Hong Kong rebounds as fund managers reduce exposure

Main news

Asian stocks rebounded overnight, rising +3% as Taiwan returned strong from the holidays, led by an analyst upgrade for Taiwan Semiconductor Manufacturing Company (TSMC). At the same time, Japan managed to make gains despite falling a mile below consensus and entering the official definition of recession in GDP statistics.

According to the Ministry of Commerce, travel and spending data for the Lunar New Year remained strong, with hotel bookings increasing by a significant 60% year-on-year. Meanwhile, Meituan reported that “daily consumption growth” increased by +36% year-on-year and +155% compared to 2019. Hainan Island, China’s Hawaii, doesn’t have enough flights to bring people home, but e-commerce spending appears to be holding steady. Visitor numbers to Macau and Hong Kong also appear to be strong.

Hong Kong started lower but managed to recover, led by Tencent, the city’s most heavily traded stock. Tencent fell -1.59%, while Alibaba rose +0.71% as gaming activity in the new year was a little light, although January gaming data looked solid. , Meituan rose +0.35%, AIA rose +0.96% and Hong Kong Exchange (HKEX) rose +1.4%.

One of the fallacies that people bring up when discussing China is that “data can’t be trusted.” But overnight, real-time app data for e-commerce and online gaming emerged. “Free” apps sell data such as what you are downloading and how much time you spend on the app. Meanwhile, “screen scrapers” visit e-commerce websites to determine changes in inventory levels.

Trading volumes were once again at abysmal levels, at just 46% of the one-year average, but that could change on Monday if China reopens its economy. Wuxi Biologics fell -1.91% despite the company’s filing to the Hong Kong exchange that the US Congress’ claims were false. I don’t know why they don’t go to court to prove this issue. After the Hong Kong transaction closed, the six megabanks announced that they had “taken proactive actions to develop and implement related operations, support the reasonable financing needs of real estate projects, and achieve results.” Hong Kong’s real estate sector slumped overnight, but this is another decisive step to support the struggling sector. Both banks announced that they will be involved in 8,200 projects after the January 12 monetary policy.^th Announcement from the Department of Housing and Urban and Rural Development.

Do you think Canada has a higher weight than China in the MSCI National World Index, even though its GDP is $2.1 trillion compared to China’s $17.9 trillion (2022 World Bank GDP data)? This is still the case as of the end of January 2024! A recent study by Copley Fund Research surveyed 340 global equity fund managers with $1 trillion in assets under management and found that nearly 80% are underweight China. Assets under management in China have fallen to $19.3 billion from a peak of $50 billion in 2020. Remember, these managers are benchmarked to the MSCI All Country World Index, and their allocation to China is just over 2%.

Stephen said the average fund weight hit a record low of 2.11%, while underweight hit a record high of 78.5% and 19% had removed China from their portfolios. The fund holds 37% of Chinese stocks in AIA (remember, AIA is not considered a Chinese stock as it is based in Hong Kong, meaning it is part of the developed markets index), Tencent , has invested in Alibaba, but the fact that the “76% of global stocks” fund owns an average of 3.6% in Microsoft shows how seriously executives around the world are currently viewing China and Hong Kong. ing. ” Last month, Stephen highlighted one of the best-performing “EM” funds. I use quotation marks because the United States is the largest allocator of the Developing World Fund. Managers are underweight in all emerging markets, as they hold many developed market stocks.

In their defense, if you don’t own US stocks they will go bankrupt or go out of business, which as an index purist is a bit baffling. It is worth noting that several prominent hedge funds increased their weight in China based on SEC 13F in the fourth quarter. Hedge funds can hedge, unlike long-only mutual fund managers. Check out Stephen’s work. You’ll enjoy it as much as I did.

After tomorrow’s close, Hang Seng Index will provide a pro forma index rebalance, including additions to Southbound Stock Connect. XPeng is a prime candidate for a southbound connect leading to a rally this week.

The Hang Seng Index and Hang Seng Tech Index rose by +0.41% and +0.79%, respectively, and the trading volume decreased by -17.61% from yesterday to 46% of the 1-year average. There were 232 rising stocks and 224 declining stocks. Mainboard short volume decreased by -22.09% from yesterday to 45% of the 1-year average (recalling that Hong Kong short volume includes ETF short volume due to market maker ETF hedging) please). Growth factors and large-cap stocks outperformed value factors and small-cap stocks. The top sectors were Technology +1.3%, Discretionary +0.9%, Healthcare +0.66%, Telecommunications -0.9%, Real Estate -0.83%, and Materials -0.41%. The top subsectors were Media, Semiconductors, and Technology Hardware, while Food/FMCG, Software, and Business/Professional Services were the worst. Southbound Stock Connect has been closed.

Shanghai, Shenzhen and STAR Board have been closed.

last night’s performance

Last night’s exchange rates, prices and yields

The mainland’s bond and currency markets were closed last night.