Asian equities had a mixed performance following Meta’s earnings miss, with Hong Kong, Mainland China, and India performing well, while Japan, South Korea, and Taiwan underperformed. Australia was closed for ANZAC Day, which commemorates the landing of Australian and New Zealand forces on the Gallipoli Peninsula during World War 1. BofA’s Global Fund Manager Survey reported that Long Magnificent 7 is the most crowded trade, with short China equities coming in second, and long US tech and short China tech causing pain since the Chinese market bottomed on February 2nd.
In Hong Kong, the market opened lower but recovered with choppy trading, with value sectors outperforming growth. The Hang Seng and HS Tech saw gains and losses, respectively, with internet names showing mixed performance. Real estate stocks rallied after news of Shenzhen relaxing home purchase restrictions, while healthcare bounced back. Mainland China saw mixed performance, with Shanghai and Shenzhen posting small gains led by value sectors. Mega/large caps are outperforming small caps year to date, with earnings season in full swing for Mainland stocks.
There is reason to be constructive on Chinese equities, with a potential bottom in Chinese equities occurring on February 2nd following a derivative-induced meltdown in January. Since then, China Tech has outperformed US Tech significantly. While this rally has not received much attention from Western financial media, the re-rating of China may occur with Asian investors taking profits from high-valuation US Tech, Indian, and Japanese stocks and reinvesting in cheap Chinese stocks.
The Hang Seng and Hang Seng Tech saw diverging performances, with volume at 123% of the 1-year average. Main Board short turnover fell, and the value factor outperformed the growth factor. The top sectors were real estate, healthcare, and materials, while communication, staples, and discretionary sectors declined. Southbound Stock Connect volumes were moderate to high, with Mainland investors buying Hong Kong stocks and ETFs. Shanghai, Shenzhen, and STAR Board were mixed, with the value factor and large caps outperforming growth and small caps.
Last night’s exchange rates, prices, and yields showed slight fluctuations, with CNY per USD at 7.24, CNY per EUR at 7.77, yield on 10-Year Government Bond at 2.26%, and yield on 10-Year China Development Bank Bond at 2.34%. Copper and steel prices also saw slight gains. Overall, the market continues to show mixed performances as investors navigate various factors impacting Asian equities.
