Week in review
- China released economic data for 2022 this week. GDP grew by +3.0%, while retail sales fell by -0.2%, less than expected.
- Chewy founder Ryan Cohen announced a stake in Alibaba and is advocating more share buybacks based on the company’s low valuation.
- The world’s economic leaders gathered at the WEF forum in Davos, Switzerland. China’s Vice Premier Liu He addressed the participants and emphasized that China is open for business again. Later, the leader met with US Treasury Secretary Janet Yellen in Zurich.
- Foreign investors have poured nearly $15 billion into mainland stocks so far this year, already exceeding the total inflows from 2022.
- In this week videoXiabing provides an insight into life in Shanghai after the end of Zero COVID restrictions and provides updates on the recovery of China’s travel industry.
Friday’s key news
Stocks in mainland China and Hong Kong ended the Year of the Tiger just like Katy Perry’s song “Roar”, although in 2021 we should be a survivor and sing “Eye of the Tiger”.
The Hang Seng and Hang Seng Tech indices rose +1.82% and +2.67% respectively as all sectors were positive for the third consecutive day. Hong Kong-listed internet stocks outperformed their US-listed counterparts overnight, contributing to the latter’s gains in today’s US market action. The Hang Seng index closed above the 22,000 level, which is a big, meaningless, round number, but psychologically important! Hong Kong’s most traded stocks by value were Alibaba, which rose +3.65% on observations by Jack Ma in Hong Kong, Tencent, which rose +2.35%, and Meituan, which rose +4.93%.
Yesterday, we mentioned that Hong Kong Exchanges & Clearing (HKEX) announced the expansion of Southbound Stock Connect to include “international companies primarily listed in Hong Kong”, which helped kick off the internet rally. Remember that not all dual-listed companies count Hong Kong as a primary listing. The move from HKEX may prompt more companies to convert their secondary offering in Hong Kong to a primary offering. Why? Tencent has nearly 9.32% of its market capitalization held by mainland Chinese investors via Southbound Stock Connect. Meanwhile, nearly 30% of Hong Kong’s daily trading volume originates from Southbound Stock Connect. HKEX also announced the expansion of Northbound Stock Connect to include more stocks.
Foreign investors bought another $1.4 billion of mainland stocks, bringing net purchases for the year to $14.6 billion, more than all of 2022.
Mega cap and large cap growth stocks favored by domestic and foreign investors had a strong day led by solar company Sungrow, which gained +7.04% after forecasting +100% profit growth in 2023. Meanwhile, a famous local mutual fund manager revealed their 2022 holdings , which showed a preference for clean tech and consumer discretionary stocks.
Following the closure in Hong Kong, Sinopharm reported that its mRNA vaccine has been approved for clinical trials in China.
US Treasury Secretary Janet Yellen’s team will travel to China next month ahead of her visit to China this year. Remember that we can also have Foreign Minister Blinken visiting China in the first week of February. The “180” in US-China relations really makes you wonder what Xi might have said to Biden at the G20.
China Last Night will take a break from Monday and resume on Thursday, January 26th. Stock and bond markets in mainland China and Hong Kong will be closed for the Lunar New Year holiday during this period. “Gong Hei Fat Choy” in Cantonese (or gong xi fa cai, 恭喜发财 in Mandarin): May you prosper in the New Year!
The Hang Seng and Hang Seng Tech indices rose +1.82% and +2.67% respectively on volume that rose +2.74% from yesterday, which is 76% of the 1-year average. 415 stocks rose while 71 stocks fell. The main board’s short sale revenue fell -1.26% from yesterday, which is 72% of the 1-year average, as 17% of the revenue was short sales. Growth and value factors performed well as large caps outperformed small caps. All sectors were positive as consumption allowance increased +3.2%, energy increased +3.14% and materials increased +2.97%. The best performing subsectors were energy, retail and materials. Meanwhile, food, grocery and household products were among the worst performers. Southbound Stock Connect was closed today.
Shanghai, Shenzhen and STAR Board rose +0.76%, +0.65% and +0.54% respectively on volume that rose +9.51% from yesterday, which is 81% of the 1-year average. 3,614 shares rose, while 1,056 shares declined. Growth and value factors performed well, while large caps outperformed small caps. The best performing sectors were utilities which rose +2.01%, communication services which rose +1.67% and materials which rose +1.63%. Meanwhile, healthcare fell -0.41% and consumer staples fell -0.38%. The best performing subsectors were telecommunications, precious metals and education. Meanwhile, motorcycles, securities and biotech were among the worst performers. Northbound Stock Connect volumes were moderate/light as foreign investors bought $1.4 billion worth of mainland stocks. The CNY rose +0.05% against the US dollar to close at CNY 6.78 per USD, Treasuries were sold and Shanghai copper fell -0.27%.
Major Chinese urban mobility tracker
Mobility drops as China goes on vacation.
Last night’s performance
Last night’s exchange rates, prices and returns
- CNY per USD 6.78 versus 6.79 yesterday
- CNY per EUR 7.35 against 7.34 yesterday
- Interest on 10-year government bonds 2.93% against 2.92% yesterday
- Yield on 10-year China Development Bank Bond 3.09% versus 3.08% yesterday
- Copper price -0.27%