Asian equities had a mixed performance following Meta’s earnings miss, with Hong Kong, Mainland China, and India outperforming, while Japan, South Korea, and Taiwan underperformed. Australia was closed for ANZAC Day. The BofA Global Fund Manager Survey reports that the Long Magnificent 7 is the most crowded trade, with short China equities coming in second. As of late, long US tech and short China tech have been causing pain since the Chinese market bottomed on February 2nd.
In Hong Kong, the market opened lower but steadily moved higher in choppy trading, with value sectors outpacing growth. The Hang Seng rose by 0.54% and HS Tech decreased by 0.49%. Notable movers included Tencent, Meituan, Hong Kong Exchanges, Alibaba, and AIA. Real estate was a top sector following news of Shenzhen relaxing home purchase restrictions, while healthcare bounced back. Mainland investors bought $240 million of Hong Kong stocks and ETFs via Southbound Stock Connect.
Mainland China saw mixed results with Shanghai and Shenzhen posting small gains, led by value sectors despite opening lower. Earnings season is in full swing for Mainland stocks, with positive results reported by Great Wall Motors. Treasury and corporate bonds continue to rally in China. TAL Education reported Q4 results ahead of the US market. The Beijing Auto Show kicked off with new car announcements.
There is a rationale for being constructive on Chinese equities as the bottom may have occurred on February 2nd. Since then, China Tech has outperformed US Tech significantly. Southbound Stock Connect has shown strong buying year to date. The next step may involve Asian investors taking profits from high-valuation US Tech, Indian, and Japanese stocks and reinvesting in cheaper Chinese stocks. This process may take time to unfold, but hedge funds and technical analysts could make quick pivots.
In the Hang Seng and Hang Seng Tech, volumes were higher than usual, with the value factor outperforming the growth factor. Real estate, healthcare, and materials were top sectors, while communication, staples, and discretionary were down. Southbound Stock Connect volumes were moderate/high. In Shanghai, Shenzhen, and STAR Board, volume was below average, with the value factor and large caps outperforming. Financials, real estate, and energy were top sectors. Northbound Stock Connect volumes were moderate, with foreign investors buying Mainland stocks. CNY and the Asia dollar index were slightly down against the USD. Treasury bonds rallied, and copper and steel prices increased.
Exchange rates, prices, and yields saw slight changes, with the CNY per USD and CNY per EUR rates fluctuating. The yield on the 10-Year Government Bond decreased, while the yield on the 10-Year China Development Bank Bond also saw a slight decrease. Copper and steel prices increased.
