Hong Kong Internet, Biden-Xi Virtual Summit and NetEase Q3 Drive Rally

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Asian stocks had a mixed night on light volumes as Hong Kong outperformed, led by internet stocks. The three most traded stocks in Hong Kong were Tencent, which gained + 2.18%, Meituan, which gained + 2.69%, and Alibaba HK, which gained + 2.29%, leading to the Hang Seng + 1.27% while the Hang Seng Tech index gained + 1.68%. Hong Kong‘s healthcare and real estate sectors gained + 2.88% and + 2.34% respectively, followed by communications services, which gained + 2.19%, and consumer discretionary, which gained + 2.17%.

The virtual Biden-Xi summit went fairly well and continued into overtime, paving the way for continued dialogue going forward. This should help ease the surplus in US-Chinese political relations over Hong Kong and Chinese stocks listed in the US.

We also saw the recovery of NetEase in Hong Kong to + 3.98% ahead of the third quarter financial results, which were released after the Hong Kong close. The results were strong as revenue grew + 18.9% year-on-year (YoY) to RMB 22.2 billion ($ 3.4 billion) from analysts’ estimate of RMB 21.244B, led by online gaming revenues, which climbed + 14.7% year-on-year to RMB 15.9B. ($ 2.5 billion). There have been discussions that new online gaming approvals could be relaxed, yet another sign of the end of the regulatory cycle.

We also had an editorial in the People’s Daily titled “Providing more financial support for the development of the digital economy” which spoke about the importance of the digital economy for the new economy.

One company that thinks its shares are too cheap is Razer (HK 1,337), a Hong Kong-listed online gaming equipment and software maker, which announced it would go private for HKD 4 for today’s close of 2.82 HKD. It was somewhat surprising that we saw a net sale of Tencent by mainland investors through Southbound Stock Connect, although Meituan was a net buy.

Hong Kong volumes were + 10.49% from yesterday, but only 77% of the year-over-year average. Mainland markets gave up their morning gains as stocks eased towards the close with Shanghai down -0.33%, Shenzhen down -0.51% and the STAR Board down -0.79% . Healthcare and commodities had a good day, gaining + 2.7% and + 1.92% respectively, with the latter’s performance being led by spirits stocks. Value stocks outperformed growth sectors as the cleantech ecosystem was weak on Elon Musk’s continued Tesla sales. Military / defense actions were weak due to Biden’s pledge not to support Taiwanese independence. Continental volumes were down -3.43% from yesterday, or 110% of the year-on-year average. Foreign investors today bought $ 657 million in mainland stocks through Northbound Stock Connect, as northbound trading accounted for 4.7% of the continent’s revenue. The CNY broke as copper was off and bonds rallied.

Sunday’s 60 Minutes had a good segment on supply chain issues driven by US West Coast ports and structural issues in the trucking industry. It’s a big change in the narrative that the problem was an Asia / China problem. It’s good to see that it took a while for the truth to come out. However, the demand shock created by the government’s stimulus measures has not been examined.

Singapore-based e-commerce company Sea (SE US) reported strong financial results ahead of the US market opening. Google, Singapore sovereign wealth fund Temasek, and consultancy firm Bain & Company collaborated on the Southeast Asian Internet Economy (SEA) report. This year’s report titled The Roaring Twenties: The Digital Decade SEA is full of nuggets, including that SEA has 589 million people who will have spent $ 170 billion on e-commerce in 2021, but that will grow to $ 1 trillion by 2030. The pandemic has been a clear catalyst for adoption Internet and electronic commerce. saw 80 million new users in 2020 and 2021.

Last night’s exchange rates, prices and yields

  • CNY / USD 6.39 vs. 6.38 yesterday
  • CNY / EUR 7.26 vs. 7.31 yesterday
  • 10-year government bond yield 2.92% vs. 2.93% yesterday
  • 10-year Development Bank of China bond yield 3.18% vs. 3.19% yesterday
  • Copper price -0.17% overnight
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