Stock Connect Flows, Tsy Yields & Property Sector Worry Weigh

Wednesday’s negative lead from Wall St., higher U.S. Tsy yields and continued worry re: the health of Chinese property sector dominated the narrative for Chinese equity markets on Thursday.

• That combination left the mainland benchmark CSI 300 -2.1% and HK’s Hang Seng index -2.5% at their respective closes.
• The former has moved nearer to its ’22 base (3,495.95), which is less than 40 points away from closing levels.
• Familiar sources of fear continue to largely negate/overpower the growing consensus that the Chinese economy has troughed in sequential terms.
• Disappointing national new home sales/price data, well-documented worry re: a potential/likely Country Garden USD bond default and speculation that Hong Kong could announce a smaller-than-expected stamp duty cut next week pressured Greater China property names.
• There were some pockets of green, with Sands China benefitting from quarterly earnings.
• Elsewhere, some chip names benefitted from hopes re: domestic substitution stemming from the latest ratcheting up on U.S. restrictions on the sector.
• Flow wise, the northbound leg of the HK-China Stock Connect schemes saw ~11.7bn of mainland shares sold in net terms, the largest round of daily net selling witnessed since August, adding a further layer of pressure.