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Asian equities had a strong start to the week today, led higher by Japan on Berkshire Hathaway increasing their stake in several companies, South Korea, and Malaysia, though Thailand and Indonesia fell slightly.
It was a big day in China’s bond market, as Treasury bonds sold off and yields rose. The 30-year government bond yield hit a three-month high of 2.12%, while the 10-year yield closed the session at 1.89% versus a February 6th low of 1.59%. Better-than-expected February economic data likely pushes a PBOC rate cut further out as CNY appreciated to 7.23 per US dollar. Q1 GDP growth likely to be around 5.5% versus the 2025 5% target.
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Housing data was weak as property sales declined -0.4% year-to-date (YTD), February’s new home prices month-over-month (MoM) declined -0.14% versus January’s -0.07% decline, used home prices MoM declined -0.34% versus January’s -0.34% decline, and property investment declined -9.8% in January-February compared to the same period last year, versus expectations of -8.9%.
Hong Kong and Mainland China-listed real estate stocks were strong performers, as policies to further stabilize the sector were rolled out as part of the Central Committee and State Council’s Sunday release of the “Action Plan for Boosting Consumption”. The plan addresses several structural issues, including reforming the Hukou system (migrant workers currently do not have access to public services in their destination or workplace cities) and the birth rate, and broadens the social safety net that leads to a high savings rate. It is worth noting the efforts to support technology, including E-Commerce, real estate, and the stock market. Highlights include:
- “vigorously boost consumption, comprehensively expand domestic demand”
- “implement employment support plans…implement the unemployment insurance stabilization return policy”
- “take multiple measures to stabilize the stock market”
- “research establishing a child care subsidy system“
- improve the ability of medical and nursing care…improve the fiscal subsidy standards for basic old-age insurance…implement individual pension system…
- (Hukou) “promote the cancellation of the household registration restrictions”
- ”increase support for the exchange of old consumer goods for new ones”
- continuously push the real estate market to stop falling and stabilize“
- support the rapid development of new consumption…vigorously cultivate quality e-commerce…promotion of new technologies”
- “strictly implement the paid annual leave system”
Both Mainland China and Hong Kong rallied in morning trading on the release though faded over the trading day due to the lack of specific policies. The follow-up 3 pm press conference from the National Development and Reform Commission (NDRC) Vice Director Li Chunlin was positive, but also lacked specifics.
Contemporary Amperex (CATL) fell -2.29% after missing analyst expectations for 2024 results.
Baidu gained +0.44% after launching the “latest foundation model ERNIE 4.5 and the deep-thinking reasoning model ERNIE X1” while making ERNIE Bot free for users. According to the company, ERNIE 4.5 outperforms GPT-4.5 in multiple benchmarks while priced at just 1% of GPT-4.5.”
Following Friday’s strong move, the market indices are above big round numbers, including the Hang Seng Index, which is at 24,145, the Shanghai Composite, which is at 3,426, the Shenzhen Composite, which is at 2,112, and the Hang Seng Tech Index, which is near 6,000, closing at 5,872. Hong Kong volumes were off a bit from the recent elevated levels, though Mainland investors bought a healthy $1.349B of HK stocks today.
The Hang Seng and Hang Seng Tech indexes diverged to close +0.77% and -0.14%, respectively, on volume that decreased -15.76% from Friday, which is 152% of the 1-year average. 329 stocks advanced while 150 stocks declined. Main Board short turnover decreased -18.65% from Friday, which is 137% of the 1-year average, as 14% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The value factor and small caps outperformed growth and large caps. All sectors were positive, led by Utilities, which gained +3.43%, Information Technology, which gained +2.63%, and Real Estate, which gained +1.14%. The top performing subsectors were consumer durables, apparel, construction materials, and household & personal products. Meanwhile, commercial & professional services, media, and semiconductors were among the worst performing. Southbound Stock Connect volumes were moderate as Mainland investors bought a net $1.35 billion worth of Hong Kong-listed stocks and ETFs, led by Li Auto, which was a moderate/large net buy, Alibaba and Tencent, which were small net buys, Xiaomi, XPeng, SMIC, and Meituan, which were small net sells.
Shanghai, Shenzhen, and the STAR Board diverged to close +0.19%, +0.14%, and -0.45%, respectively, on volume that declined -12.27% from Friday, which is 133% of the 1-year average. 2,915 stocks advanced while 2,042 stocks declined. The value factor and small caps outperformed growth and large caps. The top-performing sectors were Real Estate, which gained +0.44%, Consumer Discretionary, which gained +0.29%, and Consumer Staples, which gained +0.24%. Meanwhile, the worst-performing sectors were Communication Services, which fell -0.62%, Industrials, which fell -0.6%, and Health Care, which fell -0.42%. The top-performing subsectors were energy equipment, environmental protection, and forest industry. Meanwhile, internet services, daily chemicals, and securities brokers were among the worst-performing subsectors. Northbound Stock Connect volumes were above average. CNY and the Asia Dollar Index both posted a small gain versus the US dollar. Treasury bonds fell. Copper rose and steel fell.
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Last Night’s Performance
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Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.23 versus 7.24 yesterday
- CNY per EUR 7.89 versus 7.87 yesterday
- Yield on 10-Year Government Bond 1.90% versus 1.83% yesterday
- Yield on 10-Year China Development Bank Bond 1.94% versus 1.87% yesterday
- Copper Price +0.11%
- Steel Price -0.71%
