China Small-caps Outperform, As Major Tech Stocks Continue Sell-off

Chinese and Hong Kong equity markets continue to face pressure despite Beijing’s efforts to bolster the economy. The MSCI China Index fell as much as 1.2%, with major technology companies like Tencent and Meituan dragging the gauge lower. The surprise rate cut by the PBoC has done little to spur the market higher with investor confidence remaining weak on the lack of any large policy update. The sell-offs have been exacerbated by disappointing earnings reports from global tech giants and ongoing concerns about the economic recovery in China.

• Hong Kong equities are underperforming, property stocks have been the least hit with the Mainland Property Index down just 0.60%, while the HS Property Index is down 0.35%, the HSTech Index has fallen 1.56% while the HSI is down 1.42%.
• China onshore equities are mostly lower today, although small-caps are in positive territory with the CSI 1000 up 0.80% and the CSI 2000 up 1.20% with the wider CSI 300 down 0.60%.
• Macau's gaming sector experienced a notable decline after Las Vegas Sands, reported second-quarter net revenue of $2.76 billion, missing the average analyst estimate of $2.82b. Despite an 8.6% y/y increase, visitation in Macau remains below pre-pandemic levels. The overall recovery continues but investor sentiment is weakened by the missed revenue targets. Additionally, Macau's casino operators are facing challenges with net interest margins, which have been below the critical 1.8% threshold for the past five quarters, hitting a record low of 1.54% at the end of March, as per bbg.
• An increasing number of Chinese companies have canceled their A-share IPO plans due to tighter listing rules and a slowing economy. As of Wednesday 339 companies had terminated their IPO applications. The primary reason for these terminations is more stringent listing criteria. Some firms are now planning to go public through mergers and acquisitions or seeking listings on the Beijing bourse or Hong Kong stock exchange, according to a Shanghai Securities News report.