Electric Vehicles Shift (Quietly) Into High Gear

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Key News

Asian investors cheered Powell’s dovish comments, sending risk assets higher except for China while the Philippines was closed for a holiday. The Asia dollar index gained versus the US dollar, though the renminbi/CNY was flat overnight.

Bloomberg News is reporting that the US and China will discuss nuclear arms before the Biden-Xi meeting as the strong momentum on the US-China diplomatic front continues.

Auto stocks were strong performers following yesterday’s release of October sales data highlighting new energy vehicles (EV and hybrid) sales increased +32% year over year and +7% month to month to 890,000 vehicles. Year to date, sales rose +36% to 6.8mm cars. BYD’s stock was slightly off -0.51% (1211 HK), despite selling an impressive 301,095 NEVs in October, followed by Tesla
TSLA
China 72,115, Geely Auto +3.84% (175 HK) 62,086, and Changan Auto +0.27% (000625 CH) 58,000. EV starts ups Li Auto +2.78% (2015 HK) did 40,422, XPeng +7.57% (9868 HK) 20,0002, Leapmotor +1.26% (9863 HK) 18,202 and Nio 16,074.

Hong Kong closed higher though off morning highs, with Hong Kong internet names mostly higher and outperforming their US ADRs on Wednesday with Tencent +0.56%, Meituan -0.92%, Alibaba HK +1.15%, JD.com HK +0.66%, Kuiashou +0.88%, Baidu HK +1.48% and Bilibili HK +3.03%.

The Mainland market opened higher but slid lower across the trading day despite foreign investors buying +$366mm of Mainland stocks via Northbound Stock Connect. Kweichow Moutai was off slightly -0.08% after yesterday’s unexpected price hike with foreign investors net buyers.

Despite increased government attention and policy, the Mainland market has difficulty shaking its funk. The lack of the policy bazooka continues to weigh on sentiment despite the increased budget deficit and economic concentration from the Central Financial Work Conference. Earnings from Chinese consumer plays such as Estee Lauder and Yum China indicate low/uneven consumer confidence in China. Starbucks
SBUX
bucked the trend with strong China results this morning. China’s economy is recovering incrementally, as evidenced by the weak “official” and Caixin PMIs. More as opposed to less policy attention should help sentiment over time.

The Hang Seng and Hang Seng Tech gained +0.75% and +1.63% on volume +4.64% from yesterday, which is 63% of the 1-year average. 278 stocks advanced, while 194 declined. Main Board short turnover increased +0.48%, which is 62% of the 1-year average, as 16% of turnover was short turnover (remember Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The value factor and large caps outperformed the growth factor and small caps. Top sectors were tech +3.58%, discretionary +0.73%, and industrials +0.72%, while materials -0.35%, healthcare -0.28%, and staples -0.27%. The top sub-sectors were technical hardware, auto, and real estate, while food, consumer services, and pharmaceuticals were the worst. Southbound Stock Connect volumes were light as Mainland investors bought +$120mm with Lenovo, Xiaomi, and XPeng were small net buys while Tencent, East Buy, and were small net buys.

Shanghai, Shenzhen, and STAR fell -0.45%, -1%, and -1.15% on volume -5.46% from yesterday, which is 88% of the 1-year average. 955 stocks advanced, while 3,877 declined. The value factor and large caps outperformed the growth factor and small caps. The top sectors were communication +0.7%, energy +0.55%, and utilities +0.11%, while tech -1.17%, materials -0.93%, and industrials -0.83%. The top sub-sectors were cultural media, leisure products, and internet, while communication equipment, space, and industrial machinery were the worst. Northbound Stock Connect volumes were light as foreign investors bought +$366mm of Mainland stocks, with Kweichwow Moutai a large/moderate net buy, while Wuliangye and Luzhou were moderate/small net buys.

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China Q3 Review: Lines in the Sand & Policy Support

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

  • CNY per USD 7.31 versus 7.31 yesterday
  • CNY per EUR 7.77 versus 7.72 yesterday
  • Yield on 10-Year Government Bond 2.65% versus 2.68% yesterday
  • Yield on 10-Year China Development Bank Bond 2.71% versus 2.74% yesterday
  • Copper Price +0.34% overnight
  • Steel Price +0.27% overnight

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