Rally Runs Out Of Steam, For Now

The CSI 300 lost 1.0% on Monday, while the Hang Seng lost 0.5%.

• The CSI 300 pulled further away from 3,500 after last week’s brief breach (Friday saw a fresh multi-month high).
• Similarly, the Shanghai Composite failed to hold last week’s move above 3,000.
• Talk of profit taking activity was seen after the recent move higher.
• Questions re: LGFV debt supply/demand were a negative.
• The mainland saw modest net outflows via the HK-China Stock Connect links (~CNY1.3bn), another marginal negative.
• Auto, machinery and home appliance names benefitted from Friday’s announcement re: continued government focus on boosting consumer demand in those areas.
• Local wires pointed to the continued cancellation of IPOs, owing to increased regulatory scrutiny.
• Earnings-related swings were also seen on a stock-specific level.
• Participants continue to eye signals re: deeper economic and equity market support from policymakers.
• This week’s Chinese data highlight comes in the form of the official PMIs (Friday).
• HK equities will see various big names publish their quarterly earnings releases.