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Asian equities were mixed overnight as Hong Kong, Mainland China, Thailand, and South Korea all underperformed while Taiwan was closed.
The China Securities Regulatory Commission, People’s Bank of China , Ministry of Finance, Ministry of Human Resources and Social Security, and the National Financial Supervision Administration held a joint press conference to discuss the “Implementation Plan for Promoting the Work of Entry of Long-Term Capital." The conference was held at 9 a.m. to ensure nobody missed it, though, in an unfortunate pattern, the delivery failed to meet expectations as both Hong Kong and Mainland China slid off early gains. The market liked the first bullet point below on insurance companies buying stocks. However, the following bullets failed to inspire investors except for those in banks, insurance, and stockbrokers.
- 30% of new insurance policies written in 2025 will be invested in stocks, compared to 13% today. According to the CSRC, this adds up to “several hundred billion CNY of long-term funds to A-shares every year.”
- Insurers will invest no less than RMB 100 billion in “long-term equity investment pilot projects” in the first half of 2025 and “gradually expand the program in the future.”
- Rules governing the National Social Security Fund’s reserves will be revised, totaling RMB 3 trillion ($412 billion).
- Mutual funds' equity holdings should grow 10% annually over the next three years.
- The PBOC loaned investors RMB 50 billion in October, followed by RMB 55 billion in January, while lowering the margin from 30% to 10%, and extending the loan term to three years from one year.
- 800 companies have started the process, and 300 publicly disclosed plans to borrow upwards of RMB 60 billion to buy back stock at an interest rate of 2%.
- Banks have lent RMB 5.7 trillion to support “white list” real estate projects that are too big to fail.
One issue during the call was the fact that no one explained that the value of new stock inflows would be less than “a few hundred billion," but only at the start. After the close, one media report estimated it will increase by RMB 370 billion to RMB 830 billion annually, based on the historic growth range of new insurance policies and an allocation range from 15% to 30%. It would have been helpful to highlight that in the call. My other suggestion would have been to have Central Huijin there to discuss their stock purchases, which are likely well over $150 billion. Mainland China is implementing the recipe for stock market success that Japan implemented over a decade ago.
Growth-oriented names popular with domestic and foreign investors underperformed, except for Alibaba, which gained +0.85%. Mainland investors bought a net $693 million worth of Hong Kong-listed stocks and ETFs today.
Before the U.S. market open, TAL Education handily beat on the big three: revenue, adjusted net income, and adjusted EPS. After peer New Oriental Education missed earlier this week, I’m sure the shorts are feeling some pain this morning.
The Hang Seng and Hang Seng Tech indexes fell -0.40% and -1.43%, respectively, on volume that increased +9.75% from yesterday, which is 109% of the 1-year average. 197 stocks advanced, while 279 stocks declined. Main Board short turnover increased +12.01% from yesterday, which is 131% of the 1-year average, as 19% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The value factor and large caps fell less than the growth factor and small caps. Financials constituted the only positive sector, up +2.19%. Meanwhile, the worst-performing sectors were Information Technology, which fell -1.90%, Real Estate, which fell -1.36%, and Materials, which fell -1.14%. The top-performing subsectors were electric equipment, steel, and banks. Meanwhile, semiconductors, consumer durables, and technology hardware were among the worst-performing subsectors. Southbound Stock Connect volumes were at 1.5X pre-stimulus levels, as Mainland investors bought a net $693 million worth of Hong Kong-listed stocks and ETFs, including the Hong Kong Tracker ETF, which was a large net buy, Tencent, which was a moderate net buy, Xiaomi, Sunac, and SMIC. Meanwhile, ZTE and CNOOC were small net sells.
Shanghai, Shenzhen, and the STAR Board diverged to close +0.51%, -0.37%, and -0.95%, respectively, on volume that increased +19.33% from yesterday, which is 125% of the 1-year average. 2,251 stocks advanced, while 2,624 stocks declined. The value factor and large caps “outperformed” (i.e. fell less than) the growth factor and small caps. The top-performing sectors were Financials, which gained +1.86%, Real Estate, which gained +1.31%, and Communication Services, which gained +0.78%. Meanwhile, the worst-performing sectors were Information Technology, which fell -1.51%, Consumer Discretionary, which fell -0.71%, and Materials, which fell -0.62%. The top-performing subsectors were education, insurance, and diversified financials. Meanwhile, communication equipment, leisure products, and computer hardware were among the worst-performing subsectors. Northbound Stock Connect volumes were above average. CNY and the Asia Dollar Index were lower versus the U.S. dollar. Treasury bonds fell. Copper fell while steel gained.
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Last Night's Performance
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Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.28 versus 7.26 yesterday
- CNY per EUR 7.58 versus 7.58 yesterday
- Yield on 10-Year Government Bond 1.66% versus 1.66% yesterday
- Yield on 10-Year China Development Bank Bond 1.69% versus 1.68% yesterday
- Copper Price -0.46%
- Steel Price +0.69%
