Asian equities saw a mixed performance, with Hong Kong and Singapore outperforming while Mainland China lagged behind. Hong Kong-listed growth and technology stocks surged following a positive day for their US-listed counterparts, with Tencent, Meituan, Alibaba, Bank of China, and Hong Kong Exchanges leading the gains. Catalysts for the market included verbal support from the China Securities Regulatory Commission of Hong Kong as a financial hub, as well as an upgrade of China to overweight by UBS’ emerging markets strategy team, focusing on internet and consumer stocks. Additionally, Goldman Sachs discussed the possibility of a re-rating of Chinese equities following the release of the government’s “Nine Opinions.”
Despite news of the US government considering sanctions on Chinese banks over Russia, the market remained unfazed, with Chinese banks already taking steps to avoid aiding Russia. The passing of a bill including a TikTok ban and the IPO of Sichuan Baicha also had little impact on the market. Hong Kong-listed technology stocks continued to outperform US-listed technology stocks, while Mainland China saw a decline, with foreign investors being net sellers of Mainland stocks. Japanese stocks benefited from the government’s purchase of Japanese equity ETFs and corporate governance reforms aimed at increasing price-to-book ratios.
The release of the “Nine Opinions” by the State Council outlined plans to strengthen supervision and prevent risks in the capital market, including measures to increase dividends and restrict major shareholders from reducing their holdings in companies with low dividend ratios. Total Mainland China equity ETF buying by China’s sovereign wealth fund surged in Q1 2024, raising hopes for a similar upward trajectory as seen in Japanese stocks. In Hong Kong, the Hang Seng and Hang Seng Tech indexes recorded gains, with Communication Services, Consumer Discretionary, and Health Care sectors performing well, while Materials, Industrials, and Energy sectors fell.
Shanghai, Shenzhen, and the STAR Board in Mainland China saw declines, with negative performance across all factors. Consumer Staples and Health Care sectors gained, while Materials, Energy, and Utilities sectors fell. Foreign investors sold a net of – $413 million of Mainland stocks through Northbound Stock Connect, with mixed results for individual stocks. CNY versus USD was slightly lower, while Treasury bonds, copper, and steel prices declined.
A webinar by Quadratic Capital on the normalization of the market is scheduled for the following day, offering insights into the current market trends. The latest article on China Market Connect in March 2024 is available for readers interested in further analysis. Last night’s exchange rates, prices, and yields showed a slight decline in CNY per USD, CNY per EUR, and the yield on 10-Year Government Bond, while copper and steel prices also fell.
