2021 EV Sales Were Electrifying

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It was a quiet start to 2022 with markets closed in China, Japan, and Australia. Volume was off -17% in Hong Kong compared to Friday’s volume, which is only 34% of the 1-year average. It was not surprising that we saw profit-taking in Hong Kong-listed internet stocks after Thursday’s very strong performance, which led to profit-taking in the US on Friday while Hong Kong was on holiday. Several media reports tried to pin the tail on the Hong Kong internet decline though the Hong Kong shares appear to have simply caught up with the US close on Friday.

December electric vehicle (EV) sales were released as companies reported full-year 2021 sales. Approximately 3 million EVs were sold in China in 2021. Li Auto reported that 2021 sales increased +177% to 90,491 new vehicles, XPeng’s sales increased +263% to 98,155. and Nio’s sales increased +109% to 91,429. BYD’s 2021 EV sales increased to 603,783 versus 2020’s 189,689. Hong Kong-listed clean technology stocks had a strong day led by the EV names along with wind and nuclear power companies. The EU is considering adding natural gas and nuclear to their definition of clean energy, which might have interesting implications for the sector globally.

Distressed property developer Evergrande suspended trading in its Hong Kong shares in advance of disclosing inside information. Media reports link the halt to reports that 39 Evergrande buildings need to be torn down because they had the wrong permits. This is a rounding error for the company though headlines need to generate clicks. I suspect a phone call will be made that reverses this decision though the real estate sector was off -2.81% in Hong Kong.

Health care was off -3.44% in Hong Kong though biotech was very weak on no news other than traditional Chinese medicine stocks being added to the national insurance plan. Hong Kong’s most heavily traded stock, recent IPO and US sanctioned stock SenseTime gained +40.91%. Southbound Stock Connect was closed today which likely contributed to the light volumes.

China internet’s valuation was a common theme in several of the 2022 outlooks released by institutional brokers. What we need are catalysts to get the space going. In thinking about the issue, I may have come up with my own Yogi Berra-like quote: “China will continue to underperform as long as India outperforms.” Of course, Mainland-listed stocks had a significantly better 2021 versus Hong Kong and US-listed shares. Active emerging markets and global managers have been overweight India though there is increased chatter of the country’s high valuations. A rebalancing to China would help stabilize the sector.