Key News
Asian equities were mixed overnight as Taiwan outperformed the region.
CNY had another strong night versus the US dollar, gaining +0.43% to close at 7.136 following the last two days’ gains of +0.66% and +0.39%. CNY had been sitting at the 7.31 level for weeks as the market now believes the US Fed hiking cycle is over. Despite the currency’s gain, neither Hong Kong nor Mainland China could hold onto morning gains as the indices eased over the trading day to close slightly down.
The real estate sector gained +2.65% in Mainland China and +1.81% in Hong Kong as Bloomberg News reported a “white list” comprised of fifty real estate developers was being made by policymakers to facilitate financing. Real estate stocks have been decimated as many of the companies have been kicked out of MSCI indices, making the sector in both Hong Kong and Mainland China quite small for those benchmarked to MSCI. The real estate companies’ bonds have stabilized over the last three weeks, as evidenced by the US dollar-denominated Asia high-yield bond indices.
Distressed developer Sunac (1918 HK), with just $1.8 billion of stock market cap, jumped +12.02% after announcing its “…restructuring involves the full discharge and release of the company’s existing debt in exchange for the issuance of the New Notes”. A sleeper rally with a tasty yield for the bold. Real estate companies gain could be a pain for banks that would supply the financing. Interesting that the Mainland market was higher, helped by the renminbi’s strength, despite decliners outpacing advancing stocks 2-to-1.
Despite generally positive Q3 financial results, Hong Kong faded across the trading day, though Hong Kong internet held up better than most sectors. Hong Kong’s most heavily traded were Tencent -0.55%, Alibaba HK +2.08%, Meituan +1.38%, Xiaomi -4.94% despite strong Q3 results, JD.com +2.03%, and Kuaishou -2.66% in advance of Q3 financial results posted after the Hong Kong close. A recap of Trip.com, Baidu, and Kuaishou Q3 results are discussed below.
Trip.com (TCOM US, 0061 HK) reported after the US market closed yesterday. Revenue increased 99% year over year (YoY) to RMB 13.7 billion ($1.9 billion) versus expectations of RMB 13.71 billion, adjusted net income increased to RMB 4.9 billion ($673 million) from RMB 1 billion versus expectations of RMB 3.294 billion, and adjusted EPS was RMB 7.26 ($1) versus expectations of RMB 4.91. Revenue was “…a 99% increase from the same period in 2022 primarily due to substantial recovery of the travel market.” Quarter over quarter picked up nicely. The company bought 3.6 million shares worth $120 million in Q3.
Baidu (BIDU US, 9888 HK) reported after the Hong Kong close today. Q3 revenue rose +6% YoY to RMB 34.44 billion ($4.72 billion) versus expectations of RMB 34.20 billion, adjusted net income rose +23% to RMB 7.26 billion ($996 million) versus expectations of RMB 6.27 billion, and adjusted EPS rose +21% to RMB 20.40 ($2.80) versus expectations of RMB 17.61. Baidu’s core search business increased +5% to RMB 26.6 billion ($3.64 billion). The company bought $126 million of shares in Q3, bringing the year-to-date total to $351 million. The company added ex-JD.com CEO and ex-PricewaterhouseCoppers CPA Sandy Ran Xu as independent board members.
Kuaishou (1024 HK) increased revenues +20.8% to RMB 27.94 billion from RMB 23.12 billion versus expectations of RMB 27.70 billion, adjusted net income increased to RMB 3.17 billion from a loss of RMB 672 million versus expectations of RMB 2.66 billion, and adjusted EPS was RMB 0.73 versus expectations of RMB 0.61 (EPS is from Bloomberg data). The company increased market share as the number of daily and monthly users increased while its e-commerce activity picked up, with gross merchandise sold increasing to RMB 780 billion from RMB 588 billion. The company repurchased 11.63 million shares in Q3.
The Hang Seng and Hang Seng Tech fell -0.25% and -0.99% on volume +0.83% from yesterday, which is 99% of the 1-year average. 258 stocks advanced, while 225 declined. Main Board short turnover increased by +16% from yesterday, which is 98% of the 1-year average as 16% of turnover was short turnover (remember Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The value and growth factor both performed well, with the former outpacing the latter while large caps edged out small caps. The top sectors were real estate +1.81%, discretionary +0.81%, and materials +0.64%, while tech -3.12%, utilities -0.87%, and communication -0.56%. The top sub-sectors were media, retailing, and real estate, while technical hardware, semis, and auto were the worst. Southbound Stock Connect volumes were moderate as Mainland investors sold -$312 million of Hong Kong stocks and ETFs, with Xiaomi a small net sell, while Tencent and Meituan were moderate/small net sells.
Shanghai, Shenzhen, and STAR Board fell -0.01%, -0.39%, and -0.87%, respectively, on volume +7.89% from yesterday, which is 114% of the 1-year average. 1,521 stocks advanced, while 3,268 declined. The value factor and large caps outperformed the growth factor and small caps. The top sectors were real estate +2.57%, staples +1.81%, and materials +0.79%, while tech was the only negative sector -0.52%. The top subsectors were real estate, cultural media, and precious metals, while computer hardware, motorcycles, and aerospace/military were the worst. Northbound Stock Connect volumes were moderate as foreign investors bought $19 million of Mainland stocks with Kweichow Moutai, O-Film, and Sungrow small net buys, and BYD a small net sell. CNY and the Asia dollar index had healthy gains again versus the US dollar. Treasury bonds were sold while copper and steel rose.
Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.13 versus 7.17 yesterday
- CNY per EUR 7.81 versus 7.83 yesterday
- Yield on 10-Year Government Bond 2.66% versus 2.66% yesterday
- Yield on 10-Year China Development Bank Bond 2.73% versus 2.73% yesterday
- Copper Price +0.53% overnight
- Steel Price +1.70% overnight
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