HK Equities Erase Thursday Gains Down 2-5%,China Equities Down 1-2%

Hong Kong & China equities have pushed lower throughout the day with HK equities erasing all of Thursday's move higher, while the CSI300 has hit a key technical resistance while the weaker yuan isn't helping. The Biden administration is investigating if SMIC violated export rules for chips powering Huawei's Mate 60 Pro, while introducing new restrictions on chip tool shipments to China. Meanwhile, Chinese President Xi Jinping will meet US business leaders to reassure amid declining foreign investment, and a new US bill aims to restrict American investment in certain Chinese stock index products. Additionally, China's NEV retail sales are set to soar in March, with a projected 37% year-on-year and 93% month-on-month surge driven by price cuts.

• Hong Kong equities are lower today after giving up all of yesterday rally, the HSTech Index is down 4.23% which could be tied back to the US investigating is SMIC violated exports rules, while the Mainland property Index is down 2.42%%, the wider HSI is down 3.04%. In China the CSI300 has hit the 200-day EMA has bounced straight off it, the index now trades off 1.46%, while the smaller cap CSI1000 is down 1.69% and ChiNext is also down 1.83%.
• China Northbound flows were -6.02billion yuan on Thursday, with the 5-day average at 3.62 billion, while the 20-day average sits at 2.911 billion yuan.
• A quick wrap of the past week in the China property space, China Builder Radiance defaults on dollar bond, China Vanke secured a 14yr 1.4b yuan loan from Industrial Bank which will be used to repay the companies debts, China Evergrande's $78 Billion has been accused of a $78b fraud in the 2 years prior to defaulting, China State-Owned developer Yuexiu cancels 1B yuan bond issuance.
• The Biden administration is investigating whether China's top chipmaker, SMIC, violated U.S. export rules to produce a chip for Huawei's Mate 60 Pro phone. There are concerns about whether SMIC illegally obtained U.S. tools to manufacture the chip, prompting a review by the administration. Despite pressure from China hardliners, no conclusion has been reached yet. Additionally, the administration announced new restrictions on shipments of chipmaking tools to advanced Chinese chip factories and is urging allies to stop shipments to China as well.
• Chinese President Xi Jinping is set to meet with several US business leaders next week during an annual forum in Beijing, with attendees including figures such as Tim Cook of Apple and Stephen Schwarzman of Blackstone. This meeting follows the China Development Forum, which has seen less publicity than usual, amid efforts by Chinese leadership to reassure foreign companies amid declining investment from abroad.
• A new bill in Congress aims to restrict US mutual funds from investing in certain Chinese stock index products, part of a broader effort targeting investments in China. The legislation seeks to prevent American investors from being misled about the value of Chinese companies, with additional measures proposed to increase scrutiny on Chinese companies' financial practices and their role in US supply chains. However, the bill still faces significant hurdles in Congress before potentially becoming law.
• According to preliminary data from the China Passenger Car Association, retail sales of new energy vehicles (NEVs) in China are expected to surge by 37% year-on-year and 93% month-on-month to reach 750,000 units in March. This increase is attributed to price cuts in NEVs. Additionally, retail sales of passenger vehicles are forecasted to rise by 3.7% year-on-year and 50% month-on-month to 1.65 million units in March.