.com +1.78%, and Kuaishou +3.34 was doing. , Volume was down -6.59% from yesterday, which is only 78% of the 1-year average.
Tencent bought back stock for the fifth day in a row, while investors in Mainland bought stock through Southbound Stock Connect. Tencent isn’t buying huge amounts of stock. Rather, the company is dollar-cost averaging. It is interesting that Tencent announced its JD.com divestiture and Sea Ltd. Started buying back stock after stock sale announcements. Do you wonder if Tesla could be next? Hmm.
Alibaba was off HK-1.57% as analysts conducted their pre-quiet period calls ahead of the disclosure of financial results, which are likely to take place after the Lunar New Year. It seems that the coming results will be good, but not very good. The company’s outlook will be important to analysts, while investors will also examine China’s macroeconomic conditions and economic policy support, which is clearly beyond the company’s control. Alibaba CEO Daniel Zhang resigned from Weibo’s board, although he was replaced by their chief marketing officer. This could indicate that Alibaba is not looking to sell its Weibo stake.
Trip.com HK had a rough night on rising cases of coronavirus in China, which led to a strong day in Hong Kong healthcare gaining +2.69%. Materials grew +2%, real estate grew +1.34%, communications grew +1.22% (due to Tencent’s move), and financials grew +0.46%.
There was a bigger price rotation from developments in the mainland as Shanghai fell -0.73%, Shenzhen fell -1.06%, and Star Board fell -1.81% on volumes that were flat from yesterday, just above the 1-year average. The financial sector was the only sector in the green, gaining +0.47%. As at the beginning of last year, we are seeing managers rebalancing their portfolios from overweight popular/crowded growth trades to some value area risk.
The clean technology ecosystem, which includes electric vehicle, solar and wind companies, was hit again with wine and technology including semiconductors. The opportunity for these sectors is not waning because last year’s rotation lasted a month or so before they came back. Foreign investors sold off $631 million worth of Mainland shares today as exposure to these same growth stocks. Chinese Treasury bonds rose, the currency was flat against the US dollar and copper slipped.
Ren Zepping is a famous Chinese economist. There is a lot of discussion about a composition written by him on how to increase the birth rate of China. He wrote that monetary policy should be used to encourage parents to have more children. The PBOC should give money to parents who have more children. This will be a big topic in 2022 as China’s Gen Z+ generation will use free/reduced housing, tax cuts and other incentives to have more children.
Last Night’s Exchange Rates, Prices and Yields
- CNY/USD 6.37 vs. 6.37 Yesterday
- CNY/EUR 7.22 vs. 7.21 Yesterday
- Yield on 10-Year Government Bond 2.80% vs 2.81% yesterday
- Yield on 10-year China Development Bank bonds 3.08% versus 3.09% yesterday
- Copper price -0.23% overnight