Hong Kong Internet Rebounds

Key News

Asian equities were mixed overnight as Mainland China outperformed the region and Hong Kong-listed internet stocks rebounded following positive earnings releases from Tencent and JD.com.

Another factor that has been impacting China’s markets has been massive flooding in multiple regions. Fortunately, most reports have floods subsiding and the destruction they caused being rectified. This may prove a small catalyst and lead to a slight improvement in risk appetite.

Hong Kong’s unemployment rate has fallen from 5.4% in April last year to 2.8% for the May to July period this year. The semi-autonomous city’s improvement in labor conditions has been attributed to an increase in foreign visitors since pandemic conditions improved.

The Hang Seng and Hang Seng Tech indexes diverged to close -0.01% and +0.78%, respectively, overnight on volume that increased +15% from yesterday. Short sale volume increased +36% from yesterday. Mainland investors bought a net $1.3 billion worth of Hong Kong stocks overnight via Southbound Stock Connect. Real estate and healthcare were lower overnight while technology and internet were mostly higher.

Shanghai, Shenzhen, and the STAR Board all closed higher by +0.43%, +0.85%, and +0.95%, respectively, on volume that increased +5% from yesterday. Foreign investors sold a net $194 million worth of Mainland stocks overnight via Northbound Stock Connect. Among the top traded names autos outperformed while financials were lower.

Considering the slow news day overnight, we wanted to share an interesting research project we have been working on. Headlines have been negative on China’s economy recently. But, we partnered with Morningstar to develop an index that tracks the performance of developed markets companies that derive a significant portion of their revenue from China and emerging markets (Bloomberg Ticker: MSCEREPU
EPU
Index) and they have been outperforming. If China’s economy is doing as poorly as the headlines say, how can these companies’ stocks be doing so well? We will keep following this index and provide another update soon.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.29 versus 7.30 yesterday
• CNY per EUR 7.95 versus 7.94 yesterday
• Yield on 1-Day Government Bond 1.37% versus 1.35% yesterday
• Yield on 10-Year Government Bond 2.57% versus 2.56% yesterday
• Yield on 10-Year China Development Bank Bond 2.68% versus 2.68% yesterday
• Copper Price +0.90% overnight
• Steel Price +0.65% overnight