Markets Rebound As Superman Buys

Key News

Asian equities were largely higher on light volumes and very little news. Hong Kong internet names rebounded overnight leading the Hang Seng to gain +0.57% and the Hang Seng Tech Index to gain +1.29%. Hong Kong’s volume was off -15.86% from yesterday, which is only 55% of the 1-year average.

Markets are becoming very thin and illiquid, which makes them susceptible to headlines including today’s Reuters headline that the Ministry of Industry Information Technology (MIIT) had stopped doing business with Alibaba’s cloud computing unit. I could not find this “news” in China media, on the MIIT’s website, or anywhere else. However, an institutional broker did find it. According to a Mainland news outlet I had never heard of, “a person close” to the MIIT said this had happened. It is amazing that this constitutes news today. The headline clipped Alibaba Hong Kong’s rally to +0.88% after opening +5.27%. Other than Alibaba, the space had a strong day. Tencent and Meituan both saw modest net inflow via Southbound Stock Connect.

The clean energy ecosystem rebounded in both Hong Kong and China overnight. Mainland China was mixed overnight as Shanghai fell -0.07%, Shenzhen gained +0.64%, and the STAR Board gained +0.03% on volume that was +5.98% higher than yesterday, which is 101% of the 1-year average.

Real estate was off in both Hong Kong and China despite increased policy guidance supporting the space. Private equity firm Warburg Pincus announced it had raised $2.8 billion for its first Asia-focused real estate fund with an emphasis on technology geared properties. Northbound Stock Connect flows were light as foreign investors sold -$273 million worth of Mainland stocks today. Chinese Treasury bonds had a very strong day while the renminbi was flat and copper was up a touch.

Hong Kong media source, The Standard, reported that Hong Kong conglomerate CK Hutchison announced it bought back 100k shares/HK$ 4.95mm today, which brings its buyback since March to 21.71mm shares/HK$ 1.24B. CK Hutchison is famous for its retired founder and former CEO Li Ka-Shing, who was known as Superman for his daring corporate actions. How impressive was he? No greater testament to his legacy than the firm’s ticker, which is 1 HK.

An investor pointed out to me that the China internet space almost universally trades at an enterprise value below market cap, has more cash than debt, and is, on average, over 80% below analysts’ price targets.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.37 versus 6.37 Yesterday
• CNY/EUR 7.20 versus 7.19 Yesterday
• Yield on 1-Day Government Bond 1.41% versus 1.39% yesterday
• Yield on 10-Year Government Bond 2.83% versus 2.85% yesterday
• Yield on 10-Year China Development Bank Bond 3.09% versus 3.09% yesterday
• Copper Price +0.72% overnight