Key News
Last night was a roller coaster in China’s markets after the Mainland reopened following the weeklong National Holiday or “Golden Week”. The Shanghai and Shenzhen stock markets opened at the 10% limit-up threshold, but the Hang Seng fell -9.41% after investors were disappointed by the National Development and Reform Commission (NDRC) press conference’s lack of fiscal policy details.
The Shanghai and Shenzhen stock market opened at the 10% limit-up threshold, showing the pent-up demand from investors. Mainland volumes were up 400% versus the 30-day average. Some local media reports have referenced anywhere between 1-2 million new accounts opened per day during the National Day holiday. New brokerage accounts opened during the National Day holiday will only be able to start trading on October 9, and more funds may flow in afterward.
It is important to note that the rally has been massive, leading the government to want to manage expectations. Regulators are cautious of overheating the market and are guiding banks not to direct loans or leverage to the stock market.
The big event overnight was the press conference held by the National Development and Reform Commission (NDRC). The conference disappointed investors because it did not provide enough detail on the new fiscal stimulus. The Hang Seng Index was down -9.41% overnight. However, it is important to note that there will be a series of meetings in the coming days and weeks where the full fiscal stimulus package will be outlined.
Upcoming events:
- Ministry of Finance (MOF) Press Conference in the coming days, which historically, has been more associated with fiscal announcements
- NPC Standing Committee at the end of October, which may approve any additional deficit
- Ad-hoc State Council weekly meetings, which could be related to specific stimulus that are related to consumers and welfare
We have seen the government’s previous stimulus packages have lifted consumer confidence over the holiday, with travel data for China’s National Holiday coming in strong. More than 2 billion trips were made during the week-long holiday. Xinhua says outbound and inbound travel volumes hit a record.
Despite the record travel numbers, consumption of goods needs to rise to the level of services. We are still seeing this imbalance. Our colleague in China said in June that people were feeling that experiences should be valued over physical goods, especially coming out of the pandemic. This is changing, albeit gradually, and goods consumption subsidies will help.
The PBOC fixed the yuan at 7.07 CNY per USD, which is above the level expected. Allowing the currency to depreciate somewhat after a strong run makes sense and demonstrates the central bank’s easing stance.
The Hang Seng and Hang Seng Tech indexes fell -9.41% and -12.82%, respectively, on volume that increased +109% from yesterday. The top-performing sectors were Health Care, which fell -7.84%; Energy, which fell -8.39%; and Materials, which fell -8.79%. Meanwhile, the worst-performing sectors were Real Estate, which fell -17.48%, Consumer Staples, which fell -13.09%, and Consumer Discretionary, which fell -11.28%.
Shanghai, Shenzhen, and the STAR Board gained +4.59%, 8.89%, and 17.38%, respectively, on volume that increased +33% from the last session. The top-performing sectors were Information Technology, which gained +11.86%, Health Care, which gained +6.02%, and Industrials, which gained +6.03%. Meanwhile, the worst-performing sectors were Utilities, which fell -1.60%, Energy, which fell -0.98%, and Consumer Staples, which gained +0.41%.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.05 versus 7.02 last Tuesday
- CNY per EUR 7.74 versus 7.70 last Tuesday
- Yield on 10-Year Government Bond 2.19% versus 2.15% last Tuesday
- Yield on 10-Year China Development Bank Bond 2.32% versus 2.29% last Tuesday
- Copper Price -0.66%
- Steel Price -2.79%