Key News
Asian equities were mostly lower overnight, except for India, Australia, and Singapore, as Hong Kong underperformed.
Xi Jinping visited an affordable housing complex in Shanghai’s Minhang District. Recently, China’s government laid out plans to provide more support for affordable housing, following a Singapore-style model in which the government directly finances home purchases and/or offers rent relief. His visit to the complex in Shanghai demonstrates how much of a priority this is for him at the current moment. Will this save property developers? Certainly not. However, the push is likely to improve consumer sentiment as housing becomes more affordable. Xi also visited multiple private companies in the technology sector, especially those involved in the production of next-generation computing chips. His trip to the financial hub also coincides with the 10th anniversary of the establishment of the Shanghai Free Trade Zone (FTZ).
Foreign and Mainland investors alike were net sellers of Mainland and Hong Kong stocks, respectively, in a broadly risk-off session. Internet stocks were mostly lower, though Pinduoduo continues to see upside in today’s US trading off of its stellar Q3 earnings. Competition is heating up as Alibaba and JD are ceding market share to Pinduoduo. However, it is nice to see some divergence between names in this space that is driven by fundamentals, not geopolitical sentiment.
Meituan, one of Hong Kong’s most heavily traded stocks by value overnight, fell -12% last night after issuing a negative forward-looking revenue alert as the company implied that demand for its delivery services may decline in the fourth quarter. Meituan has benefitted from the services-focused consumption rebound in China this year. However, the company’s margins have been squeezed by consumer subsidies, which could end in Q4.
Fast-fashion retailer SHEIN announced plans to go public in a US IPO that could be valued at $90 billion. SHEIN is the top competitor to Pinduoduo’s US & Canada E-Commerce platform “Temu” and has exclusive contracts with suppliers across China. The China-born company now has a Singapore domicile and generates revenue from developed markets so it will be interesting to see how indexes treat this listing if and when it comes.
It was sad to hear about the death of legendary investor Charlie Munger. He paved the way for many investors in both China and new energy technologies at Berkshire Hathaway
BRK.B
The Hang Seng and Hang Seng Tech indexes both closed lower by -2.08% and -2.25%, respectively, overnight on volume that increased +37% from yesterday. Mainland investors sold a net -$104 worth of Hong Kong stocks overnight via Southbound Stock Connect. The top-performing sectors overnight were Materials, which gained +0.46%, Energy, which fell -0.30%, and Communication Services, which fell -1.09%. Meanwhile, the worst-performing sectors were Real Estate, which fell -4.39%, Communication Services, which fell -3.63%, and Consumer Staples, which fell -2.75%.
Shanghai, Shenzhen, and the STAR Board all closed lower by -0.56%, -0.78%, and -1.13%, respectively, on volume that was flat from yesterday. Foreign investors sold a net -$648 million worth of Mainland stocks overnight via Northbound Stock Connect. The top-performing sectors overnight were Energy, which gained +0.70%, Consumer Staplers, which gained +0.25%, and Materials, which fell -0.18%. Meanwhile, the worst-performing sectors were Real Estate, which fell -2.62%, Consumer Discretionary, which fell -1.43%, and Financials, which fell -0.89%. Government bonds were mostly flat. Copper gained while steel was off.
Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.13 versus 7.14 yesterday
- CNY per EUR 7.83 versus 7.84 yesterday
- Yield on 1-Day Government Bond 1.65% versus 1.56% yesterday
- Yield on 10-Year Government Bond 2.68% versus 2.69% yesterday
- Yield on 10-Year China Development Bank Bond 2.77% versus 2.77% yesterday
- Copper Price +0.18% overnight
- Steel Price -0.92% overnight
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