HK & China Equities Edge Higher, Markets Awaits Property Results

Hong Kong and China equities are higher today, markets will likely be rangebound as we await more results from banks and probably the most anticipated results from property names including China Vanke and Country Garden which are due out later today. Some of China's largest banks have reported an increase in bad loans due to the prolonged property downturn. Elsewhere President Xi met with US CEOs where he pitched China as a good investment, the US has asked allies to tighten servicing of chip gear in China.

• Hong Kong equities are higher today, with HSTech Index the top performer up 2.45%, the Mainland Property Index opened down 2.00%, however has recovered most of those losses to now trade just 0.40% lower, the HSI is up 0.70% while the HS China Enterprises is up 1.20%. In China, equities are also higher with the small-cap CSI1000 up 1.75%, ChiNext up 0.75%, while the large-cap CSI300 lags up just 0.40%
• China Northbound flows were -7.2billion yuan on Wednesday, with the 5-day average at -1.22billion, while the 20-day average sits at 1.81 billion yuan.
• In the property space, Sunac China FY revenue beats estimates, while Country Garden Services reported a 85% slump in net income for 2023. China's largest state-owned banks, including Bank of Communications and Industrial & Commercial Bank of China, are experiencing an increase in bad loan ratios due to the prolonged property downturn, with pressure to maintain asset quality amidst sluggish home sales and developer liquidity. Despite scant profit gains and narrowing interest margins, their resilience in the face of a slowing economy heavily reliant on bank lending remains a focal point for investors.
• Chinese President Xi Jinping met with American business leaders, including figures from companies like Blackstone and Qualcomm, aiming to restore confidence in China's economy and maintain stable relations with the US. Xi emphasized the importance of cooperation between the two countries while addressing concerns about domestic economic issues and geopolitical tensions, amidst ongoing disputes and uncertainties in US-China relations.
• The US is urging its allies to impose stricter restrictions on servicing chipmaking equipment in China, as part of efforts to hinder Beijing's semiconductor development goals. American officials are particularly concerned after Huawei's recent launch of a 5G smartphone powered by an advanced Chinese-made chip, which still relied on equipment from US and Dutch suppliers. This move reflects ongoing US efforts to limit China's access to advanced technology, with Washington pressing for tighter controls on servicing equipment deployed at blacklisted Chinese entities.
• Looking ahead, Hong Kong has Budget Balance later today, while China has 4Q BoP Current Account Balance on Friday