Hong Kong Internet Rally Goes Free Solo on the Wall of Anxiety

Main News

Asian stocks were mixed/mostly lower as Hong Kong performed significantly better, India posted a small gain and the Philippines closed for the Immaculate Conception holiday. Asian investors welcomed the ten measures that rolled back the COVID restrictions and the strong statement repeated from the mainland media after the Politburo meeting: “… the recovery of consumer demand is particularly important for economic growth, and consumption is directly related to the prevention of the epidemic. policies”.

Hong Kong internet stocks had a strong day, with Hong Kong’s top-traders Tencent +5.73%, Meituan +6.45% and Alibaba HK +5.11%, although US-listed Chinese stocks fell. Several companies such as Kuaishou +11.08%, Alibaba Health +16.06%, JD Health +12.19% and Bilibili HK +22.01% had very strong days, indicating that the shorts are still sold out.

I noted yesterday that China’s currency, the CNY, was stable, indicating a favorable environment for Chinese stocks. While watching financial television earlier this week, when asked four professional portfolio managers on the show, they all said China was “uninvestable.” Good! Stay away because the pain trading with CEWC is higher and the potential for an ADR delisting solution providing potential catalysts! It should be noted that the acceleration of ADR delisting was not included in the defense budget (NDAA), according to a DC source. Mainland China was flat overnight, with real estate outperforming as CSRC Vice Chairman Li Chao and Shanghai Stock Exchange General Manager Cai Jianchun spoke at a conference about accelerating the spread of REITs. Issuing REITs would provide another financial tool for struggling property developers. From a news perspective, President Xi visited Saudi Arabia and Hello Group (ticker MOMO) beat analysts’ estimates on revenue and adjusted net income, though adjusted EPS was missing. There were 4,031 new cases of COVID and 17,134 asymptomatic cases, though our Big City Mobility Tracker shows a pickup in subway traffic (see below).

Sun Yu of the China team of Bridgewater, the world’s largest hedge fund, attracted attention in the mainland media for an interview in which he noted a rather pessimistic outlook for the US, Europe and the UK due to tightening credit liquidity and the risk of stagflation. China is completely different. China is in a phase of liquidity improvement and economic support. “Going forward, policies are more supportive of the economy and future growth is driven by domestic consumption and technology development… which is more attractive for stocks.”

Hang Seng and Hang Seng Tech gained +3.38% and +6.64% -22.53% from yesterday, which is 130% of the 1-year average. 454 shares increased in price, while 46 shares decreased. Main Board short turnover is down -21.81% from yesterday, which is 111% of its 1-year average, as 15% of turnover was short. While growth factors were mixed, value factors edged out as small caps outperformed large caps. The top sectors were healthcare +6.2%, communications +6.12% and demand +5.6%, with energy the only lower sector -0.73%. The best performing subsectors were healthcare equipment, consumer services and software, while telecommunications and energy were off. Southbound Stock Connect volumes rose nearly 2 times the 1-year average as mainland investors sold 54mm of Hong Kong stocks with Tencent, Meituan, Kuaishou and XPeng, all small net buys.

Shanghai, Shenzhen and STAR Board are down -0.07%, -0.32% and -0.32% in volume from yesterday -8.46%, which is 91% of the 1-year average. 1,602 shares advanced while 3,005 shares declined. Value factors have outperformed growth factors and large caps have outperformed small caps. The best performing sectors were real estate +2.68%, communications +1.09% and financials +0.51%, technology -0.71%, utilities -0.49% and energy -0.44%. The main subsectors were real estate, education and consumer products, while diversified finance, agriculture and computer equipment were among the worst performers. Northbound Stock Connect volumes were moderate/high as foreign investors bought 16mm mainland stocks, preferring Shenzhen/growth stocks over Shanghai/value stocks. CNY fell -0.05% to 6.97 against the US dollar, the Treasury yield curve steepened and copper gained +0.24%.

Big China City Mobility Tracker

Although metro traffic continues to grow, traffic trends have remained stable. The latter shows a higher tolerance for arriving in crowded subway cars.

Last Night’s Show

Last Night’s Currency Rates, Prices and Returns

• CNY USD 6.97 vs. USD 6.98 yesterday
• CNY was 7.32 against 7.33 euros yesterday
• 10-year government bond yield 2.89% vs. 2.87% yesterday
• The 10-year China Development Bank Bond yielded 3.03% versus 3.02% yesterday
• Copper price +0.24% overnight