Earnings, U.S. Lead & Offshore Selling Weigh Into The Weekend

Thursday’s negative lead from the U.S. weighed on Chinese equity benchmarks ahead of the weekend.

• The CSI 300 shed 0.7%, while HK’s Hang Seng lost 1.8%.
• More granularly, disappointing earnings in the chipmaker sphere, most notably from SMIC, weighed on that sector, with a similar dynamic observed in Macau casino names.
• From a more top-line perspective, domestic brokerages seem to be relatively bullish re: the Chinese economic & equity outlook for ’24, but that did little for broader sentiment.
• Comments from a PBoC advisor, talking up the country’s ability to meet its GDP growth target in ‘23, along with space for a higher budget deficit in ’24, garnered attention, although the advisor cautioned that domestic demand remains under pressure.
• We also heard from PBoC Governor Pan, who stressed that China’s central government is paying close attention to local government debt risks in some provinces, while broader property risks remain manageable. This comes against the backdrop of heightened worry re: China Vanke.
• Elsewhere, some Chinese cities abolished maximum price limits for land auctions.
• Benchmark property sub-indices on the mainland and in HK still struggled, even with Country Garden up 4% as the embattled developer apparently plans to generate an offshore debt restructuring plan by year end, per RTRS sources.
• The National Administration of Financial Regulation held “an important meeting” in Beijing with the heads of its local branches on Thursday afternoon, per local reports. No further details were given.
• We also flag reports noting that this week has seen the largest round of onshore bank NCD issuance on record, with liquidity worries remaining evident.
• Flow-wise, the HK-China Stock Connect scheme links saw a net CNY4.9bn of outflows. That represented the fastest clip of selling seen month-to-date and will have provided some pressure.