Asian equities experienced mixed performance overnight, with Hong Kong witnessing profit-taking following a strong move in growth and internet stocks. The market had previously reacted positively to news of capital market reforms and purchases of Mainland China-listed ETFs with Hong Kong stocks by the National Team. However, today’s dip in stocks like Bilibili suggested that recent policy announcements may have underwhelmed investors. Despite this, semis and high dividend plays had a strong showing, while healthcare stocks lagged. Mainland Chinese investors continued to show interest in Hong Kong stocks, with significant net buying reported.
In China, real estate underperformed as investors reacted negatively to the People’s Bank of China’s decision to keep loan prime rates unchanged. This move was met with disappointment, leading to a decline in real estate stocks. While the PBOC Governor hinted at the possibility of bond buying/selling in the secondary market to manage monetary policy, there are doubts regarding the implications of this move. The RMB and the Asia dollar index both fell slightly against the US dollar, with speculation that US interest rates may remain higher for an extended period, indicating potential weakness for the RMB. Foreign investors have been net sellers in the Chinese market for nine consecutive days, with concerns about the National Team’s absence in ETFs.
In Hong Kong, both the Hang Seng and Hang Seng Tech indices saw a decline in performance, with lower trading volumes compared to the previous day. Large caps and value stocks fared better than small caps and growth stocks, with sectors like energy and utilities outperforming while healthcare and real estate stocks struggled. Southbound Stock Connect volumes were moderate, with Mainland investors continuing to show interest in Hong Kong stocks and ETFs. Meanwhile, in China, the Shanghai, Shenzhen, and STAR Board indices had a mixed performance, with large caps and value stocks outperforming small caps and growth stocks. The top sectors were energy and utilities, while real estate and communication stocks faced selling pressure.
The overall outlook for Asian equities remains uncertain, with market performance influenced by a combination of domestic policies, global economic factors, and investor sentiment. The news of China’s sovereign wealth funds buying certain stocks may also impact market dynamics in the coming days. In terms of currency and bond markets, the CNY saw a slight decline against the USD, while yields on government and China Development Bank bonds remained stable. Prices of copper and steel experienced mixed movements, reflecting the ongoing volatility in commodity markets. Overall, investors are advised to closely monitor market trends and be prepared for potential fluctuations in the days ahead.
