Typhoon Kompasu Closes Hong Kong While Mainland Growth Stocks Rebound
Asian equities were largely higher with Japan off and Hong Kong unexpectedly closed due to Typhoon Kompasu hitting the island. Tomorrow is a market holiday in Hong Kong. Hong Kong’s market close reminds me of Typhoon Hatu hitting Hong Kong back in 2017. Hundreds of flights were canceled and diverted due to the 70mph winds but one plane, a KLM 747, actually landed during the typhoon, giving a new meaning to the term Flying Dutchman!
Mainland equities opened lower but grinded higher to close in positive territory. Growth stocks ended higher while energy and utilities were lower. Mainland volumes were a touch weak as we would prefer to see a strong day like today on strong volumes. Northbound Stock Connect, which accounts for approximately 5% of Mainland turnover, was closed due to Hong Kong’s closure.
September export/import data diverged with exports beating expectations while imports were a touch light. The Sunday CBS News had a good segment on the demand shock created by government stimulus-fueled buying, which outstripped supply and caused mass ship unloading issues. Commodity imports decreased in September, likely driven by sky-high commodity prices.
There was some chatter that a bank reserve requirement ratio (RRR) cut could be coming this week. After the close, September new loans and aggregate financing came in a touch light, which would support such a move. There is also talk about how the PBOC will fight inflation driven by high commodity prices. Chinese Treasury bonds have weakened on inflation worries.
While utility and energy stocks were off with a particular emphasis on coal stocks, clean technology was a very strong sector today as lithium, wind, battery, electric vehicles (EVs), and rare metals outperformed. Discretionary and staples were both strong as liquor stocks outperformed, which also happened to index heavyweights. Domestic travel during the Golden Week holiday was off due to Delta restrictions, though consumption likely saw a pick-up based on data coming out. CNY had a strong day versus the US dollar, gaining +0.34% to 6.42.
Hong Kong and Southbound Stock Connect was closed today. Utility companies have been weak as they will be capped on how much of price increases they can pass along.
Shanghai, Shenzhen, and the STAR Board gained +0.42%, +1.29% and +1.92% as volume declined -10.78% which is 91% of the 1-year average. The 542 mainland stocks within the MSCI China All Shares gained +1.73% led by staples +3.33%, discretionary +3.05%, healthcare +2.78%, tech +2.56%, industrials +1.79% and materials +1.52% while energy -4.35% and utilities -2.77%. The mainland’s most heavily traded were Kweichow Moutai +3.15%, BYD +5.52%, Longi Green Energy +6.47%, Wuliangye Yibin +4.43%, Tianqi Lithium +3.64%, Luzhou Laojiao C +5.83%, China Northern Rare Earth +6.28%, Sungrow Power Supply +5.6%, Ganfeng Lithium +6.06% and Tongwei +4.12%. Northbound Stock Connect was closed today.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.43 versus 6.45 yesterday
- CNY/EUR 7.44 versus 7.45 yesterday
- Yield on 10-Year Government Bond 2.96% versus 2.97% yesterday
- Yield on 10-Year China Development Bank Bond 3.26% versus 3.27% yesterday
- Copper Price +0.57% today