HK Outperforms Mainland

Mixed performance surrounded Chinese & HK benchmarks on Tuesday, with the CSI 300 shedding 0.8% on the day, while the Hang Seng index was 0.8% better off (HSCEI was ~0.9% firmer).

• At a broad level, economic worry re: the mainland weighed on indices there, while HK indices were seemingly able to benefit from the feedthrough from Monday’s Fedspeak.
• Stocks of troubled property developer Country Garden tumbled as the company hired advisers and issued more pressing warnings re: potential default.
• Elsewhere, Chinese construction firms struggled on the back of worry re: slowing investment and exposure to heightened geopolitical tensions in the Middle East.
• Conversely, digital transformation names benefitted from Premier Li Qiang stressing the need for deeper effort re: boosting industrialisation and deploying AI.
• Also note that Hang Seng futures benefitted from the previously covered BBG source report which suggested that “China is considering raising its budget deficit for 2023 as the government prepares to unleash a new round of stimulus to help the economy meet the government’s annual growth target.” Still, the contract didn’t manage to challenge session highs during the post-cash close bid.
• CNH shrugged off the news.
• On the flow side, international participants sold a net CNY5.5bn of mainland equities via the northbound legs of the HK-China Stock Connect channels.