Market

Important Mainland Media Article On Internet Regulation

Key News

Asian equities were largely off except for Japan, which outperformed. Pakistan was off after MSCI downgraded it from emerging markets to frontier markets and South Korea was down as the government seeks to implement regulatory oversight of internet companies. Sound familiar? Investors shot first and asked questions later as many brokers believe today’s significant downdraft in Naver and Kakao was overdone.

We have reports that Tencent and NetEase will have to ensure limited hours for minors is being adhered to. Again, the percentage of revenue for kids isn’t going to be a revenue hit per Tencent’s Q2 earnings release, which stated “players aged under 16 accounted for 2.6% of our China game grossing receipts. Among which, players aged under 12 accounted for 0.3%.” 

Hong Kong-listed internet stocks were mixed/ largely higher as a front-page editorial from the People’s Daily newspaper on internet regulation took center stage. The article stated regulation has “…intensified anti-monopoly supervision investigated and dealt with the monopoly and unfair competition behaviors of relevant platform companies in accordance with the law, and prevented the disorderly expansion of capital. The results have been achieved, and the fair competition order in the market has been steadily improving.”

I think “have been achieved” is a key line as it would indicate we are closer to the end. As we listed yesterday, the government’s commitment to private enterprises was reiterated as the article states in bold “…the status and role of the non-public economy in [China’s] economic and social development have not changed! Unswervingly, the principles and policies of encouraging, supporting and guiding the development of the non-public sector of the economy have not changed!”. The article reiterates the commitment to open its economy and capital markets.

Tencent saw another day of net buying via Southbound Stock Connect along with Meituan. The Mainland market had an interesting day as traditional utility stocks were up on news regarding the launch of a green power trading program though I’ve had trouble finding details. Clean-tech, comprised of EV ecosystem/solar/ wind /industrial metals, was off today in a bout of profit-taking. Foreign investors were net sellers for the first time in twelve days, selling -$250mm. Interesting to note, they were sellers of Shanghai stocks (value/liquor) but buyers of Shenzhen stocks (growth names). 

H-Share Update

The Hang Seng opened higher but slid in the afternoon closing -0.12% on volume -10.25% from yesterday which is . The 210 Chinese companies listed in Hong Kong within the MSCI China All Shares gained +0.25% led by communication +1.68%, utilities +1.16% and real estate +0.4% while materials -1.28%, tech -1.07% and energy -0.79%. Hong Kong’s most heavily traded by value were Tencent +1.75%, Meituan +1.4%, Alibaba HK +0.52%, Xiaomi -2%, Kuaishou Tech -2.6%, BYD -0.44%, AIA -0.32%, ANTA Sports +3.82%, Geely Auto -3.14% and JD.com HK +1.89%. Southbound Stock Connect volumes were moderate as Mainland investors bought $95mm of Hong Kong stocks as Southbound Connect trading accounted for 12.8% of Mainland turnover.

A-Share Update

Shanghai, Shenzhen and STAR Board diverged -0.04%, +0.08% and -1.8% on volume +5.22% from yesterday which is 156% of the 1-year average. The 542 Mainland stocks within the MSCI China All Shares eased -0.39% led by utilities +3.28%, communication +3.06%, energy +1.53% while staples -1.75%, healthcare -1.07% and industrials -0.87%. The Mainland’s most heavily traded by value were broker East Money +3.19%, China Northern Rare Earth -2.11%, TBEA Co -3.99%, GoeTek +10%, Inner Mongolia BaoTou Stell +1.6%, China Three Gorges Renewables -0.15%, Tianqi Lithium +2.04%, Longi Green Energy -3.23%, Power Construction +6.67% and BOE Tech +2.76%. Northbound Stock Connect volumes were moderate as foreign investors sold -$250mm of Mainland stocks as Northbound Connect trading accounted for 5.1% of Mainland turnover. 

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.46 versus 6.46 yesterday
  • CNY/EUR 7.63 versus 7.67 yesterday
  • Yield on 10-Year Government Bond 2.87% versus 2.86% yesterday
  • Yield on 10-Year China Development Bank Bond 3.20% versus 3.19% yesterday
  • Copper Price -0.53%

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