Asian equity markets displayed a mixed but predominantly upward trend overnight, with Hong Kong markets notably outperforming those in Mainland China and much of Asia. The positive momentum in the region can be attributed to a rebound in Mainland-listed shares following a sharp decline in the preceding two days. This fluctuation aligns with expectations surrounding the National Development and Reform Commission (NDRC), which have at times led to disappointment. It is crucial to recognize that while the NDRC plays a key role in China’s economic strategy, it does not authorize fiscal spending decisions, instead focusing on how to manage funds allocated for initiatives such as infrastructure projects.
In a strategic move, the Ministry of Finance (MoF) has announced plans to issue a sixth round of ultra-long-dated bonds with a yield of 2.19% for a 30-year term. This planned issuance is set to occur tomorrow, just a day before the finance minister’s conference, underscoring a continued effort from policymakers to maintain liquidity in the financial system, particularly following the weeklong holiday. This financing activity hints at an ongoing commitment to stabilize economic conditions and prepare for forthcoming fiscal strategies, which may include new consumer policies.
Meanwhile, the People’s Bank of China (PBOC) has initiated its first round of a new swap program, totaling RMB 500 billion. This program allows securities firms, asset management firms, and insurance companies to access additional liquidity for stock purchases. The expectation is that this move will further stimulate market trading and provide support to sectors facing headwinds. While most sectors in Hong Kong showed gains, in the Mainland market, Technology and Real Estate sectors lagged, indicating mixed signals on sector performance and investor sentiment.
In the context of Hong Kong, Meituan emerged as the second most-traded stock, rising 5% following Morgan Stanley’s optimistic revision of its price target and growth forecasts for the company. This uptick was propelled by a surge in activity on Meituan’s platforms during the recent National Holiday or “Golden Week,” reflecting potentially robust consumer engagement. Analysts continue to upgrade their outlooks for various internet stocks in China, suggesting a favorable climate for growth in this space, heavily influenced by upcoming announcements on consumer fiscal policies.
The performance of major indexes further illustrated the regional variance. The Hang Seng Index and Hang Seng Tech Index closed higher, gaining 2.98% and 2.05%, respectively, despite a 23% drop in trading volume compared to the previous day. Noteworthy sector performances included a significant uptrend in Energy, Financials, and Consumer Staples, while the Communication Services, Health Care, and Information Technology sectors lagged in comparison. In contrast, Shanghai, Shenzhen, and the STAR Board exhibited divergence in their closing values, highlighting the varied responses to market catalysts across different exchanges.
As of today, foreign exchange rates remained stable, with the Chinese Yuan holding firm against the US Dollar and Euro. Furthermore, the yields on the 10-Year Government Bonds and the China Development Bank Bonds saw slight declines, indicating a modest shift in investor expectations surrounding long-term borrowing costs. Commodity prices reflected slight gains in Copper and Steel, suggesting stable underlying demand amidst ongoing economic developments. Overall, the market conditions reflect a complex and shifting environment, where investor sentiment is both buoyed and tempered by fiscal policy anticipation and sector-specific dynamics.
