ETFs
Internet stocks rebound in large part, national team reportedly buying small-cap ETFs
CLN
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Main news
Asian stocks were mostly higher overnight, with the exception of Thailand, with Hong Kong flat overnight.
All sectors were up on the Chinese mainland overnight, according to the MSCI China All Shares Index. The mainland market has lagged sharply behind Hong Kong in recent sessions. Why the divergence? I think local investors are waiting for further signs of recovery from the third plenum, which starts on Monday.
The “official” Consumer Price Index (CPI) and Producer Price Index (PPI) for China will be released tomorrow. The CPI is expected to rise due to a sharp rise in pork prices, while the PPI is expected to decline, possibly due to a slowdown in external demand.
Internet stocks mostly reversed yesterday’s decline, with Tencent and NetEase up. Meituan fell, however, despite buying back over 4 million shares yesterday. Bilibili outperformed Internet names, gaining +3.51%, thanks to continued momentum from the short-video platform’s positive Q1 results. Alibaba was up slightly by nearly +1% while JD.com fell -0.78%.
Ping An fell as the mega bank and fintech investor considers another convertible bond offering of more than $2 billion.
Wang Huning, a senior government strategist, said China needed to strengthen “internal circulation,” including consumer spending, in a vague but promising statement ahead of the third plenum meetings.
Goldman strategists noted that they are increasingly bullish on Chinese small-cap stocks due to their low valuations, liquidity and attractive sector composition. At the same time, the National Team is reportedly getting involved in small-cap index ETFs, as the China Southern 1000 ETF has seen strong turnover.
The Hang Seng and Hang Seng Tech indices closed flat and up +0.96%, respectively, on volume up +6% from yesterday. Mainland investors bought a net $45 million worth of Hong Kong-listed stocks and ETFs overnight via Southbound Stock Connect. The best-performing sectors were information technology, which gained +2.14%, materials, which gained +1.18%, and industrials, which gained +0.85%. Meanwhile, the worst-performing sectors were energy, which fell -1.45%, utilities, which fell -1.32%, and real estate, which fell -0.55%.
Shanghai, Shenzhen and the STAR Board all closed up +1.26%, +1.74% and +2.51% respectively, on volume up +25% from yesterday. The best performing sectors were information technology, which gained +3.77%, consumer discretionary, which gained +1.90%, and financials, which gained +1.37%. Meanwhile, the worst performing sectors were healthcare, which gained +0.12%, energy, which gained +0.23%, and consumer staples, which gained +0.48%.
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Last night’s performance
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Last night’s exchange rates, prices and yields
- CNY for USD 7.27 vs 7.27 yesterday
- CNY for EUR 7.87 vs 7.87 yesterday
- 1-day government bond yield 1.24% vs. 1.24% yesterday
- 10-year government bond yield 2.27% vs. 2.29% yesterday
- China Development Bank 10-year bond yield: 2.36% vs. 2.38% yesterday
- Copper price -0.17%
- Steel prices +0.09%