Asian equities had a mixed performance with light volumes ahead of the US CPI print and Fed decision. The US dollar weakened against most Asian currencies, except the Yen, as the US 10-Year Treasury closed below 4.4% overnight. Hong Kong underperformed due to weak breadth and concerns over potential restrictions on Chinese companies’ access to AI chips. US semiconductor stocks reacted to government action, highlighting their revenue exposure to China that could be impacted.
Wuxi Biologics and WuXi AppTec saw gains in Hong Kong, as the Biosecure Act did not include restrictions on their services. The US Congress’s role in judging companies, along with the lack of media coverage on the issue, raised concerns. The EU increased tariffs on Chinese electric vehicles, affecting companies like BYD, Geely, and SAIC. This move was driven by domestic employment concerns in the auto industry, while tensions among European countries influenced the decision.
Vehicle stocks, including BYD, Li Auto, Geely Auto, and XPeng, underperformed on tepid inflation data from China, indicating slow domestic consumption recovery. Mainland investors showed interest in Hong Kong stocks, with a healthy $879 million investment bringing the year-to-date total to $41.96 billion. Hong Kong’s most traded stocks included Tencent, Meituan, CNOOC, Wuxi Biologics, and Alibaba. Meanwhile, Shanghai and Shenzhen indices performed better than Hong Kong’s, with Mainland indices sitting at recent support levels.
The Hang Seng and Hang Seng Tech indices fell on moderate volume, with declines in short turnover. Large cap and value stocks were more resilient than small cap and growth stocks, with healthcare, energy, and utilities performing well. In contrast, real estate, consumer discretionary, and staples sectors saw declines. Southbound Stock Connect volumes were moderate, with mainland investors buying HK stocks and ETFs. Shanghai, Shenzhen, and STAR board indices had a mixed performance, with energy, utilities, and communication services sectors showing strength.
Last night’s exchange rates showed a slight decline in CNY against the USD, while yields on government and China Development Bank bonds also edged lower. Copper and steel prices were down slightly. Investors looking for opportunities in Asia’s high yield bond market can read the latest article discussing the potential for high yields in the region. Overall, the markets in Asia reacted to global economic factors, government actions, and domestic consumption data, with investors closely watching the US CPI print and Fed decision for further guidance on market direction.
