Asian equities followed the US’ Friday underperformance overnight. Hong Kong-listed internet stocks were hit today as the Ministry of Industrial and Information Technology (MIIT) reiterated that internet companies cannot block competitors on their platforms. This should not have been news as we knew this already, but, combined with a Financial Times article stating that Ant Group would need to separate their loan business from their mobile payment business in a new entity, took the wind out of the space. It is worth noting that the FT article only quoted “unnamed sources”. I’m surprised investors haven’t become more skeptical of such articles. Last week, a false report that Didi would be taken over by the government was disseminated in the US.
The most interesting part of the Financial Times article was how well Ant Group is doing (see revenue chart below).
Just hours after Biden and Xi’s phone call, we heard that the Biden Administration would begin to examine US-China trade issues.
Tencent saw a small net sale from Mainland investors via Southbound Connect though the company did buy back stock again.
Mainland markets saw value sectors outperform growth sectors as weakness in semiconductors continues to weigh on the STAR Board. It is important to note that STAR Board’s weakness is not due to the launch of the new stock exchange in Beijing. The new exchange will focus on small and medium-sized enterprises, replacing existing OTC markets, rather than science and technology stocks. According to an institutional broker, the new Beijing Exchange will have 66 stocks with a combined market cap of $29 billion versus the STAR Board’s 332 stocks with a combined market cap of $772 billion.
Metal stocks such as lithium and cobalt continue to do well in both Hong Kong and Mainland China. Foreign investors were net sellers of Mainland stocks after a very strong week last week.
The Hang Seng opened lower and stayed there, closing -1.5% as volume increased from Friday. The 210 Chinese companies listed in Hong Kong and within the MSCI China All Shares Index fell -2.08% with energy and materials up +3.95% and +1.89%, respectively. Meanwhile, discretionary -3.83%, staples -3.47%, tech -2.49%, healthcare -2.42%, and communication -2.41%. Hong Kong’s most heavily traded stocks by value were Tencent, which fell -2.45%, Meituan, which fell -4.47%, Alibaba HK, which fell -4.23%, Xiaomi, which fell -2.9%, Wuxi Biologics, which fell -2.87%, Smoore Int’l, which fell -15.26%, HK Exchanges, which gained +0.79%, BYD, which fell -2.14%, Kuaishou…
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