Asian stocks had a strong day as Japan, China, Hong Kong, Taiwan and South Korea posted impressive returns following US Fed Chairman Powell’s dovish comments that raised investors’ risk appetite, especially toward growth stocks. The Hang Seng Index rose +2.79% led by Internet stocks, followed by yesterday’s US rally. Hong Kong volume rose +18.51% since yesterday, which is 93% of the 1-year average, while 2 stocks advanced for every 1 falling stock. The four most traded stocks in Hong Kong by value were Tencent, which gained +4.52%, Meituan, which gained +9.13%, Alibaba HK, which gained +5.89%, and JD.com HK, which gained +5.89%. Gained a gain of +10.98%. very good!
Despite today’s Wall Street Journal headline that “For Chinese Tech Stocks, No News Is Good News” there were several catalysts for yesterday’s US move and today’s follow-up. As we mentioned yesterday, Fidelity hosted an investor symposium that highlighted the allure of China’s Internet. Meanwhile, Internet analysts at UBS last week recommended the space after similar moves from Goldman Sachs and JD.com announced it would enter the European market through an employeeless store in the Netherlands. We need to bring our colleague and key person to Amsterdam Sjef to see you. We also had reports last week that Charlie Munger doubled his Alibaba stake in Q4 after doubling in Q3. No catalyst – bah humbug! As we’ve mentioned several times, a rally in the space would “force” large fund families to shed their underweight. Both Tencent and Meituan had increased buying from mainland investors through Southbound Stock Connect. Remember that Hong Kong has a large structured products market which shows an upward and downward trend.
Growth stocks/sectors outperformed value stocks/sectors in both Hong Kong and China. Growth-oriented Shenzhen +1.42% and Star Board +1.7% outperformed Shanghai’s +0.8% on volume flat yesterday, barely higher than the 1-year average, while stocks declined 3 to 1. carried forward. The catalyst for the rally was China’s 2021. Car sales grew +4.4% to 20.1mm cars in 2021 versus 2020, according to Yicai Global and CAAM. Internal combustion engine car (gas guzzlers) sales declined -6% to 17.2mm from 2020, while EV sales grew 250% to 3mm. The 2021 forecast for EV sales is 5mm, although my colleague Anthony believes that from his conversations with the companies it seems lower. The report lit a fire under the clean technology sector as EV battery maker CATL was China’s most traded stock, with a value of +5.28%, followed by EV bus maker BYD with +7.07% Tianqi Lithium 4.th Highest volume turnover +2.15%.
December PPI was up 10.3% versus 11.3% year-on-year and November’s 12.9% while December CPI was 1.5% versus 1.7% and November’s 2.3%. Efforts to rein in inflation, especially in commodity prices, began to show a gradual effect. After the mainland shutdown, total spending for December was RMB 2.37 trillion versus 2.4 trillion and November’s 2.61 trillion, new loans 1.13 trillion versus 1.25 trillion expectations and November’s 1.27 trillion while M2 was up +9%. The minus was the data touch lite, though it suited policymakers to step on the support gas pedal, especially with the Olympics just around the corner. In the short term, we should see the PBOC providing substantial liquidity in the Chinese New Year.
Foreign investors purchased $1.103B of Mainland shares through Northbound Stock Connect with a focus on growth versus value. Chinese Treasury bonds were flat, the CNY appreciated slightly against the US$ and copper edged higher.
Last Night’s Exchange Rates, Prices and Yields
- CNY/USD 6.37 vs. 6.37 Yesterday
- CNY/EUR 7.23 vs 7.22 Yesterday
- Yield on 10-year government bonds 2.80% vs 2.80% yesterday
- Yield on 10-year China Development Bank bonds 3.08% versus 3.08% yesterday
- Copper price +1.38% overnight