Asian stocks mixed overnight, with Singapore outperforming and Pakistan underperforming.
Markets in mainland China and Hong Kong fell overnight, with the former down more than the latter. The STAR Board continued yesterday’s momentum despite the decline in the continent’s broader indices. Hong Kong opened higher but collapsed at the close. Heading south Flows into Hong Kong have been significant, exceeding $100 million, as mainland investors try to capitalize on momentum in Hong Kong.
Baidu gained 12. 5% overnight on the back of heightened optimism about autonomous vehicles. The government said it would strengthen its political support for the company’s Apollo Go program. Autonomous vehicles, basically used as taxis, will soon be able to enjoy a new expansion in China. Government ministers have reportedly said they will even help autonomous rental vehicles. The long term turns out to be now as Baidu is more complex than Tesla in terms of kilometers traveled autonomously, the latter is more complex in driving with sensors without access to maps. At a conference, our team heard an engaging debate about Tesla’s generation compared to Baidu’s, and one speaker said that autonomy would be Tesla’s expansion engine. But it’s already a vital driving force for Baidu, which trades at a much lower multiple than Tesla.
China’s Customer Value Index (CPI) came in below expectations for June, emerging just 0. 2% versus 0. 4% expected, while the Manufacturer Value Index (PPI) fell to -0. 8%, which is relatively in line with expectations. This is the second time in the past year that emerging red meat prices have sparked speculation about higher inflation. Maybe customers are diversifying their diet? In any case, China’s exclusionary economic scenario means that it cannot cope with the higher inflation of Europe, the United States and now (somewhat) Japan. While this is smart for stability, it doesn’t inspire customers to spend today. This is an issue that may be addressed in the next third plenary session, which begins on Monday.
Earnings season is just around the corner in mainland China as many companies release their half-year results. Around 60% of companies that have reported effects have reported an increase in profits. Solar corporations Tongwei Solar and TCL Technology were among the most prominent corporations reporting overnight. Tongwei issued a profit warning, while TCL issued combined guidance, albeit with an increase in profits for its PV panel business in particular.
The Hang Seng and Hang Seng Tech indices closed down -0. 29% and -0. 01%, respectively, with a volume of 8% higher than yesterday. Mainland investors bought Hong Kong-listed stocks and ETFs worth $111 million. The most productive sectors were Consumer Staples, which gained 1. 38%, Consumer Discretionary, which gained 0. 58%, and Financials, which gained 0. 48%. For their part, the sectors that performed worst were Materials, with a decrease of -4. 08%, Energy, with a decrease of -3. 98%, and Utilities, with a decrease of -2. 55%.
Shanghai, Shenzhen and STAR Board closed -0. 68%, -0. 35% and 0. 07% respectively, with volume -6% less than yesterday. The performing sectors were Information Technology, which gained +0. 67%, Financial Services, which gained +0. 40%, and Consumer Discretionary, which gained +0. 31%. At the same time, the sectors that performed the worst were energy, with a decrease of -3. 84%, public services, with a decrease of -1. 91%, and communications services, with a decrease of -1 . 54%.
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