The week in review for Asian equity markets saw the Hang Seng and Shanghai Composite enter positive territory year-to-date, with most Asian indexes higher except for Indonesia and Australia. The CSI Overseas China Internet Index has outperformed the Nasdaq Composite by nearly 20% since February, leading to UBS upgrading China stocks to overweight. The Loan Prime Rate, which helps set mortgage rates, was left unchanged as expected. Asian equities were mixed overnight, with Hong Kong, Mainland China, Taiwan, and South Korea outperforming, while Australia, Indonesia, and India posted losses.
Multiple catalysts contributed to China’s rally, including the Ministry of Commerce’s issuance of Implementation Rules for Subsidies for Trade-in-Listed Vehicles, providing a subsidy for trading in old cars for electric vehicles. This led to gains for companies like BYD, Li Auto, Xpeng, and NIO. Real estate was the top-performing sector in Mainland China and Hong Kong following positive sentiment from UBS’ John Lam and successful land auctions in Chengdu, Nanjing, and WuXi. Financials underperformed overall, but brokers saw gains on potential sector strengthening talks. President Xi’s meeting with US Secretary of State Blinken also had a positive impact.
The Hang Seng Index closed above its 200-day moving average, reaching its highest level since August 2023. Hong Kong’s most heavily traded stocks included Tencent, Meituan, Alibaba, AIA, and Sense Time. Mainland China also had a strong day, with the Shanghai Composite breaking through its 200-day moving average. This includes significant buying via Northbound Stock Connect, indicating strong support from the National Team. Investors are beginning to unwind their underweight positions in China, with Chinese investors buying China and the National Team purchasing Mainland stocks. Southbound Stock Connect saw moderate activity, with Mainland investors buying Hong Kong-listed stocks and ETFs.
The Hang Seng and Hang Seng Tech indexes gained, with growth stocks and small caps outpacing value stocks and large caps. The top-performing sectors were Real Estate, Technology, and Consumer Discretionary, while Utilities fell slightly. Southbound Stock Connect volumes were moderate to high, with Mainland investors buying Hong Kong-listed stocks and ETFs. In Shanghai, Shenzhen, and the STAR Board, gains were seen in Real Estate, Technology, and Consumer Discretionary sectors. Northbound Stock Connect volumes were moderate, with foreign investors buying a significant amount of Mainland stocks.
Overall, the week in review showcased positive momentum in Asian equity markets, with strong performances in real estate and technology sectors. The National Team and foreign investors are showing increased interest in Mainland and Hong Kong-listed stocks, indicating a shift in investor sentiment towards China. The Hang Seng and the Shanghai Composite reaching positive territory year-to-date signifies growing confidence in the market, with catalysts like government subsidies for electric vehicles driving gains in certain sectors. The week ahead will likely see continued focus on Chinese stocks as investors reevaluate their positions.
