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Policy Support For Clean Energy & Real Estate Lifts Stocks

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Policy Support For Clean Energy & Real Estate Lifts Stocks

Main news

Asian stocks got off to a strong start to the week, with the exception of Japan, which was closed for Ocean Day, a national holiday to thank the ocean for its bounty. Mainland China and Hong Kong performed strongly, largely on policy commentary on unfinished apartment owners not paying their mortgages and demand for clean energy as the country experienced a severe heatwave.

Mortgage loans outstanding recently represent only a small fraction of total mortgage loans and are concentrated on unfinished projects. Still, the headlines clearly drove the policy shift. Buyers may receive a payment grace period. Real estate was the best performer in both Hong Kong and mainland China, up 0.6% and up 3.63%.

The People’s Bank of China (PBOC), China’s central bank, injected $1.3 billion worth of liquidity into the financial system overnight. Yi Gang, governor of the People’s Bank of China, affirmed the central bank’s commitment to support the economy.

Energy stocks led oil prices higher as the sector gained +4.34% in Hong Kong and +4.82% in mainland China. Biden’s trip to Saudi Arabia has yet to turn on the tap, which means energy prices are likely to remain high in the short term. Meanwhile, China’s intense heatwave is raising awareness of clean energy policy support, as environmental, wind and solar stocks perform strongly.

While U.S.-listed peers were closed on Friday, Hong Kong-listed internet stocks performed strongly on the day.

It is worth noting that Beijing is providing 100 million yuan worth of food and beverage coupons to boost the local economy. This direct stimulus focuses on small private businesses.

There was less volume than we would have liked on a rising day. At the same time, given the very high volume of short selling in Hong Kong, if the rally can continue, it will put a lot of pressure on these shorts.

The Hang Seng Index and Hang Seng Technology Index rose +2.7% and +3.02%, respectively, with trading volume down -10.4% from Friday and 82% of the 1-year average. 437 stocks rose and 52 fell. Hong Kong short sales fell -16.45% from Friday and 100% of the 1-year average, as short sales accounted for 19% of trading volume. Value and growth factors are doing well in today’s broad rally as large caps outperformed small caps. The best performing sectors were energy, up 4.34%, materials up 3.85% and real estate up 3.6%. All departments are in green status. The best-performing sub-sectors included shale gas and oil stocks and energy-related sectors such as precious metals and mining, while e-cigarette and tobacco stocks were the worst-performing sub-sectors. Southbound trading volumes were light as mainland investors were net sellers of Hong Kong-listed stocks, with some net inflows including Tencent, while Meituan, Kuaishou, Li Auto and China stock ETFs saw some net outflows.

Shanghai, Shenzhen and the STAR Market closed at +1.55%, +1.48% and -0.27%, respectively, with trading volume down -6.1% from last Friday and 94% of the 1-year average. 3,902 stocks rose while 628 stocks fell. Today, the value factor is outperforming the growth factor, while small caps are outperforming large caps. The best performing sectors were energy, up +4.82%, real estate, up +3.63% and utilities, up +3.45%. All departments are in green status. The best-performing sub-sector was clean energy, especially solar, iron ore and aluminum. Meanwhile, certain semiconductor stocks, lithium miners and healthcare stocks were the worst performing subsectors. Northbound flows in Shanghai Stock Connect were small/moderate as foreign investors bought US$527m worth of mainland stocks. Treasuries rose, the yuan appreciated to 6.73 against the dollar and copper rose 1.30% on a rare day of gains.

Last night’s exchange rates, prices and yields

CNY/USD 6.74 vs 6.76 Friday CNY/EUR 6.84 vs 6.82 Friday 1-day government bond yields 1.21% vs 1.21% Friday 10-year government bond yields 2.78% vs 2.79% Friday 10-year CDB Bond yields 3.06% vs 3.05% Copper rose 1.30% overnight on Friday

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