Asian stocks yesterday curbed the enthusiasm seen in US stocks as only Indonesia managed a positive day. Asian growth stocks were hit hard after Snap’s missed financial results weighed on sentiment. Growth sectors/stocks underperformed in China and Hong Kong as energy was the positive sector in both markets.
The spirit of the Quad Leader Meeting (India, Australia, Japan and the US) is likely to be impacted. The meeting will be followed by an Indo-Pacific trade effort of thirteen countries that do not include China. Efforts to exclude China from Asia’s economy are unlikely to succeed because it ignores economic reality. Japan imports and exports more goods to China than the US!
JPMorgan and UBS both cut their 2022 China GDP estimates to 3.7% and 3%, which was also a factor in sentiment. Shanghai’s lockdown curbed economic activity as Shanghai industrial output fell -60% year-on-year in April. Yesterday, we referred to the State Council’s communiqué outlining thirty-three fiscal and monetary measures to be implemented to support the economy. The market was not interested in support. The yawning of the market/ignoring their point of view should make them move on to the implementation of the gas pedal. The only sector that responded to the issue of policy support was traditional, non-EV automakers, as the car sales tax would be reduced.
Electric vehicles are already enjoying this sales tax deduction fee. EV maker Xpev’s (XPEV US, 9868 HK) financial results beat Q1 estimates, but its Q2 revenue outlook had an impact on sentiment. According to a report in The Standard, the market also ignored a release from the National Energy Administration that solar investments rose 204% to RMB 29b through April. Expansion was dire in both China and Hong Kong as only 310 advanced in China stocks and 52 in Hong Kong. On the other hand, we had both Kuaishou (1024 HK) and NetEase (NTES US, 9999 HK) financial results beating analysts’ expectations after the pre-US market open/Hong Kong close this morning. Healthcare was closed as Junshi Bio (688180 CH) hit -20% rumoured in classic/sell news after positive covid test results. A head-scratching bit, however, is par for the course today.
The Hang Seng and Hang Seng indices closed at -1.75% and -3.48% volumes at +8.09%, 79% of the 1-year average. There were only 52 forward stocks, while 430 stocks declined. Hong Kong short sell volume grew +4.34%, which is 87% of the 1-year average. Value factors outperformed growth factors, while large caps “outperformed”/i.e., fell less than small caps. Energy was the only sector in the green, while healthcare -4.66%, tech -3.44%, discretionary -3% and staples -2.84%. Southbound Stock Connect volumes were moderate as mainland investors Tencent and Meituan were short net sellers. They were small net buyers of Kuiashou.
Volumes in Shanghai, Shenzhen, and Star Board dropped +2.41%, -3.62%, and -4.73% by +15.28%, 92% of the 1-year average. There were only 310 advance stocks, while 4,153 stocks declined. Energy was the only positive sector at +0.01% while healthcare -4.24%, technology -3.79%, industry -3.25% and materials -3.24%. Foreign investors sold a healthy — $1.433B — through Northbound Stock Connect. Treasury bonds were flat while the CNY fell -0.28% against the US dollar and copper rose +0.03%.
Last Night’s Exchange Rates, Prices and Yields
- CNY/USD 6.67 vs. 6.65 yesterday
- CNY/EUR 7.14 vs 7.09 Yesterday
- Yield on 10-Year Government Bonds 2.77% Vs Tomorrow’s 2.77%
- Yield on 10-year China Development Bank bond 2.98% versus 2.97% yesterday
- Copper price +0.03% overnight
Credit: www.forbes.com /