Asian equities were mixerd overnight, with the US dollar weaker before the release of US CPI data and Hong Kong markets closed for Buddha’s birthday. This resulted in light volumes, with both Shanghai and Shenzhen falling to the bottom of their recent trading range. President Biden’s China tariffs impacted sentiment, particularly in the solar and wind sectors.
The real estate sector was the top performer on speculation that the Chinese government plans to buy unsold apartments to stabilize housing prices and support property developers. Property developer bonds rallied on the news, offering investors an opportunity for equity-like returns with a favorable yield. MSCI released their pro forma for the month-end index rebalance, with China’s weight slightly decreasing to 25.4% from 25.7%.
Hillhouse, a global private equity firm, disclosed further buying of their top holding Pinduoduo, while sell-side analysts praised Tencent’s strong financial results and shareholder-friendly buyback. Alibaba’s performance was met with mixed reactions, with a top-line beat but a bottom-line miss due to investment write-downs. Baidu and JD.com are set to report earnings, with Baidu launching its 6th-generation robotaxi.
In Hong Kong, markets were closed, while Shanghai, Shenzhen, and the STAR Board saw slight declines. Real estate and energy sectors gained, while healthcare, utilities, and financials fell. The value factor and large caps outperformed growth factor and small caps. Northbound Stock Connect was closed, and CNY and the Asia dollar gained against the US dollar. Treasury bonds fell, and copper and steel prices also declined.
Recent articles highlight the fundamentally different nature of China’s current stock market rally, with five key reasons outlined. Exchange rates, prices, and yields saw slight fluctuations, with the CNY per USD at 7.22, yield on the 10-Year Government Bond at 2.30%, and copper and steel prices falling slightly. Overall, the Asian markets continue to navigate various factors impacting their performance, including geopolitical tensions and economic data releases.
