Asian equities had a strong week, with markets in Hong Kong, Indonesia, and Taiwan leading the gains, while Mainland China markets remained flat. Internet earnings were in focus, with Tencent and JD.com beating estimates, while Alibaba and Baidu reported mixed results. Real estate also took the spotlight as the government announced a plan to stabilize prices by purchasing unsold apartments, leading to gains in developer stocks. Inflation reports also impacted markets, with China reporting higher-than-expected growth in consumer prices, signaling a positive outlook for the economy, and the US’ softer-than-expected CPI print contributing to a risk-on atmosphere globally.
The People’s Bank of China announced a three-pronged stimulus package to support the real estate market, including providing loans to local governments to buy unsold apartments, lowering minimum down payments for mortgages, and reducing mortgage rates for first-time home buyers. This move was seen as a significant policy shift aimed at addressing the various impacts of the real estate sector on China’s economy. While foreign investor confidence in China remains low, Asian investors recognize the influence of government policies and the need to adapt their investment strategies accordingly.
In Mainland China and Hong Kong, real estate emerged as the top-performing sector, with developer stocks seeing significant gains. Trading volumes were high, with Tencent, Alibaba, and China Construction Bank leading the way in terms of market activity. The Hang Seng index closed above 19,500, with industrial production performing better than expected but retail sales coming in lower. The market response to the PBOC’s stimulus measures reflected a positive sentiment towards government intervention and support for the real estate sector in China.
In Hong Kong, trading volumes were lower than the previous day but still above the 1-year average, with value and large caps outperforming. The top-performing sectors were Real Estate, Consumer Discretionary, and Financials, while Health Care, Technology, and Consumer Staples saw declines. Southbound Stock Connect volumes were high, with Mainland investors buying a significant amount of Hong Kong-listed stocks and ETFs. In Mainland China, the Shanghai, Shenzhen, and STAR Board indices gained, with real estate, financials, and materials sectors showing strength.
Looking ahead, a webinar on the potential drivers of a sustained equity bull market in China is scheduled for May 29th, while another webinar on the US-China election and its impact on relations is set for June 11th. The recent stock market rally in China is seen as fundamentally different, with reasons explained in a recent article. Exchange rates remained stable, government bond yields fluctuated slightly, and commodity prices such as copper and steel saw gains. Overall, the week was marked by positive developments in Asian markets, driven by strong performances in real estate and internet earnings.
