China Import/Export Release
Falling commodity prices had a significant impact on the decline in the value of China’s imports. Meanwhile, falling global demand for physical goods impacted the value of China’s exports. China is the world’s factory so its trade data reflects as much about the global economy as it does about China’s own. We can expect exports to decline or remain flat as developed countries’ consumers continue to spend money on travel and experiences rather than manufactured goods. Furthermore, the potential for an actual recession may only exacerbate that decline. Most of China’s imports are commodity-based, rather than finished goods, so commodity prices have an outsized impact.
Key News
Asian equities were mostly lower overnight on higher volumes in a broadly risk-off atmosphere following China’s release of lower-than-expected trade figures for July.
While China deflation fears are being aired in US media, we do not believe this is too much of a concern. China’s economic policy has been relatively conservative over the past year, so the central bank has a great deal of dry powder to use. This is different from Japan, which experienced deflation, until recently, despite a decidedly accommodative monetary stance.
Mainland investors bought a net $933 million worth of Hong Kong stocks on the weakness overnight while foreign investors sold a net -$869 million worth of Mainland stocks. This disparity highlights the fickleness of foreign investors while Mainland investors keep buying. What do they know that foreign investors don’t? Perhaps they know that their government is advising them to buy stocks. Perhaps they know that many Hong Kong names, especially in the internet and consumer sectors, have little to do with China’s international trade and can be snapped up at a discount at times like this.
Battery maker CATL released its Q2 2023 financial results. The company’s results were in-line with market expectations for the world’s largest battery company. In the release, the company highlighted its technological advantages as helping power its strong results.
According to a commentary in the China Securities Journal, public stock funds exceeded bank savings products in terms of assets for the first time ever.
The Hang Seng and Hang Seng Tech indexes both closed lower by -1.81% and -2.78%, respectively, on volume that surged +32% from yesterday. Short sale volume also surged by +63% from yesterday. Real estate developers declined again overnight in Hong Kong while energy was a particular bright spot.
Shanghai, Shenzhen, and the STAR Board all closed lower by -0.25%, -0.33%, and -0.35%, respectively, on volume that decreased -11%. CNY fell versus the US dollar but gained versus the Euro. Steel and copper were both lower. Within Mainland China’s markets, gold miners and pharmaceuticals were notable outperformers. Meanwhile, auto and real estate companies were under pressure as developers continued their slide from yesterday.
Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.22 versus 7.19 yesterday
- CNY per EUR 7.90 versus 7.92 yesterday
- Yield on 1-Day Government Bond 1.35% versus 1.40% yesterday
- Yield on 10-Year Government Bond 2.65% versus 2.65% yesterday
- Yield on 10-Year China Development Bank Bond 2.75% versus 2.75% yesterday
- Copper Price -1.31% overnight
- Steel Price -1.08% overnight
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