Asian equities had a mixed performance overnight, with Hong Kong outperforming while Mainland China remained closed for the Labor Day vacation. Hong Kong’s strong rally was led by growth stocks and sectors on higher-than-average volume and good breadth, with advancers outnumbering decliners by 4 to 1. Chinese financial media covered Fed Chair Powell’s speech and recent weakness in US stocks, highlighting the possibility of investors shifting profits from US technology stocks to undervalued Chinese equities.
The Politburo release on Tuesday emphasized support for housing policies, indicating the need to reduce existing housing stock and suggesting upcoming policy measures to stimulate the economy. Chinese cities have been removing home purchase restrictions, signaling a proactive approach to address economic challenges. Hong Kong saw strong performances from heavily traded stocks like Tencent, Meituan, Alibaba, AIA, and Sense Time Group, with growth stocks and internet stocks favored by investors. Electric Vehicle (EV) stocks also saw gains following the release of April sales figures.
Golden Week travel numbers are promising, with significant high-speed rail passengers and the implementation of a subsidy program for the auto trade sector. Despite concerns of overcapacity, the policy has driven positive momentum in the market. Western financial media has highlighted China’s rally, despite healthy gains, indicating potential for further upside due to low investor positioning. The Hang Seng and Hang Seng Tech indexes saw gains on positive volume, with growth and small caps outperforming value and large caps.
In Hong Kong, the Real Estate, Health Care, and Consumer Discretionary sectors were the top performers, while Utilities and Energy saw declines. The pharmaceuticals/biotech, retail, and auto subsectors performed well, while nuclear power, oil, and telecom were among the worst-performing. Southbound Stock Connect was closed, along with the Shanghai, Shenzhen, and STAR Board markets. Exchange rates, bond yields, copper and steel prices were stable, with the CNY per USD closing at its previous rate and the CNY per EUR seeing a slight decrease. The bond yields and commodity prices remained unchanged from the previous day.
