Asian equities were mixed as Taiwan outperformed while Mainland China and Hong Kong underperformed. The US dollar strengthened again versus Asian currencies as doubts about the number of Fed cuts increased.
Today's poor market action highlights how fragile investor sentiment is toward Mainland China and Hong Kong as investors have quickly taken profits. The market action also highlights the dominance of fast money types (traders/hedge funds) versus strategic long-term investors like big mutual fund families, pension funds, foundations, endowments, insurance companies, etc. The latter group doesn't appear to be involved yet as they potentially want more evidence that the government's commitment to stimulus is real, though logistically they require investment committee meetings and board and trustee meetings to make an allocation.
The US election might be a factor for professional investors as they wait to see who wins, though I don't see how it matters. The lack of "big money" to support the market makes it susceptible to days like today.
Mainland investors bought the Hong Kong dip, buying a healthy $1.1 billion worth of Hong Kong-listed stocks and ETFs, including the Hong Kong Tracker ETF, which saw a very large net inflow today.
Yesterday's economic data was cited as a culprit, with exports slowing and missing expectations, while loan data, despite being okay, was reported negatively. A Wall Street Journal article insinuating the Chinese government is only repairing local government balance sheets and wants to prop up the stock market was cited as weighing on sentiment. The article cites an asset manager who proudly states they didn't participate in China's rally. Bravo! There is also talk that many of the brokerage accounts opened recently haven't been funded. There was also the rumor the NPC would be delayed until after the US election, though more likely, we should be getting the agenda and date this week or next.
On the plus side, there is chatter that a decrease in the deposit rate could be implemented this week, which would disincentivize bank savings.
After the close, it was announced that the Ministry of Housing and Urban-Rural Development, Ministry of Finance, Ministry of Natural Resources, and the People's Bank of China will host a press conference Thursday at 10 am local time to discuss "the relevant situation of promoting the stable and healthy development of the real estate market" and have a Q&A with reporters.
The Hang Seng and Hang Seng Tech indexes fell -3.67% and -4.65%, respectively, on volume down -5.70% from Thursday, which is 222% of the 1-year average. 39 stocks advanced, while 473 declined. Main Board short turnover decreased by -1.93% from Thursday, which is 188% of the 1-year average, as 14% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers' ETF hedging). Value and large capitalization stocks fell less than growth and small capitalization stocks. All sectors were negative, led lower by consumer staples, down -6.06%, consumer discretionary, down -5.5%, and materials, down -4.9%. All sub-sectors were negative, with food/beverages, automobiles, and retailing leading the way down. Southbound Stock Connect volumes were high/3X normal as Mainland investors bought a healthy $1.1 billion of Hong Kong stocks and ETFs, with the HK Tracker ETF, a very large net buy, Alibaba, Tencent, and Meituan small net sells.
Shanghai, Shenzhen, and the STAR Board fell by -2.53%, -2.10%, and -2.93%, respectively, on volume down -0.02% from Friday, which is 197% of the 1-year average. 1,070 stocks advanced, while 3,923 declined. Value and small capitalization stocks fell less than growth and large capitalization stocks. All sectors were negative, led lower by consumer staples, down -3.74%, energy, down -3.52%, and materials, down -3.46%. All sub-sectors were negative, except for aerospace/defense, led lower by diversified financials, motorcycles, and soft drinks. Northbound Stock Connect volumes were high, just over 2X the average. CNY and the Asia dollar index fell versus the US dollar. The Treasury bond curve steepened. Copper and steel fell.