Chinese markets drop overnight, Didi announces cybersecurity review, week in review

Weekly review

  • Mainland China and Hong Kong both saw growth, including internet and healthcare stocks outperformed the value on Monday.
  • So far this year, foreign investors have bought $ 34.325 billion in mainland stocks, bringing the total to $ 65.33 billion since 12/31/2019.
  • Didi, China’s largest running app, first listed its shares on the New York Stock Exchange (NYSE) on Wednesday, priced at $ 14 apiece, the top of its IPO price range in stock Exchange.
  • Chinese healthcare stocks outperformed Thursday as policymakers expressed the need for more support for the sector, including traditional Chinese medicine (TCM).

New Keys

Asian stocks were broadly higher, although Hong Kong returned from yesterday’s vacation in a bad mood and the mainland took a hit. When brokers use terms like Tragic Friday and Black Friday, it is never a good sign as there were several things going on.

Alibaba Holds Conference Calls With Analysts Covering The Stock Before Their Aug. 20e publication of profits. The company appears to be saying it’s going to have a decent quarter with over 30% revenue growth, but not a “bright off” quarter. Considering the low price of the stock, this is not necessarily negative.

President Xi’s speech, which we mentioned yesterday, was aimed at a domestic audience, but was seen as unnecessary for US-China relations as foreign investors sold $ 1.329 billion in mainland shares through Northbound. Stock Connect.

The Chinese Cyberspace Administration has announced that it will be implementing a cybersecurity review of Didi Travel (Chuxing means to travel in Chinese). During the investigation, Didi Travel will not be allowed to register new users although it can still function. Ironically, the regulator today released a report titled “Digital China Development Report 2020”, which highlights the adoption and integration of the Internet into the economy, with a focus on rural users. Rural online retailing has grown from RMB 0.9 trillion in 2016 to RMB 1.8 trillion in 2020.

The PBOC drained a small amount of liquidity from the financial system today, which isn’t a big deal, but probably hasn’t helped sentiment. The Financial Times ran a very unflattering article about Jack Ma and Joe Tsai pledging Alibaba shares as collateral for loans from five banks. The move isn’t that unusual, although the level of detail in the article makes it clear that someone involved spilled the beans.

In Hong Kong, declines topped 4-1 advances in an indication of a broad sell-off. The top 50 mainland stocks fell -3.59% overnight, although there were 1,481 advancing stocks versus 2,407 declining stocks. In both markets, growth stocks fell more than value stocks. Mainland investors sold Tencent through Southbound Connect.

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H-Share update

The Hang Seng and Hang Seng TECH indices were in the green for a few seconds at the opening before getting off the train and going down -1.8% and -3.22% respectively. The volume increased by + 25% compared to Wednesday, or 107% of the average over one year. The 209 Chinese companies listed in Hong Kong and in the MSCI China All Shares index are down -2.36%, led by discretionary -3.82%, technology -3.59%, health – 2.35%, industry -1.74%, communication -1.72% and commodities – 1.54%. The most traded stocks in Hong Kong by value were Tencent, which fell -1.63%, Meituan, which fell -5.12%, Alibaba HK, which fell -3.64%, Xiaomi , which fell -2.96%, Geely Auto, which fell -4.7%, Wuxi Biologics down -1.97%, Ping An Insurance down -1.51%, BYD down of -4.74%, Hong Kong Exchanges down -1.51% and AIA down -0.73%. Southbound Stock Connect volumes were high as mainland investors sold Hong Kong shares for $ 906 million, with Southbound trading accounting for 13.9% of Hong Kong turnover.

A-Share Update

Shanghai, Shenzhen and the STAR Board also fell -1.95%, -1.86% and -2.64%, respectively, as volume fell -1% from yesterday, or 107% from the one-year average. The spread was not as bad as it was with 1,481 stocks up and 2,407 stocks down. The mainland’s 532 shares of the MSCI China All Shares index were down -2.84%, led by healthcare -4.8%, commodities -3.67%, financials – 2.95%, discretionary goods -2.84%, technology -2.75%, real estate -2.55%, utilities – 2.31%, communication -1.82%, industrial -1 , 77% and materials -1.01%. The mainland’s most traded shares by volume were broker East Money, which fell -4.62%, Kweichow Moutai, which fell -4.37%, Longi Green Energy, which fell -2 , 89%, BYD, which gained +1.03%, Tianqi Lithium, which gained + 4.39%, CATL which fell by -1.87%, COSCO Shipping which gained + 1.62%, Tongwei Solar which fell by -2.85%, Ping An Insurance which fell by -3.8% and China Three Gorges Renewables which fell by 4.8%. Northbound Stock Connect volumes were high as foreign investors sold $ 1.33 billion net of mainland stocks, with northbound trading accounting for 6.9% of mainland revenue. Bonds rallied, the CNY lost ground, and copper prices fell overnight.

Last night’s exchange rates, prices and yields

  • CNY / USD 6.45 vs. 6.47 yesterday
  • CNY / EUR 7.66 vs. 7.68 yesterday
  • Yield on 5-year government bonds 2.95% vs. 2.95% yesterday
  • 10-year government bond yield 3.08% vs. 3.09% yesterday
  • 10-year Development Bank of China bond yield 3.48% vs. 3.50% yesterday
  • Copper price -0.55%

About KraneShares

Krane Funds Advisors, LLC is the investment manager of the KraneShares ETFs. Our range of China-focused ETFs provide investors with solutions to understand the importance of China as an essential part of a well-designed investment portfolio. We strive to offer innovative, first to market strategies, which have been developed on the basis of our strong partnerships and our in-depth knowledge of investing. We help investors stay on top of global market trends and aim to provide meaningful diversification. Krane Funds Advisors, LLC is majority owned by China International Capital Corporation (CICC).