Real Estate Stimulus Announced As Xi Heads To The U.S.

Key News

Asian stocks were largely higher, except for Hong Kong, on light volumes as investors stayed on the sidelines waiting for this morning’s U.S. CPI print and India was off on holiday.

We also have the release of China’s October economic data today after yesterday’s mixed loan and financing data left the door for more policy support with rumors of a bank reserve requirement ratio cut coming. After the close, it was announced the PBOC would provide RMB 1 trillion ($137 billion) for “urban village restoration and subsidized housing projects”. The news had an immediate impact on Hong Kong futures, which rose in response despite today’s Hong Kong down draft. Interesting that real estate was the top sector in both Hong Kong and Mainland China prior to the release. The move isn’t the policy bazooka, but it is a clear step up in support of the real estate sector and trying to raise/stabilize prices.

As President Xi left for the US today, there was a great deal of chatter that Biden and Xi will announce an effort to stop the export of chemicals that can be used in making fentanyl. Clearing Boeing’s
737 MAX for use in China, a big Chinese US agricultural purchase, and semiconductors are also rumored to be win-win areas that the leaders will focus on.

Hong Kong-listed growth sectors and stocks underperformed though internet stocks were hit in advance of earnings following Singles Day results that beat low expectations. Tencent fell -0.65%, Meituan fell -2.96% (apologies earnings are not today as a data provider had the wrong date), and Alibaba fell -1.8%. The electric vehicle (EV) ecosystem was one of the few Hong Kong growth sectors that outperformed. Mainland investors bought the Hong Kong dip via net buying in Southbound Stock Connect, with the Hong Kong Tracker ETF seeing large/moderate net buy. The Mainland markets grinded higher to post small gains despite foreign investors selling for -$289 million of Mainland stocks via Northbound Stock Connect. The Mainland market’s most heavily traded stocks have changed fairly dramatically in the last few months. Volume has also picked up in another positive signal. After the close, E-Commerce discounter Vipshop (VIPS US) beat analyst expectations for Q3, but light Q4 guidance weighed on the stock. Tomorrow, we have Tencent and after the Hong Kong close!

The Hang Seng and Hang Seng Tech indexes fell -0.17% and -0.74%, respectively, on volume that increased +2.12% from yesterday, which is 69% of the 1-year average. 265 stocks advanced, while 196 declined. Main Board short turnover declined -2.89% from yesterday, which is 74% of the 1-year average as 18% of turnover was short turnover (remember Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The value factor and small caps “outperformed”/fell less than the growth factor and large caps. The top sectors were real estate +2.3%, utilities +1.73%, and financials +0.65%, while discretionary -1.29%, communication -0.91%, and tech -0.71%. The top sub-sectors were insurance, utilities, and semis, while retailing, consumer durables, and technical hardware were the worst. Southbound Stock Connect volumes were moderate as Mainland investors bought +$174 million of Hong Kong stocks and ETFs, with the Hong Kong Tracker ETF seeing a large/moderate net buy and MOG Digitech a moderate/large net buy while Meituan was a small net sell.

Shanghai, Shenzhen, and the STAR Board gained +0.31%, +0.38%, and +0.87%, respectively, on volume that increased +2.78% from yesterday, which is 102% of the 1-year average. 2,784 stocks advanced, while 1,942 declined. The value and growth factors were mixed as small caps outpaced large caps. The top sectors were real estate +1.03%, consumer discretionary +0.93%, and financials +0.89%, while energy -0.63%, materials -0.09%, and industrials -0.08%. The top sub-sectors were computer hardware, education, and software, while coal, gas, and oil/gas were the worst. Northbound Stock Connect volumes were moderate as foreign investors -$289 million of Mainland stocks with Innolight, Mindray, and ISOFTSTONE small net buys and Ping An a moderate net sell, Cypc, ICBC, and East Money small net sells. CNY and the Asia dollar index were basically flat versus the U.S. dollar. Treasury bonds were sold while copper and steel gained.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

  • CNY per USD 7.29 versus 7.29 yesterday
  • CNY per EUR 7.82 versus 7.79 yesterday
  • Yield on 10-Year Government Bond 2.65% versus 2.65% yesterday
  • Yield on 10-Year China Development Bank Bond 2.73% versus 2.71% yesterday
  • Copper Price +0.27% overnight
  • Steel Price +1.14% overnight

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