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Asian shares were mostly lower overnight in light trading, with South Korea and the Philippines posting strong performances.
The privately calculated Caixin China Services PMI was released last night. The reading of 54 was higher than the expected reading of 52.5. Chinese consumers continue to recover, and at the same time restrictions on property purchases have been lifted in almost all jurisdictions. This is very positive for the Chinese market, but the performance was almost flat overnight.
Geely Auto rose +1.34% overnight along with BYD’s gains, while battery maker CATL fell. The company reported that its first-quarter car sales increased by about +50% year-over-year. Geely also signed a strategic agreement to use STM Microelectronics in its supply chain. Geely is the only Chinese automaker selling cars in the U.S. The company partners with Volvo to manufacture Polestar electric vehicles. China’s electric vehicle ecosystem has largely ignored the U.S. 100% tariffs. It remains to be seen whether Geely will be affected by the new tariffs.
Expectations for a U.S. interest rate cut next year or later this year have improved due to recent employment and inflation data. This could also be a positive for China, as some believe it will wait for a significant rate cut before the U.S. does, although it has made several smaller rate cuts in the past year.
Reuters reported that some China-based chip companies are designing lower-end chip models that fall below U.S. regulatory standards but have potentially higher performance, which would allow those companies to continue to have access to TSMC for their manufacturing needs.
Growth stocks rose slightly in Hong Kong, while value stocks fared slightly better in mainland China.
Copper fell sharply overnight, dragging materials stocks down on the Shanghai Futures Exchange on building inventories and expectations of a slight slowdown in demand. This is reportedly the highest level for copper stocks on the exchange since 2020.
The Hang Seng Index and Hang Seng Tech Index closed at -0.10% and 0.30% respectively overnight with flat volume from the previous day. Mainland Chinese investors bought $562 million worth of Hong Kong-listed stocks and ETFs overnight through the Southbound Stock Connect. The top gainers overnight were Healthcare (up 1.06%), Communication Services (up 0.90%) and Consumer Staples (up 0.33%). Meanwhile, the worst-performing sectors were Materials (down -2.94%), Real Estate (down -1.65%) and Energy (down -0.84%).
The Shanghai, Shenzhen and STAR Markets closed down -0.83%, -1.19% and -0.21% respectively, with trading volume down -8% from the previous day. Sectors that recorded their highest overnight gains were Utilities (up 0.62%), Healthcare (up 0.02%) and Information Technology (down -0.23%). Meanwhile, sectors that recorded their lowest gains were Real Estate (down -2.12%), Communication Services (down -1.56%) and Materials (down -1.35%).
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Last night’s performance
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Yesterday’s exchange rates, prices and yields
- The yuan is trading at 7.25 yuan per dollar (compared to 7.24 yuan yesterday).
- The yuan is trading at 7.87 yuan per euro (compared to 7.88 yuan yesterday).
- One-day Treasury yield was 1.30% (vs. 1.30% yesterday).
- The yield on the 10-year Treasury note was 2.28% (compared to 2.29% the previous day).
- 10-year China Development Bank bonds are yielding 2.39% (vs. 2.40% yesterday).
- Copper price -2.44%
- Steel prices -0.68%
