China's central bank reduced the reserve requirement ratio (RRR) by 0.25% on Thursday, a move that seems to hint at disappointing upcoming data for retail sales, industrial production, and property investment. This development comes amidst a mostly positive shift in Asian equity markets, despite mixed results on Wall Street.
Chinese tech giant Xiaomi (OTC:XIACF) experienced a 2.68% increase in Hong Kong following an agreement with Huawei to utilize some of its 5G patents. Yum China, the operator of several American fast food franchises in the country, also forecasted double-digit EPS growth over the next three years.
On the same day, foreign investors sold over $800 million in Mainland China's A-share stocks via Northbound Stock Connect. This marked a return to foreign outflows after a brief period of net inflows. Despite this, experts warn against using Northbound flows as a definitive measure of market sentiment and risk.
The Hang Seng and Hang Seng Tech indexes rose by 0.21% and 0.44% respectively on Thursday, with volumes up 2% from the previous day. Mainland investors purchased $333 million worth of Hong Kong stocks overnight via Southbound Stock Connect.
In commodities, copper prices rose by 0.26% and steel prices increased by 0.85%. The energy sector was a top performer in both Hong Kong and Mainland China due to positive oil price momentum. With China being a significant source of demand, it is poised to influence oil prices in the near future.
In contrast to these positive trends, both Hong Kong and Mainland China experienced a downturn in the real estate sector as Country Garden approaches another bondholder vote deadline regarding an extension of its coupon payment deadline.
State media has released several pieces discussing capital market and stock market reform. These articles highlighted the potential impact of bond sales in Hong Kong by the People's Bank of China on supporting offshore RMB. They also delved into the slowdown of Initial Public Offerings (IPOs) in Mainland China, suggesting that companies and underwriters are waiting for reforms to stimulate long-term investor interest.
Shanghai, Shenzhen, and the STAR Board experienced varied results, closing at +0.11%, -0.64%, and -0.94% respectively. In currency news, the exchange rates were CNY 7.28 per USD and CNY 7.76 per EUR. The yield on 1-Day Government Bond remained steady at 1.45%, while the yield on 10-Year Government Bond and China Development Bank Bond were 2.61% and 2.73% respectively.
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