HK Equities Continue Their Strong Run, China Falls On Mixed Data
Hong Kong & Chinese equities are off earlier highs and now trade mixed for the day, Industrial production beat estimates coming in at 6.7% vs 5.5%, investors focused on the poor retail sales that came in at 2.3% vs 3.7% while property investment fell to -9.8% in Apr vs -9.6% in March. Focus this week has been largely on the China property space after a proposal by the Chinese government to allow local governments to purchase unsold properties from distressed developers, we expect further updates around this policy today as government officials are set to meet with Banks to discuss the property market, Chinese markets have also been impacted this week by news that the US will be imposing further tariffs on Chinese sectors including EVs, Semiconductors and Batteries. Looking back over the week Hong Kong markets have continued their outperformance over their China Mainland peers with the HSI outperforming the CSI300 by 2.22% and 17.89% for the month.
- Hong Kong markets have had a shortened week, property names have been the major focus with the Mainland Property Index up 0.25% today, 4.63% for the week and 35% from the lows made on Apr 19th. Big tech names including Alibaba and Tencent reported this week, with mixed results the HSTech Index is up 0.65% for the day and 3.50% for the week, while the HSI is trading up 0.23% today and 2.35% for the week with the index now up almost 20% for the month we now sit well into overbought territory when looking at the 14-Day RSI and trade well above all moving averages, signally there may be a pull-back to come shortly.
- China markets have under performed HK markets ever since Chinese officials announced measures to support the HK markets by driving quality IPOs to list there and other supportive measures. The US announced further tariffs on some Chinese EVs, Semiconductors and Battery sectors during the week, the China EV Index is down 3.34% for the week. China's main large-cap Index the CSI300 is down 0.20% today, 0.82% for the week and has underperformed the HSI by almost 18% for the month, small-caps have been slightly worst this week with the CSI1000 down 1.54% while the growth focused ChiNext is 0.22% lower today and down 2.00% for the week.
- In the property space, the major news this week was around the Chinese government putting together the proposal for local governments to by unsold homes from distressed developers, while earlier on Friday China Evergrande suspended trading, although there was no reason listed but it should be noted their equity surged 73% before the halt.
- Looking over the data for the week: Saturday we have PPI slightly below consensus at -2.5% vs -2.3%, CPI beat estimates coming in at 0.3% vs 0.2%, Money Supply missed estimates at 7.2% vs 8.3%, the MLF was held unchanged at 2.5%, New Home Prices fell 0.58% m/m, while Used Homes Prices fell 0.94% m/m . Earlier today Industrial Production beat estimates at 6.7% vs 5.5%, Retail Sales missed estimates coming in at 2.3% vs 3.7% and Fixed Assets ex Rural were 4.2% vs 4.6%.
- Looking ahead, quiet week for Chinese data with the 1 & 5yr LPR on Sunday, while Hong Kong has the unemployment rates on Sunday and the CPI composite on Thursday