Key News
Asian equities had a strong day as Indonesia was up more than 2%, while Japan, Pakistan, South Korea, Taiwan, and Thailand were up more than 1%.
Early in the trading day, CNH, offshore traded renminbi, fell versus the US dollar, closing at 7.29 and hitting an intra-day low of 7.31 versus yesterday’s close of 7.28. US Treasury yields were lower overnight, so the move doesn’t appear to be driven by interest rate differentials, as the probability of a December Fed cut of 0.25% basis points remains high.
President Trump’s most recent 100% tariff threat toward the BRICS+ countries who stop using the US dollar may have been a factor (isn’t Bitcoin anti-US dollar?). The likely culprits are the reverberations from the Euro’s rough outing versus the US dollar yesterday due to a likely ECB rate cut and the Yen’s recent appreciation versus the US dollar.
Mainland China and Hong Kong bounced around the room in morning trading before grinding higher after the dates for the China Economic Work Conference (CEWC) were confirmed for December 11th and 12th. Expectations are that they will reiterate 2025’s GDP target are “around” 5%, with most believing within a range of 4.5% to 5% and an increase in the fiscal deficit between 3.5% to 4%.
Foreign investors’ singular focus on “domestic consumption” fails to understand previous stimulus/support on housing, and local governments are implicitly consumption-focused. There is no date for the Politburo meeting, though there is chatter that it will be this weekend.
The Citigroup China Economic Surprise Index continues to rise, and the major Hong Kong and Mainland China indices have been grinding higher after the post-stimulus pullback. Hong Kong-listed internet stocks had a strong day, except for Meiutan, which fell by -1.14% after seeing some profit-taking after a big rally year-to-date. JD.com also fell by -1.36% despite the success of home appliance purchase subsidies. Baidu gained +1.51% as Hong Kong approved its robo-taxis, while Tencent gained +1.15% and Alibaba gained +0.54% as both company’s buyback programs rolled on.
Mainland China-listed semiconductor and growth stocks were hit with profit taking while value sectors outperformed in Hong Kong in a “revenge of the nerds” (slow growth/value sectors outperformed growth stocks and sectors), though Hong Kong-listed internet stocks had a decent day. The outgoing Biden Administration’s Department of Commerce added 136 Chinese firms to the Entity List, which restricts US technology exports. The Chinese government retaliated by banning the export of gallium, germanium, antimony, and super hard materials, which are predominantly used in the manufacturing of semiconductors, according to Reuters. The China Semiconductor Industry Association, China Internet Association, China Association of Automobile Manufacturers, and the China Communications Enterprise Association released statements that their members should be “prudent” or “cautious” when buying US-made semiconductors due to the potential unreliability of further shipments.
The US government added over 130 companies to its “Entity List” of foreign companies subject to additional licensing requirements. Many of the China-based companies that were added reported that the Entity List addition is a non-factor due to their domestic China orientation. I’ve seen no examination of how or if it could weigh on US semiconductor companies with high China revenue exposure. I don’t want to over-emphasize this tit-for-tat as, in theory, the newly raised rules would be easy to take back down during an Art of the Deal. 22 provinces have announced a total of RMB 1.673 trillion of hidden debt refinancing.
The Hang Seng and Hang Seng Tech indexes gained +1.00% and +0.27%, respectively, on volume down -13% from yesterday, which is 98% of the 1-year average. 324 stocks advanced, while 159 declined. Main Board short turnover decreased by -41% from yesterday, which is 87% of the 1-year average, as 14% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Value and small capitalization stocks outperformed growth and large capitalization stocks. The top sectors were energy, up +2.05%, financials, up +2.01%, and utilities, up +2%, while consumer staples fell -0.18%. The top sub-sectors were petroleum, banks, and utilities, while electrical equipment, semiconductors, and industry conglomerates were the worst. Southbound Stock Connect volumes were back to pre-stimulus levels as Mainland investors bought $37 million of Hong Kong stocks and ETFs with Alibaba’s moderate net buy, Hong Kong Tracker ETF a moderate/large net sell, Meituan a moderate/small net sell, Tencent and CNOOC were small net sells, and Xiaomi a very small net sell.
Shanghai, Shenzhen, and the STAR Board diverged to close +0.44%, -0.14%, and -1.04%, respectively, on volume the declined -3.94% from yesterday, which is 174% of the 1-year average. 2,315 stocks advanced, while 2,593 declined. Value and large capitalization stocks outperformed growth and small capitalization stocks. The top sectors were utilities, up +1.26%, energy, up +0.95%, and financials, up +0.78%, while technology fell -1.32%, healthcare fell -0.58%, and real estate fell -0.44%. The top sub-sectors were land transportation, banking, and marine, while office supplies, computer hardware, and catering/tourism were the worst. Northbound Stock Connect volumes were above average. CNY fell while the Asia dollar index made a small gain versus the US dollar. Treasury bond prices fell. Copper and steel gained.
Last Night’s Performance
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 1% |
| Hang Seng Tech | HSTECH Index | 0.3% |
| Hong Kong Turnover | HKTurn Index | -13.3% |
| HK Short Sale Turnover | HKSST Index | -41.2% |
| Short Turnover as a % of HK Turnovr | N/A | 13.8% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 37.7 |
| China (Shanghai) | SHCOMP Index | 0.4% |
| China (Shenzhen) | SZCOMP Index | -0.1% |
| China (STAR Board) | Star50 Index | -1% |
| Mainland Turnover | .chturn Index | -3.9% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 0.5% |
| Japan | NKY Index | 1.9% |
| India | SENSEX Index | 0.7% |
| Indonesia | JCI Index | 2.1% |
| Malaysia | FBMKLCI Index | 0.7% |
| Pakistan | KSE100 Index | 1.2% |
| Philippines | PCOMP Index | -0.1% |
| South Korea | KOSPI Index | 1.9% |
| Taiwan | TWSE Index | 1.3% |
| Thailand | SET Index | 1.2% |
| Singapore | STI Index | 0.9% |
| Australia | AS51 Index | 0.6% |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 154 | 0.94 |
| Communication Services | 9 | 1.04 |
| Consumer Discretionary | 29 | 0.05 |
| Consumer Staples | 13 | -0.18 |
| Energy | 7 | 2.05 |
| Financials | 24 | 2.02 |
| Health Care | 14 | 0.81 |
| Industrials | 18 | 1.35 |
| Information Technology | 11 | 1.53 |
| Materials | 11 | 0.22 |
| Real Estate | 6 | 1.35 |
| Utilities | 12 | 2.01 |
| Mainland China Listed | 487 | -0.03 |
| Communication Services | 13 | -0.35 |
| Consumer Discretionary | 41 | -0.08 |
| Consumer Staples | 32 | -0.17 |
| Energy | 17 | 0.95 |
| Financials | 68 | 0.78 |
| Health Care | 45 | -0.58 |
| Industrials | 74 | 0.2 |
| Information Technology | 93 | -1.32 |
| Materials | 80 | -0.35 |
| Real Estate | 7 | -0.44 |
| Utilities | 17 | 1.26 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 1.2 |
| Alibaba HK | 9988 HK Equity | 0.5 |
| JD.com HK | 9618 HK Equity | -1.4 |
| NetEase HK | 9999 HK Equity | 0.7 |
| Yum China HK | 9987 HK Equity | 1.9 |
| Baozun HK | 9991 HK Equity | 4.1 |
| Baidu HK | 9888 HK Equity | 1.5 |
| Autohome HK | 2518 HK Equity | 3.3 |
| Bilibili HK | 9626 HK Equity | 1.6 |
| Trip.com HK | 9961 HK Equity | 1.2 |
| EDU HK | 9901 HK Equity | 2.9 |
| Xpeng HK | 9868 HK Equity | -0.1 |
| Weibo HK | 9898 HK Equity | 2.6 |
| Li Auto HK | 2015 HK Equity | -0.8 |
| Nio Auto HK | 9866 HK Equity | 0.9 |
| Zhihu HK | 2390 HK Equity | 1.1 |
| KE HK | 2423 HK Equity | 3.7 |
| Tencent Music Entertainment HK | 1698 HK Equity | 6.1 |
| Meituan HK | 3690 HK Equity | -1.1 |
| Hong Kong’s Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | 1.2 |
| MEITUAN-CLASS B | -1.1 |
| XIAOMI CORP-CLASS B | 1.9 |
| ALIBABA GROUP HOLDING LTD | 0.5 |
| AIA GROUP LTD | 0.4 |
| CHINA CONSTRUCTION BANK-H | 2 |
| WUXI BIOLOGICS CAYMAN INC | 7.9 |
| CNOOC LTD | 2 |
| KUAISHOU TECHNOLOGY | 0.1 |
| IND & COMM BK OF CHINA-H | 2.4 |
| Shanghai and Shenzhen’s Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| EAST MONEY INFORMATION CO-A | -0.4 |
| DAWNING INFORMATION INDUST-A | -7.1 |
| SICHUAN DEVELOPMENT LOMON -A | -0.6 |
| SERES GROUP CO L-A | 1.5 |
| HITHINK ROYALFLUSH INFORMA-A | 1.3 |
| SHANGHAI ELECTRIC GRP CO L-A | 4.3 |
| SHENZHEN YSSTECH INFO-TECH-A | 3.2 |
| CCOOP GROUP CO LTD-A | -1.6 |
| YONGHUI SUPERSTORES CO LTD-A | 7 |
| 360 SECURITY TECHNOLOGY IN-A | -1.4 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.28 versus 7.27 yesterday
- CNY per EUR 7.66 versus 7.65 yesterday
- Yield on 10-Year Government Bond 1.99% versus 1.98% yesterday
- Yield on 10-Year China Development Bank Bond 2.07% versus 2.07% yesterday
- Copper Price +0.47%
- Steel Price +0.51%
—
Originally Posted December 3, 2024 – China Economic Work Conference Dates Announced
Author Positions as of 12/3/24 are KLIP, KBA, KALL, KCNY, KFYP, KCNY, KEMQ, BZUN, HSBC, KWEB, KHYB, LI US
Charts Source: KraneShares
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