Asian equities were largely lower with India surprisingly outperforming despite rising coronavirus cases and media coverage. Hong Kong had a volatile day posting a small loss while China staged a late-day comeback to close up small. Meituan’s anti-competitive investigation was announced after Hong Kong’s close yesterday, sending its US listing down -5.82%. How did the Hong Kong listing do today based on the same information? Up +2.62%. Similar to Alibaba
Wuxi Biologics announced after the Hong Kong close yesterday that its parent sold 108mm shares at a 6.8% discount to Monday’s closing price, sending the Hong Kong listing down -6.01%. It will be interesting to learn who/whom bought the shares. Both Meituan and Wuxi were bought by Mainland investors via the Southbound Connect. March Industrial Profits increased 92.3% year-over-year to RMB 711.2B. The release was not cited as a market-moving event, since investors will focus on companies’ earnings season.
Fintech company Lufax Holding reported Q1 financial results after the US market close yesterday. Management did a strong job keeping costs relatively under control, allowing the company to increase profitability. This is despite its core retail credit facilitation service fees and wealth management transaction and service fees declining -7.1% and -9.4% respectively. “Other income” increased by +241%, offsetting the above weakness driven by an “increase of account management fees, collections, and other value-added service fees”. The company addressed increased regulation on their conference call. I like how management addressed it right up front in the call stating “our business was not materially affected, thanks to our pre-emptive regulatory intentions and proactive adjustments. These efforts have also enabled us to achieve solid operating results in the first quarter.” Well said!
- Revenue increased +16.9% to $2.328B (RMB 15.251B) from RMB 13.046B versus analyst expectations of RMB 14.573B
- Expenses increased 17.1% to $1.302B (RMB 8.53B)
- Net Margin 32.6%, which is an increase of 1.6%
- Net Profit increased 18.7% to $758mm (RMB 4.969B)
- Adjusted EPS RMB 2.27 versus analyst expectations of RMB 1.72
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The Hang Seng bounced around the room closing -0.04% as volume fell -1.4%, which is back below the 1-year average. The 200 Chinese companies listed in Hong Kong within the MSCI
Shanghai, Shenzhen, and STAR Board were mixed at +0.04%, +0.03%, and -0.23% respectively, overcoming morning losses. Volumes were off by -15.93%, which is only 86% of the 1-year average while breadth saw 1,296 advancers and 2,606 decliners. The Chinese companies listed in the Mainland within the MSCI China All Shares Index gained +0.42%, led by healthcare +2.49%, staples +1.1%, and discretionary +0.49%, while energy fell -0.59%, materials -0.48%, and utilities -0.4%. Healthcare sub-sectors outperformed along with paper companies, shipping, and alcohol sub-sectors while airlines, auto, and communication sub-sectors were off. The Mainland’s most heavily traded by value were broker East Money, which fell -2.61% on a broker downgrade after three executives quit, BOE Tech, which gained +1.66%, Zijin Mining, which rose +1.26%, Ping An, which was up +0.52%, GEM Co, which fell -2.77%, CATL, which was off -0.11%, COSCO Shipping, which gained +7.75%, Luxshare Precision, which rose +5.7%, Kweichow Moutai, which was up +0.8%, and Chongqing Sokon, which rose +3.5% on its involvement in with Huawei’s EV efforts. Northbound Connect volumes were moderate as foreign investors bought $541mm of Mainland stocks as Northbound trading accounted for 5.1% of Mainland turnover.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.48 versus 6.49 yesterday
- CNY/EUR 7.83 versus 7.84 yesterday
- Yield on 10-Year Government Bond 3.21% versus 3.20% yesterday
- Yield on 10-Year China Development Bank Bond 3.59% versus 3.58% yesterday
- China’s Copper Price +2.27% overnight
Krane Funds Advisors, LLC is the investment manager for KraneShares ETFs. Our suite of China focused ETFs provide investors with solutions to capture China’s importance as an essential element of a well-designed investment portfolio. We strive to provide innovative, first to market strategies that have been developed based on our strong partnerships and our deep knowledge of investing. We help investors stay up to date on global market trends and aim to provide meaningful diversification. Krane Funds Advisors, LLC is majority owned by China International Capital Corporation (CICC).