By Brendan Ahern Senior Contributor
KraneShares
Asian equities were largely higher overnight, led by Thailand, Pakistan, and Taiwan, while Japan underperformed and Hong Kong was closed for the Hong Kong Special Administrative Region (SAR) Establishment Day, which marks the handover of the territory to China by the UK following 156 years of colonial rule.
Mainland China opened lower, but grinded higher on good volumes and mixed breadth.
President Xi headed the Central Committee for Financial and Economic Affairs鈥 sixth meeting, which was focused on several economic areas. The release states the government should 鈥済overn the low-price and disorderly competition of enterprises in accordance with laws and regulations鈥 and 鈥減romote the orderly exit of backward production capacity鈥. This is aligned with recent government regulators鈥 talk on addressing overcapacity in the auto industry. Coincidentally, the China Automobile Dealers Association鈥檚 investor warning index increased +3.9% to 56.6%. Levels above 50 indicate auto dealers are holding high levels of inventory, which exposes them to liquidity risk. The statement may also be referencing the recent increase in E-Commerce competition. JD.com entered restaurant delivery and online travel by slashing prices and losing money in order to garner market share.
While execution and implementation of this guidance will be important, it should be cheered by investors as it would raise profit margins. It would also address President Trump鈥檚 and the EU鈥檚 concerns on excess auto production. The release also referenced growing the marine industry, including offshore wind power, as electricity companies outperformed.
Mainland healthcare stocks outperformed after the National Healthcare Security Administration and National Health Commission released “Several Measures to Support the High-Quality Development of Innovative Drugs”.
Real estate was off, as the China Index Academy announced that year-to-date (YTD) sales through June from the top 100 real estate 鈥渆nterprises鈥 were RMB 1.8 trillion, which is down -11.8% year-over-year (YoY). June sales were off -18.5% YoY, though improved +1.2% from May. Construction companies underperformed today on the real estate release.
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Banks were higher, as investors are anticipating high dividend payments, based on high balance sheet cash positions.
Aerospace was hit with profit-taking after recent outperformance. Semiconductors and software both underperformed, as well, though I did not see a negative catalyst.
June new energy vehicle (NEV), a category that includes both electric vehicles (EVs) and hybrid electric vehicles, delivery figures were released this morning. The below is courtesy of CnEVPost:
NIO: 24,925 units
Li Auto: 36,279 units, -24% YoY
Zeekr: 43,012 units
XPeng: 34,611 units, +224% YoY
Leapmotor: 48,006 units, +138% YoY
Xiaomi: 25,000 units
Tesla is increasing the price of its Model 3 in China to RMB 285,500 from RMB 275,500. Tesla China also announced the installation of V4 super chargers in several cities.
Today鈥檚 anniversary of the turnover of Hong Kong reminds me of how little is taught in the West of the Opium Wars and the colonial powers’ invasion of China. I understand why, as it isn鈥檛 that pretty. I did not know very much about it until joining KraneShares, where, out of curiosity, I educated myself by reading several books. I鈥檝e included an image below of the Shanghai International Settlement flag that includes the colonial powers that owned a piece of Shanghai. It is something that might be worth examining as it explains an element of today鈥檚 geopolitical tensions.Live Webinar
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Last Night’s Performance
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Last Night鈥檚 Exchange Rates, Prices, & Yields
CNY per USD 7.16 versus 7.16 yesterday
CNY per EUR 8.45 versus 8.44 yesterday
Yield on 10-Year Government Bond 1.64% versus 1.65% yesterday
Yield on 10-Year China Development Bank Bond 1.69% versus 1.70% yesterday
Copper Price 0.31%
Steel Price -0.73%
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