Alibaba HK rises as Tencent’s WeChat Pay mobile payment goes live on Alibaba

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Asian stocks fell overnight as Hong Kong outperformed and China was mixed. The Hong Kong rally was pretty broad at 3 leads for 1 down as every sector was in the green and led by a strong rebound in internet stocks. Tencent was the most traded in Hong Kong by value, gaining +1.12%, followed by Alibaba HK + 6.43%, as Tencent’s WeChat Pay is officially usable on Alibaba’s e-commerce websites. . I noticed that on Alibaba’s global website there was a WeChat button, although I’m frankly not sure if it’s a new addition.

The walled garden or moat that companies have built to harm their rivals is crumbling as companies adhere to regulations. Tencent saw net purchases from mainland investors overnight for the 11e over the last 12 trading days when the company bought 220,000 shares today. Real estate stocks rebounded strongly, with developer Sunac (1918 HK) gaining + 14.81% after the company denied seeking government help and buying back bonds.

The mainland market was mixed overnight as yesterday’s high-flying alcohol stocks were hit by profit taking while energy, real estate and utilities had strong days. The PBOC has talked about protecting housing against a financial crisis.

Evergrande’s situation will not go away as restructuring debt and loan repayments with creditors will be arduous, but recognition of the size of the company is on the radar of policymakers. Evergrande is called the Lehman moment, but it feels more like their Bear Stearns moment because there is no Lehman without Bear falling. Preventing the first domino from falling is the No.1 job in China.

Everything related to energy and utilities in the continental market, such as coal, oil, wind, solar, hydropower and power generation, has outperformed high energy prices by China. China’s futures price for thermal coal delivery in January rose + 4.56% overnight to US $ 199 from a 52-week low at US $ 91.

Chatter is that coal stocks have not been replenished, due to China’s carbon commitments and increased safety regulations following several mining accidents in the spring. Mongolia’s coal imports have been slowed by problems with covid production while China has limited Australian coal imports due to political rhetoric. The chairman of State Grid, China’s largest utility, said the company would follow “important instructions from Secretary General Xi Jinping.” Ultimately, utilities might have to eat high prices and not pass them on to consumers while doing everything possible to increase production.

China Daily, a mainland media source, noted that “the use of electricity in factories is currently applied in 10 regions at the provincial level, including Jiangsu, Guangdong and Zhejiang provinces.” These controls could be relaxed “as government efforts to contain soaring coal prices and improve the supply of coal to power plants should improve.” Lithium stocks were hit again on the continent when battery giant CATL fell. Foreign investors bought $ 741 million in mainland stocks overnight.

Southbound Bond Connect kicked off last night, giving mainland investors access to the Hong Kong bond market. No better time for our webinar tomorrow with our partner Nikko Asset Management to discuss the Evergrande situation.

Update on H-shares

The Hang Seng opened higher and continued to close at + 1.2% on a volume of -0.96% from yesterday, or 86% of the 1 year average. The 210 Chinese companies listed in Hong Kong within the MSCI China All Shares gained + 2.24%, led by real estate + 6.03%, energy + 4.68%, utilities + 3.71 %, discretionary goods + 3.67%, materials + 1.44%, technology + 1.34%, communication + 1.13% and health + 1.1%. The most traded Hong Kong stocks by value were Tencent +1.12%, Alibaba HK + 6.34%, Meituan +1.37%, energy giant CNOOC + 5.78%, Xiaomi + 0, 69%, Wuxi Biologics + 3.04%, Ping An + 0.18%, AIA – 0.46%, China Merchants Bank +1.86% and Li Ning -1.48%. Southbound Stock Connect volumes were moderate / high as mainland investors bought $ 756 million in Hong Kong shares, with southbound trading accounting for 13.8% of Hong Kong revenue.

Update on A-shares

Shanghai, Shenzhen and Hong Kong diverged + 0.54%, -0.18% and -1.07% as volume fell -24.46% from yesterday, or 106% of the average over a year. Mainland 541 MSCI China All Shares pulled a + 0.07% James Bond led by energy + 5.16%, real estate + 4.84%, utilities + 4.1 % and financials +1.62% while communications -1.14%, commodities -1.11% and technology and health -0.69%. The most traded in value on the mainland were Luzhou Laojia C + 3.9%, China Three Gorges Renewables + 8.43%, liquor company Kweichow Moutai -1.78%, liquor company Wuliangye Yibin -1 , 65%, broker East Money + 4.13%, COSCO Shipping -5.95%, China Northern Rare Earth + 0.16%, China Energy Engine flat, Tianqi Lithium -1.28% and battery giant CATL -2.55%. Northbound Stock Connect volumes were subdued as foreign investors bought $ 741 million in mainland stocks today, with northbound trading accounting for 4.6% of mainland revenue.

Last night’s exchange rates, prices and yields

  • CNY / USD 6.46 vs. 6.46 yesterday
  • CNY / EUR 7.55 vs. 7.56 yesterday
  • 10-year government bond yield 2.88% vs. 2.88% yesterday
  • 10-year Development Bank of China bond yield 3.21% vs. 3.19% yesterday
  • Copper price -0.13% overnight

Krane Funds Advisors, LLC is the investment manager of the KraneShares ETFs. Our range of China-focused ETFs provide solutions for investors to understand the importance of China as an essential part of a well-designed investment portfolio. We strive to deliver innovative strategies, first to the market, which have been developed on the basis of our strong partnerships and our in-depth knowledge of investing. We help investors stay on top of global market trends and aim to provide meaningful diversification. Krane Funds Advisors, LLC is majority owned by China International Capital Corporation (CICC).

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Elaine R. Knight