Recover From Lows, Major Indices Still Finish A Touch Softer

The major China-related equity benchmarks were little changed to softer on Monday.

• Participants had to balance the impact of no change in the interest rate applied to the latest round of PBoC MLF operations (BBG survey consensus looked for a 10bp cut) vs. a larger-than-expected net liquidity injection via the same operations.
• Benchmark indices initially showed lower, before recovering from lows and meandering through the remainder of the day.
• That left the CSI -0.1% and the Hang Seng -0.2% at the close (the former lodged a fresh ’24 intraday low).
• Local reports pointed to some smaller lenders recently lifting short-term deposit rates in a bid to entice depositers.
• Continued focus on the need for fiscal and monetary support did the rounds.
• The HK tech sphere traded heavily, with Baidu struggling on the back of reports pointing to the Chinese military testing its AI on the firm’s chatbot. Baidu pushed back against the reports, but worry surrounding potential subsequent U.S. sanctions for the name remained evident.
• Li Ning struggled on the back of a negative move from a brokerage, although recovered from worst levels.
• Negative feedthrough from Burberry weighed on luxury retailer names.
• Shares of troubled developer Logan Group pushed higher after an agreement with USD bondholders.
• Supportive steps from local governments re: LNY tourism supported related names.
• HK-China Stock Connect flows were essentially flat on the day re: mainland equities, with a very modest bias towards net selling (~CNY0.4bn).
• More widely, an academic suggested that authorities will likely introduce lock-in periods, establish value concepts and optimise market environments to boost counter-cyclical equity investing.