HK & China Equities Erase Earlier Losses, Small-Cap Bounce

Hong Kong and China equity are higher today, with Hong Kong equities outperforming. It has been a quiet day for markets in terms of news and data flow. Moody's has downgraded China Oversea Land to Baa2, the UK is looking at imposing new restrictions on AI technology on countries like Russian and China. Some Chinese companies have revised down earnings due to tighter regulations, Taiwan Semiconductor Manufacturing Co will released earnings later today.

• Hong Kong equities have recovered from their opening levels with the Mainland Property Index now now up 1.30% after opening 0.80% lower, the HSTech Index has erased earlier losses to now trade up 1.14%, tech stocks throughout the region have bounce off earlier lows and the market eagerly awaits TSMC earnings, while the wider HSI is now up 1.23%. In China, equities are lagging the move higher by HK equities with the CSI300 up just 0.57%, while smaller-cap indices including are outperforming large-cap with the CSI2000 up 1.10% and the CSI1000 up 1.00%
• China Northbound saw an outflow of 0.23b on Wednesday, with the 5-day average at -0.05billion, while the 20-day average sits at -0.11billion yuan.
• In the property space, Moody's downgraded China Overseas Land's long-term rating to Baa2 from Baa1, with the outlook revised to stable from negative. The downgrade reflects concerns that COLI's credit metrics may not recover amid the extended downturn in China's property market. However, the outlook indicates expectations that COLI will maintain strong contracted sales performance and stabilize its credit metrics with robust liquidity over the next 6-12 months.
• The UK is considering imposing new restrictions on outward investments in emerging technologies like artificial intelligence and semiconductors, aiming to mitigate security risks associated with aiding adversarial states like Russia and China. Deputy Prime Minister Oliver Dowden plans to collaborate with G7 nations to assess these risks and explore the possibility of additional regulations, particularly in sectors crucial for national security.
• A group of A-share listed companies in China have adjusted their 2023 annual earnings estimates, a step likely taken to prevent potential delisting penalties for falsifying financial records, reports the official Shanghai Securities News. According to exchange filings, 35 companies have revised their initial earnings projections, with 31 of them lowering their estimates, including three shifting from profits to losses, with analysts attributing these adjustments to recent stricter regulations, particularly concerning accounting fraud.
• Looking ahead, Hong Kong has Unemployment data later today, while China's 1 & 5 yr LPR on Monday is the next focus