Key News
Asian equities were mixed overnight after Microsoft and Meta reported disappointing financial results after the US market closed, though Mainland China outperformed.
South Korea and the Philippines underperformed. Taiwan was closed for Super Typhoon Kong-Rey, while Malaysia and Singapore were closed for Diwali, the Hindu festival of lights symbolizing the spiritual victory of Dharma over Adharmic, light over darkness, good over evil, and knowledge over ignorance. Hat tip to Chile and Slovenia for having today off for Halloween.
Hong Kong and Mainland China bounced around the room in a choppy session, as the former succumbed to late-day selling to close lower while Mainland China held onto gains. Mainland investors bought the Hong Kong dip with $345 million worth of net Hong Kong stock buying via Southbound Stock Connect.
The “official” October Manufacturing PMI calculated by the National Bureau of Statistics was 50.1 versus September’s 49.8 and economist expectations of 49.9, while the Non-manufacturing PMI was 50.2 versus September’s 50 and expectations of 50.3. PMIs are a diffusion index with levels above 50, indicating growth month-over-month. Yes, it is just one month so we are keeping the champagne on ice, especially after our Yankees lost last night, though maybe stimulus measures are having a positive effect.
It is worth noting that one local Hong Kong broker believed the late-day selling was due to a rebalance away from China despite a strong run since the beginning of September versus global equities. BYD fell by -4.61% in Hong Kong and by -4.05% in Mainland China after posting revenue growth of +25% year over year (YoY) to $28.06 billion, adjusted net income up +13% to $1.62 billion, and adjusted EPS up +13% to $0.56, though net profit per vehicle of RMB 9,300 missed expectations of RMB 10,000. That seems absurd to me as Mainland media noted BYD’s quarterly revenue exceeded Tesla’s Q3 revenue of $25.18 billion. Tesla’s market cap is $826 billion, and that stock is trading at a price to earnings (P/E) of 122 versus BYD’s market cap of $114 billion and a P/E of 22. Add more absurdity.
Real estate was the top performer in Hong Kong, closing higher by +1.61%, and in Mainland China, closing higher by +2.42%, as six mega-banks announced that they will automatically adjust mortgages lower tomorrow based on the lower rates. Yesterday’s news on strong transaction volumes in Shanghai and Shenzhen may have been a factor as well. Banks and brokers had a good day in both markets following the big SOE bank results yesterday.
Solar names were higher on the NDRC’s statement on supporting renewable energy.
Prada (1913 HK) gained +7.49% after reporting better than expected results, including the largest geographic area, Asia Pacific, with growth of +9.2% YoY.
Pinduoduo (PDD US) looked weak pre-market on the EU examination of their Temu business.
Li Auto is also off US pre-market despite beating analyst expectations on revenue, adjusted net income, and adjusted EPS, as the Q4 revenue forecast was light.
Alibaba bought 201,800 US ADRs yesterday, accounting for 2% of the volume in its US-listed shares. A Mainland media source article noted a review of “important policy of the State Council in October.” The release reviewed agency and policies implemented, including the NDRC’s October 8th release on “specific measures to further expand domestic demand.” Also included was the expansion of “employee pension insurance” for the sick and disabled beginning in 2025. It is a big, wide-ranging piece covering everything from real estate policies and interest rate cuts to “reproductive support policy.” Tomorrow, I’ll include a deeper dive into this release, which I don’t see mentioned in Western media. It makes you wonder what they aren’t telling us.
The Hang Seng and Hang Seng Tech indexes fell -0.31% and -0.32%, respectively, on volume that decreased -7.3% from yesterday, which is 126% of the 1-year average. 198 stocks advanced, while 284 declined. Main Board short turnover decreased by -30.33% from yesterday, which is 73% of the 1-year average, as 9% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Value and large capitalization stocks fell less than growth and small capitalization stocks. The top-performing sectors were Real Estate, which gained +1.61%, Information Technology, which gained +1.51%, and Energy, which gained +0.74%. Meanwhile, Health Care fell -2.38%, Communication Services fell -1.37%, and Consumer Discretionary fell -1.27%, to make up the worst-performing sectors. The top-performing subsectors were diversified financials, semiconductors, and food & beverage. Meanwhile, automobiles and pharmaceuticals were among the worst-performing. Southbound Stock Connect volumes were 1.25X the average as Mainland investors bought $345 million of Hong Kong-listed stocks and ETFs, including Tencent and Xiaomi, which were moderate net buys, and Sunac and GCL Tech, which were small net buys. Meanwhile, CNOOC and Meituan were small net sells.
Shanghai, Shenzhen, and the STAR Board gained +0.42%, +0.92%, and +1.11%, respectively, on volume that increased +20.14% from yesterday, which is 251% of the 1-year average. 3,522 stocks advanced, while 1,466 stocks declined. The growth factor and small cap stocks rose more than the value factor and large cap stocks. The top-performing sectors were Real Estate, which gained +2.45%, Information Technology, which gained +1.69%, and Financials, which gained +0.54%. Meanwhile, Consumer Discretionary fell -1.17%, Health Care fell -0.82%, and Communication Services fell -0.66%, to make up the worst-performing sectors. The top-performing subsectors were education, diversified financials, and computer hardware. Meanwhile, precious metals, motorcycles, and land transportation were the worst. Northbound Stock Connect volumes were high, 2X the average. CNY and the Asia dollar index gained versus the US dollar. Treasury bonds gained. Copper and steel fell.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.11 versus 7.12 yesterday
- CNY per EUR 7.73 versus 7.71 yesterday
- Yield on 10-Year Government Bond 2.15% versus 2.16% yesterday
- Yield on 10-Year China Development Bank Bond 2.23% versus 2.24% yesterday
- Copper Price -0.23%
- Steel Price -0.15%
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