Asian equities saw mixed performance this week, with China markets underperforming on profit-taking while India outperformed. Several companies, including Trip.com and NetEase, reported better-than-expected Q1 earnings, with PDD’s net income and earnings per share doubling analyst expectations. JP Morgan’s China economist raised the bank’s 2024 GDP target to 5.2% from 4.8%, and CSRC Vice Chairman Fang Xinghai encouraged companies to pay more in dividends in a speech given in London.
Asian equities were mostly in the red as investors grappled with higher rates, leading to a decline in currencies like the Thai Baht, South Korean Won, Philippine Peso, and Japanese Yen. Hong Kong and China markets continued their correction, with growth stocks leading the decline. Alibaba’s convertible bond deal was seen as a reason for selling, but the move was rationalized as beneficial for the company due to the cost-saving benefits. Hong Kong traders remained calm, viewing the market action as a healthy correction after recent gains.
A focus on expanding cross-border e-commerce exports and promoting overseas warehouse construction was announced by Premier Li at a State Council meeting, signaling positive efforts to boost e-commerce in China. The CSRC also introduced rules on large corporate insider sales to reduce selling pressure. The Ministry of Commerce reported an increase in retail sales of consumer goods and online retail sales in April. Nvidia’s decline in chip sales to China was attributed to US government restrictions, similar to Apple’s challenges in the country.
The Chinese aerospace/defense sub-sector was one of the worst performers, with a US defense ETF outperforming a Chinese defense ETF over the last sixteen years. The Hang Seng and Hang Seng Tech indexes fell on higher volume, with a majority of stocks declining. Mainland China markets also fell, with foreign investors selling mainland stocks and a mix of gains and losses in different sub-sectors. CNY and the Asia dollar index were slightly lower against the US dollar, while Treasury bond prices fell and copper prices declined.
Looking ahead, a webinar on the potential drivers of a sustained equity bull market in China is scheduled for May 29th, 2024, and a discussion on the US election’s impact on US-China relations will take place on June 11th, 2024. Additionally, opportunities in Asia’s high yield bond market are discussed in the latest article. Exchange rates, prices, and yields showed minor fluctuations compared to the previous day, with CNY per USD remaining stable, while copper and steel prices saw slight changes.
