Kung Hei Fat Choi! Asia had a good day as traders in Hong Kong returned from vacation in high spirits. The Hang Seng index gained +3.24%, driven by internet companies. Volumes were +75% higher than Monday’s half day, 72% of the 1-year average, while advances outpaced declines by almost 8 to 1. With China still on vacation, many investors took a day off.
Dual-listed Hong Kong stocks caught up to their US counterparts after a week of positive performance. Remember that last Friday Cyberspace Administration organized an event attended by National Development and Reform Commission (NDRC), State Administration for Market Regulation (SAMR) and 27 companies Internet. The commission is seen by some as a signal that China’s internet regulatory cycle may be coming to an end. The event’s press release portrays the internet space as critical to China’s economy.
Hong Kong’s most traded stocks were Tencent, which gained +1.48%, Alibaba HK, which gained +5.61%, HSBC, which gained +4.99%, AIA, which gained +5 .39%, Meituan, which gained +3.28%, and JD .com HK, which gained +1.86%. It’s worth pointing out that neither HSBC nor AIA are part of MSCI China, but rather MSCI Hong Kong. The former is part of MSCI Emerging Markets while the latter is part of MSCI’s Developed Markets Index Suite. All sectors were in the green today in a strong move.
Mainland markets, including Northbound and Southbound Stock Connect, will reopen on Monday.
The House will likely pass the America Competes Bill, which includes a provision to shorten the disbarment window from three years to two years. The House bill and the Senate version do not match, so legislative bodies will have to reconcile the two in committee meetings. In theory, the shortened window language could be dropped. Last week, Reuters reported that a “surprise” solution to the Holding Foreign Companies Accountable Act (HFCAA) could be announced in June or sooner following a meeting between CSRC, China’s financial regulator, and global banks and asset managers operating in China. Institutional investors, ourselves included, will continue to migrate from US ADRs to Hong Kong share classes. Speaking to the Hong Kong Stock Exchange last week, they expect a significant number of re-listings to occur in 2022, which will accelerate the migration of US ADRs to Hong Kong share classes.
Electric vehicles (EVs) had a good day in Hong Kong as Xpeng HK jumped +11.21% after announcing in January that it had delivered 12,922 EVs, which beat Nio’s 9,652 and Nio’s 12,268. Li Auto. BYD HK gained +7.05% as January sales were 95,422 units from 42,401 in January 2021. The EV ecosystem had been weak recently on fears that China’s EV subsidy cuts could reduce the buyers. Apparently not!
China’s fourth-quarter internet earnings season is expected to begin the following week.
The Wall Street Journal reported that the current administration will go after TikTok despite the denial of the previous administration’s attempt in court. TikTok’s servers are already in the US, so I don’t know what the argument will be. I don’t fit TikTok’s demographics, but I don’t think such an effort will help get younger people voting in November.
Events to come
We are hosting two webinars over the next two weeks. join us for State of the Union Carbon Market with KraneShares and Climate Finance Partners Thursday, February 10 at 11:00 a.m. EST and Cast Your “A” Game – KraneShares and MSCI Discuss the Future of Mainland China Investing Tuesday, February 15 at 10:00 a.m. EST.
Last night’s exchange rates, prices and yields
Bond, commodity and currency markets in mainland China were shut down overnight.