Here's what happened in China's markets last trade day (8/11):
1.Tourist arrivals to Hong Kong jumped 31% to 3.6 million in July compared with June, which is the highest since the start of the pandemic and the first time that arrivals exceeded 3 million this year.
This is still a far cry from the 4.7 million average monthly arrivals HongKong enjoyed in 2019 but the trend is positive in favor of reaching full recovery by next year. In fact, tourist arrivals from countries like the Philippines and Thailand have already returned to 90% of their pre-pandemic levels, while mainland Chinese tourists are 70% recovered. There’s still obviously a long way to go for travelers from Western countries to get back to normal owing in part to geopolitical tensions and decoupling efforts that have diverted business away from Hong Kong to places like Singapore and the U.K. But the continued growth in tourist arrivals bodes well for Hong Kong’s retailers and food establishments. It’s a mini-recovery story to watch this year. $Trip.com (TCOM.US)$ $LUK FOOK HLDGS (LKFLF.US)$ $CHOW TAI FOOK JEWE (CJEWY.US)$ $Global X MSCI China Consumer Discretionary ETF (CHIQ.US)$ $BABA-W (09988.HK)$ $MEITUAN-W (03690.HK)$
This is still a far cry from the 4.7 million average monthly arrivals HongKong enjoyed in 2019 but the trend is positive in favor of reaching full recovery by next year. In fact, tourist arrivals from countries like the Philippines and Thailand have already returned to 90% of their pre-pandemic levels, while mainland Chinese tourists are 70% recovered. There’s still obviously a long way to go for travelers from Western countries to get back to normal owing in part to geopolitical tensions and decoupling efforts that have diverted business away from Hong Kong to places like Singapore and the U.K. But the continued growth in tourist arrivals bodes well for Hong Kong’s retailers and food establishments. It’s a mini-recovery story to watch this year. $Trip.com (TCOM.US)$ $LUK FOOK HLDGS (LKFLF.US)$ $CHOW TAI FOOK JEWE (CJEWY.US)$ $Global X MSCI China Consumer Discretionary ETF (CHIQ.US)$ $BABA-W (09988.HK)$ $MEITUAN-W (03690.HK)$
2. The MSCI China Index announced its quarterly index review that will see 29 stocks added, while 19 will be removed.
Among those companies to be added to the important index tracked by hundreds of billions in managed funds include Sinotruck, the only Hong Kong-listed company to be included this quarter. The rest of the additions are A-shares listed in the mainland exchanges. Sinotruk is a leading manufacturer of light, medium, and heavy-duty trucks in China and has already started manufacturing fuel cell trucks after winning a 1,100-unit contract last year set for delivery in the next 2 to 3 years. There are no notable or major Hong Kong-listed companies set to be removed from the MSCI China Index when the rebalancing takes effect after the markets close on August 31. $SINOTRUK (HK) LTD (SHKLY.US)$ $CATARC Automotive Proving Ground (301215.SZ)$ $iShares MSCI China ETF (MCHI.US)$ $MSCI Inc (MSCI.US)$
3. Beijing is allowing provincial governments to issue new loans of up to RMB 1 trillion (or about $138 billion) to ease the debt burden of the country’s local government financing vehicles (LGFVs).
LGFVs were created to raise money through issuing of debt instruments to banks, insurance firms, and public investors, which then is spent on social and infrastructure projects that could help boost economic activity. But China’s LGFVs have amassed an estimated $8.5 trillion over the years, largely as a result of increased spending on infrastructure projects meant to fuel economic growth. While $138 billion is a fraction of the overall estimated debt, it will help alleviate near-term pressure on LGFVs and allow them to issue new debt for what appears to be more infrastructure projects to help China reach its GDP growth targets.
4.China’s aggregate financing to the real economy grew by RMB 528.2 billion in July, down 34% from a year ago and decisively worse than the RMB 1.1 trillion expected by the market.
This huge shortfall in aggregate financing (i.e. total social financing) happened despite money supply (M2) rising 10.7% in July compared to the same month last year. It means that while there is ample liquidity in the system, not enough of it is being made available to the real economy in the form of loans, corporate bonds, equity financing, or investment property. That’s a concern for the People’s Bank of China (PBoC), which has been implementing measured liquidity-boosting policies like RRR cuts but is not achieving the desired effect. Lack of confidence in the business community, along with an unwillingness by commercial banks to increase their risk exposure, are likely contributors to this sticky situation. $iShares China Large-Cap ETF (FXI.US)$ $Global X MSCI China Financials ETF (CHIX.US)$
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
