Asian equities had a mixed performance for the week, with China markets outperforming significantly. Tesla received approval for its autonomous driving technology in China, a milestone for the company in its largest market. China released April PMIs, with Manufacturing beating estimates while non-Manufacturing fell slightly below expectations. Yum China reported its highest-ever revenue, though slightly short of analyst expectations.
Asian currencies were strong against the US dollar, with China’s offshore Renminbi appreciating. Hong Kong-listed stocks performed well following strong gains in US-listed China stocks. Travel data showed significant year-over-year increases, suggesting a strong rebound in the Chinese consumer market. Consumer names were mixed, with Yum China gaining while Haidilao fell.
Online real estate company KE Holding and Hong Kong-listed real estate stocks saw gains amid reports of trade-in deals and policy support from the Politburo. Electric vehicle and auto stocks were also higher, with BYD, Li Auto, and XPeng posting gains. The real estate sector was strong, with reports of trade-in deals for homebuyers in Shanghai.
US-listed China stocks had a strong day, leading to questions about the sustainability of the rally. Short covering was a factor, with China technology outperforming US technology and large caps by over +20%. The rally in China stocks has been ongoing for three months, with investors gradually shifting their underweight positions in China. Hedge funds and individual investors are expected to move more quickly than institutional investors in reallocating to China.
The Hang Seng and Hang Seng Tech indexes gained on increased volume, with positive performance in consumer discretionary, real estate, and communication services sectors. Southbound Stock Connect was closed overnight, while Shanghai, Shenzhen, and the STAR Board were also closed. Mainland China’s currency, commodity, and bond markets were closed, with the focus shifting towards the performance of the Chinese market in the coming week.
Overall, the Asian equities market showed mixed performance, with China markets leading the way. Tesla’s approval for autonomous driving technology in China and Yum China’s record revenue were notable developments. The strong performance of Hong Kong-listed stocks and the ongoing rally in US-listed China stocks raised questions about the sustainability of the recent gains. Investors are gradually reallocating to China, with hedge funds and individual investors expected to lead the way. The focus will now be on the performance of the Chinese market in the coming week.
