Offshore RMB Does Not React To Evergrande Wind-Down, Week In Review – Forbes

Evergrande Plaza in Chengdu, China. This photo was taken in April 14th, 2017

Asian equities were largely higher as Hong Kong outperformed led by internet stocks. Investors appeared to be in good spirits in advance of the long weekend as Mainland China, Japan, and Taiwan will be closed Monday. However, there was precious little to speak of from a news perspective.Meanwhile, regional volumes were driven higher by the FTSE Russell rebalance and Quad Witching (the expiration of options contracts).

The PBOCs injection of $14 billion worth of liquidity into the financial system helped soothe investor concerns about Evergrande. However, the move was likely driven by the need for cash before the long weekend.

A Peoples Daily editorial claimed that Evergrande is not too big to fail. However, we now know that it is. A few years ago, insolvent companies including HNA Group, Anbang Insurance, and Fosun were going to implode China, according to the media narrative. But, the companies were broken up, their debt was distributed, and life went on. China will not let the first domino, which could be Evergrande, fall. CNH, the version of Chinas currency that trades during US market hours, shows little worry. CNHs volatility is very low, indicating that the market is not concerned.

There were several interesting sector moves overnight. Healthcare absolutely ripped, driven by BeiGenes positive drug recommendation from the EU. Meanwhile, lithium stocks were hit again, bringing down miners and other metal plays. The lithium space, along with coal and steel, has outperformed recently so some profit-taking is not that surprising. Positive remarks from the National Development and Reform Commission on clean energy and the Ministry of Transportation on electric vehicle (EV) usage increasing, both of which helped the broader cleantech space including EV, wind, and solar names. Energy names took it on the chin as crude prices eased a touch overnight.

Both Northbound and Southbound Stock Connect were closed today in advance of Chinas market holidays on Monday and Tuesday. Tencent bought back another 230,000 shares overnight.

Country performance

MSCI China All Shares Index

Stock performance

The Hang Seng opened lower but snapped back, rising across the trading day to close +1.03% on volume that was +51% higher than yesterday. The 210 Chinese companies listed in Hong Kong and within the MSCI China All Shares Index gained +1.87% led by healthcare +5.28%, discretionary +2.86%, staples+2.74%, communication +2.39%, tech +2.17%, real estate +1.89%, and utilities +1.7%. Meanwhile, energy -1.72, financials -1.2% and materials -1.2%. Hong Kongs most heavily traded stocks by value were Tencent, which gained +2.39%, Kuaishou Technology, which gained +6.22%, BeiGene, which ripped +20.29%, Ping An Insurance, which fell -5.05%, Meituan, which gained +3.53%, Alibaba HK, which gained +2.24%, Baidu, which gained +2.38%, AIA, which was flat, JD Health, which gained +9.52%, and BYD, which gained +3.37%.

Shanghai, Shenzhen, and the STAR Board bounced around the room opening higher then falling into the red before rebounding to close +0.19%, +0.35%, and -0.13%, respectively, on volumes that were -9.85% lower than yesterday, which is 140% of the 1-year average. The 541 Mainland stocks within the MSCI China All Shares Index gained +0.66% led by healthcare +4.37%, utilities +3.93%, staples +2.3%, and real estate +1.18%. Meanwhile, energy -4.69% and materials -1.88%. The Mainlands most heavily traded stocks by value were Tianqi Lithium, which fell -5.12%, China Northern Rare Earth, which fell -6.32%, China Three Gorges Renewables, which gained +9.97%, Kweichow Moutai, which gained +2.93%, Gangfeng Lithium, which fell -2.8%, Inner Mongolia BaoTou Steel, which fell -6.63%, Yunnan Yuntianhua, which fell -4.02%,Jiangxi Special Electric Motor, which gained +2.51%, and Longi Green Energy, which fell -1.00%.

Krane Funds Advisors, LLC is the investment manager for KraneShares ETFs. Our suite of China focused ETFs provide investors with solutions to capture Chinas 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).

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Offshore RMB Does Not React To Evergrande Wind-Down, Week In Review - Forbes