Asian equities experienced a mixed session with South Korea performing well, while Hong Kong and India underperformed. Hong Kong’s 10-day winning streak came to an end due to profit-taking, particularly affecting growth/internet stocks that had been outperforming. Despite the pullback, the breadth of the market wasn’t bad, and Mainland investors bought the dip through Southbound Stock Connect. The upcoming Q1 earnings season starting next week with companies like Alibaba and Tencent reporting, along with the Third Plenum in July, suggest increasing policy support.
There was continued chatter about home appliance upgrades/purchases in the market. The most heavily traded stocks in Hong Kong included Tencent, Meituan, Alibaba, Kuaishou, and AIA. Real estate was the top performer following Shenzhen’s housing purchase restrictions being loosened, while energy also had a strong day. Mainland markets saw a choppy session with Shanghai and Shenzhen showing slight gains. Foreign investors were net sellers of Mainland stocks. President Xi’s visit to France included a call to “fend off a new Cold War.” The US dollar was slightly stronger, affecting CNY and the Asia dollar index negatively.
Despite some investors expressing hesitation in investing in China, many portfolios are heavily exposed to US companies with significant revenue exposure in China. The Hang Seng and Hang Seng Tech indices fell, with 238 stocks advancing and 230 declining. Short turnover on the Main Board fell, with the value factor outperforming the growth factor. Real estate, energy, and utilities were among the top-performing sectors, while communication, discretionary, and healthcare lagged. Southbound Stock Connect volumes were moderate/high as mainland investors bought $273mm of Hong Kong stocks and ETFs.
Shanghai, Shenzhen, and STAR Board saw mixed performances, with Shanghai and Shenzhen showing gains while STAR Board declined. The value factor and small caps outpaced the growth factor and large caps. The top-performing sectors were real estate, energy, and staples while utilities, discretionary, and tech lagged. Northbound Stock Connect volumes were moderate, with foreign investors selling Mainland stocks. CNY and the Asia dollar index were weaker against the US dollar. Treasury bonds rallied, while copper and steel prices gained. An upcoming webinar on AI as a catalyst for emerging markets is scheduled, and new content on China Market Connect is available to read.
In summary, Asian equities saw a mixed session with different markets performing differently. Hong Kong’s winning streak ended due to profit-taking, but Mainland investors bought the dip. Real estate and energy were among the top-performing sectors, while growth/internet stocks were affected by profit-taking. Chinese markets saw moderate gains but saw some divergence between sectors and sub-sectors. Foreign investors were net sellers of Mainland stocks via Stock Connect, and CNY and the Asia dollar index weakened against the US dollar. Treasury bonds rallied, and copper and steel prices gained. An upcoming webinar on AI’s impact on emerging markets and new content on China Market Connect are available.