PBOC Guides Mainland Market Higher

Key News

Asian equities were higher overnight on light volume as former British colonies, Australia and New Zealand, enjoyed another day off. Yesterday’s holiday was in observation of Christmas while today’s holiday is for Boxer’s Day.

Mainland markets were more upbeat than Hong Kong as Mainland investors focused on PBOC Governor Yi Gang’s speech which signaled support for the economy, financials helping achieve carbon goals, and commenting on the real estate market. Risks to China’s economy are “controllable” while the central bank will “guide financial institutions in boosting support for the real economy”. Without mentioning Evergrande nor other distressed property developers by name, he stated “some real estate enterprises were exposed due to their own poor operation and blind diversification expansion”. 

Shanghai gained +0.39%, Shenzhen +0.83%, and STAR Board +1.03% on volume +3% from yesterday which is 95% of the 1-year average. The clean energy ecosystem was largely higher with lithium stocks having a very strong day while coal and hydropower stocks were off. Foreign investors bought $202mm of Mainland stocks today via Northbound Stock Connect; while Mainland bonds rallied, CNY was basically flat versus the US dollar and copper was up a touch.

The Hang Seng gained +0.24% as volume rebounded 92% from last Thursday though that is only 59% of the 1-year average. Many widely held names were off such as Tencent -2.13% as value stocks outperformed growth stocks. The broader Hang Seng Composite was -0.04% as 287 advanced while 191 declined. Kintor Pharmaceutical (9939 HK) was off a mere -70.35% after its coronavirus vaccine posted poor results. Tencent and Meituan were small net sells in Southbound Stock Connect.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.37 versus 6.37 Yesterday
• CNY/EUR 7.22 versus 7.21 Yesterday
• Yield on 10-Year Government Bond 2.80% versus 2.81% Yesterday
• Yield on 10-Year China Development Bank Bond 3.08% versus 3.09% Yesterday
• Copper Price +0.86% overnight