Semiconductor Stocks Soar, Asia Rebounds

Key News

Asian equities were mostly higher, rebounding from yesterday’s downdraft and ignoring US equities’ decline yesterday. Earnings season kicked off this week in Mainland China. As a result, Mainland volumes were strong, above RMB 1 trillion, while Hong Kong volumes were weak.

Semiconductor stocks soared overnight as several companies reported positive 2021 earnings overnight. Nearly 80% of the Mainland-listed semiconductor companies that have reported earnings have exhibited a year-over-year increase in net profits of 50%+. The recovery from the chip shortage will be long and may result in a supply glut in the long term as these companies are rapidly increasing production to meet strong demand. This was on display in these companies’ earnings reports.

Meituan rebounded after Mainland newspaper the Economic Daily wrote in an editorial piece that restaurant support should not be interpreted as an “attack” on the company. Meituan shares were up +3.09% in Hong Kong overnight and the company’s stock was among the top ten most traded in Hong Kong by value.

There was some chatter that online gaming approvals might be in the works, which has been a concern/overhang on Tencent and NetEase, both of which are currently awaiting approvals for new games. Censors have been updating their games approval protocols to ensure alignment with “common prosperity” so there is no guarantee that all games in the pipeline receive approval. But, this is a positive rumor.

The Hang Seng Index gained +0.60% overnight on that were -21.74% lower than yesterday and well off the 1-year average. The Hang Seng TECH Index gained +1.39% overnight, reflecting the strong rebound in Meituan shares and a slight comeback for the rest of the internet sector. Mainland investors were significant buyers of Hong Kong stocks via Southbound Stock Connect overnight.

Shanghai, Shenzhen, and the STAR Board gained +0.93%, +1.75%, and +3.98%, respectively, overnight on volumes that were +6.36% higher than yesterday and near the 1-year average. China’s currency appreciated slightly overnight, bonds sold off somewhat, and copper was down.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.31 versus 6.33 yesterday
• CNY/EUR 7.16 versus 7.17 yesterday
• Yield on 1-Day Government Bond 1.55% versus 1.60% yesterday
• Yield on 10-Year Government Bond 2.79% versus 2.82% yesterday
• Yield on 10-Year China Development Bank Bond 3.06% versus 3.07% yesterday
• Copper Price -0.77% overnight

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