CLN
Key News
Despite a weaker US dollar, Asian equities were off overnight on growing chatter of a coming Middle East crisis and Trump’s tariff threat reiteration.
On the former, Mainland media noted that the International Atomic Energy Agency Board of Governors stated Iran had “failed to comply with its nuclear safeguard obligations” for the first time in twenty years. No idea if there is any connection with the Israel-Iran concerns. On the latter, Chinese company JL MAG Rare-Earth stated it “had obtained export licenses issued by national authorities for exports to destinations including the US, Europe, and Southeast Asia.” This follows last Saturday’s Ministry of Commerce license approval, as May rare earth exports increased 23% MoM and 2.3% YoY.
Hong Kong underperformed as growth stocks favored by foreign investors were hit. Interesting to see the US dollar lower versus every Asian currency except India, while favored Hong Kong growth stocks were hit, with Hong Kong’s top ten most heavily traded by value all down for the day. Alibaba -3.21% despite Ant filing for a Hong Kong stablecoin license, while Tencent -1.54% on chatter it will buy South Korea’s Nexon Games (225570 KS) for $15B. Hong Kong and Mainland healthcare stocks rebounded after I jinxed them yesterday by noting their recent outperformance. Precious metals had a good day in both Hong Kong and Mainland China. Auto/EV/Hybrid was weak on news, several cities have suspended used car purchase subsidies following reports that dealers were selling new cars as used to garner the subsidies.
The Ministry of Commerce and the Ministry of Foreign Affairs held separate afternoon press conferences reiterating the progress made in London in US-Sino relations. They did reiterate that the London meeting confirmed what Trump and Xi had outlined in their June 5th phone conversation. After their underlings screwed up the Geneva trade agreement, the two bosses had to get involved which must be frustrating for them. Reminds me of my wife’s frequent lament on household and child tasks, “I do everything!” My reply is, “How can you be doing everything, if I’m doing everything!”.
YTD Mainland investors have bought $87B of Hong Kong stocks via Southbound Stock Connect versus $102B for 2024. With that said, Tencent has seen net selling since April 23rd, while Alibaba has seen choppy/leaning outflow since early May. Even Kuaishou has seen net outflows in the last week. Xiaomi has seen only two small net buy days since early May. Meituan has bucked the trend despite a very small net sell today. What gives? One factor is that Hong Kong’s rebound has led to more capital raising as companies like CATL have been relisted in Hong Kong.
Today, Horizon Robotics sold 681mm shares, raising $601mm via private placement. The money needs to come from somewhere to fund those purchases, so the more heavily owned you are, the more likely the stock becomes a funding source. Investors aren’t blowing out of these names, just trimming them. Tencent’s percentage of shares owned via Southbound Stock Connect has declined 11.82%/1.087B shares on April 24 to 11.13%/1.023B shares today. Alibaba’s shares owned via Southbound Stock Connect went from 8.81%/1.682B shares on April 28 to 8.63%/1.646B shares today. Net net, no reason to freak out, IMO.
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Last Night’s Performance
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Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.17 versus 7.18 yesterday
- CNY per EUR 8.31 versus 8.22 yesterday
- Yield on 10-Year Government Bond 1.65% versus 1.64% yesterday
- Yield on 10-Year China Development Bank Bond 1.71% versus 1.70% yesterday
- Copper Price -0.63%
- Steel Price -0.47%
