Hong Kong Rebounds As Golden Week Wraps, Week In Review

Week in Review

Asian equities had a mixed week, mirroring a downdraft on Wall Street, though Hong Kong managed a positive return.
Mainland China markets were closed this week for the Golden Week holiday (Mid-Autumn Festival), which saw +86% more domestic trips taken compared to last year.
On Thursday, developer Sunac became the first China real estate company to receive court approval to restructure its debts after negotiations with 2,000 onshore bondholders.
Mainland financial media had a host of stories on the rebound in consumer spending on travel and other services this holiday, though the media hype could not lift consumption plays in Hong Kong.
In this week’s video update, Xiabing Su explores the groundbreaking collaboration between Kweichow Moutai and the freshly reformed Chinese chain Luckin Coffee.

Friday’s Key News

Asian equities rebounded as Hong Kong outperformed.

Hong Kong-listed internet stocks had a strong day after yesterday’s news from Meituan on Golden Week consumption data. Advancers outpaced decliners by a wide margin as the Hang Seng Index closed above 17,500, though on very light volumes due to the closure of Southbound Stock Connect.

The Ministry of Culture and Tourism estimated that, during this year’s Golden Week holiday, 896 million domestic trips were taken via cars, trains, and planes, which indicates an increase of +86% year over year (YoY) will have occurred during Golden Week, generating RMB 782 billion in tourism revenue, up +138% YoY. Reuters is reporting that 900,000 tourists visited Macau and one million tourists visited Hong Kong. The rumors of thew death of Chinese consumption appear to be greatly exaggerated.

I find it amazing how little coverage distressed real estate developer Sunac’s debt restructuring received yesterday, though only negative news seems to be fit to print.

US-China diplomatic green shoots continue to grow as the bipartisan, congressional China trip comes together. Meanwhile, Biden plans to meet with Xi Jinping in November at the Asia-Pacific Economic Cooperation (APEC) conference, which is being held in San Francisco.

Meanwhile, we have yet to hear from the US Public Company Accounting Oversight Board (PCAOB) on their potential second trip to Hong Kong, where they will meet with the “Big 4” auditors. All told, it was a very light news day.

The Hang Seng and Hang Seng Tech indexes gained +1.58% and +1.55%, respectively, on volume that increased +2% from yesterday, which is only 42% of the 1-year average. 451 stocks advanced while 48 stocks declined. Main Board short turnover declined -5% from yesterday, which is 41% of the 1-year average, as 16% of turnover was short turnover (remember short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The growth factor outperformed the value factor while small caps outpaced large caps. All sectors were positive though the top-performing sectors were industrials, which gained +2.21%, utilities, which gained +2.21%, and healthcare, which gained +2.10%. All subsectors were positive though the top-performing subsectors were healthcare equipment, transportation, and utilities. Southbound Stock Connect was closed.

Shanghai, Shenzhen, and STAR Board were closed and will reopen on Monday.