Key News
Asian equities were mostly lower overnight as Pakistan and Thailand outperformed and Hong Kong and Indonesia underperformed.
China’s markets took a breather last night after a strong run. It was a relatively slow news night without a key catalyst to bring markets lower. Mainland markets opened flat, but followed their Hong Kong counterparts south later in the session. Meanwhile, Hong Kong started to regain some ground mid-session, but ended near worst levels.
Profit taking may have been a culprit here as the latest popular trades were all lower, including technology, consumer discretionary, and the electric vehicle ecosystem. Also, Mainland investors were heavy net sellers of Hong Kong-listed stocks and ETFs, to the tune of over $1 billion.
Auto names fell broadly on concerns of competition from BYD’s new in-house assisted and smart driving features that it intends to roll out. The giant is China’s largest carmaker and, with the right software, could be a serious threat to autonomous-only competitors such as Baidu.
However, there were some positives. Shipping names were higher on data showing that container volume at Shanghai’s port reached a new record in January. Premier Li spoke on CCTV about increasing foreign investment and raising wages to promote domestic consumption. Meanwhile, DeepSeek was reported to be seeking to build a team to work on highly theoretical “Artificial General Intelligence.”
China’s CPI jump to 0.5% in January from 0.1% in December and negative inflation, or deflation, in recent periods is a positive sign for the consumer. This was the fastest-paced inflation reading in five months. Healthy Chinese (Lunar) New Year spending was the likely culprit in raising China’s inflation rate in January. Meanwhile, trade-in consumption subsidy policies continue to trickle down into the real economy. According to data from the Ministry of Commerce, more than 20 million applications for electronics trade-ins have been submitted, referencing purchases of over 25 million units.
Illumina, a U.S.-based genomic sequencing company with significant China revenues of 10% in 2022, was added to China’s retaliatory “Unreliable Entities” list. The company said it is engaging constructively with authorities and intends to adhere to all applicable laws and regulations in China’s jurisdiction.
Health care stocks have been on the rise lately. The end of a long-running antigraft campaign in hospital procurement was a likely catalyst. Meanwhile, the CEO of contract research organization Wuxi Biologics, which would have been targeted by the botched U.S. Biosecure Act, said that new contracts are at an all-time high during JP Morgan’s Annual Conference last month.
The Hang Seng and Hang Seng Tech indexes both closed lower by -1.06% and -2.73%, respectively, on volume that declined by -9% from Monday. Mainland investors sold a net -$1.14 billion worth of Hong Kong-listed stocks and ETFs overnight via Southbound Stock Connect. The top-performing sectors were Energy, which gained +0.15%, Materials, which fell -0.25%, and Financials, which fell -0.32%. Meanwhile, the worst-performing sectors were Consumer Staples, which fell -2.90%, Communication Services, which fell -2.23%, and Health Care, which fell -2.11%.
Shanghai, Shenzhen, and the STAR Board all closed lower by -0.12%, -0.49%, and -1.19%, respectively. The top-performing sectors were Materials, which gained +0.34%, Energy, which gained +0.15%, and Financials, which gained +0.13%. Meanwhile, the worst-performing sectors were Real Estate, which fell -1.64%, Industrials, which fell -1.04%, and Health Care, which fell -0.98.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.31 versus 7.31 yesterday
- CNY per EUR 7.55 versus 7.53 yesterday
- Yield on 10-Year Government Bond 1.63% versus 1.63% yesterday
- Yield on 10-Year China Development Bank Bond 1.62% versus 1.63% yesterday
- Copper Price -0.84%
- Steel Price -0.91%
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