Asian stocks: mixed results after light trading following day off.

Asian stocks were mixed last night, with light trading following a day off yesterday.

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Asian equities had a mixed night on light volumes, with some indexes rising while others fell. This followed an off day yesterday, when many Asian markets were closed for the Lunar New Year holiday.

It's impossible to deny that the headlines regarding COVID-19 have been negative as of late. However, it's worth noting that despite the headlines, economic data continues to surprise to the upside. For example, the Caixin China Services PMI came in at 55 in August, beating expectations of 54. This is despite the fact that both Chengdu and Guiyang remain under lockdown due to the COVID-19 pandemic. While the headlines may be negative, it's important to remember that the underlying data doesn't always reflect that. In this case, the strong economic data shows that there is still reason to be optimistic despite the challenges that the COVID-19 pandemic presents.

Tencent's early investor Naspers is selling down its position to fund a buyback. Berkshire Hathaway trimming its BYD position has weighed on its stock. Tencent bought another 1.12 million shares overnight which they have been doing since August 19th. Then there is the US $s relentless march higher as the Bloomberg JP Morgan Asia Dollar Index declined to another 52-week low. The PBOC looked to tap the brakes on the renminbi's slide as it cut banks' foreign currency reserve level by 2% as CNY declined to 6.95 versus the US $. Looking at these recent developments, it seems that Tencent is feeling the heat from various sides. However, the company is still standing strong and continues to invest in itself. It will be interesting to see how Tencent weathers this storm and comes out on the other side.

It's no secret that foreign investors are getting increasingly bearish on Chinese stocks, with short selling activity in Hong Kong reaching new highs. This negativity is weighing on Hong Kong's market more than on mainland China's, as foreign investors' view of China is increasingly defined by the offshore market. Today's market action is a good example of this, with the mainland market rallying while foreign investors sold off more stocks via the Northbound Stock Connect. President Xi's attendance at a conference focused on the economy and core technologies may help to ease some of the concerns, but it remains to be seen whether or not this will be enough to turn the tide.

Overall, it was a positive day for the Hang Seng and Hang Seng Tech, with the former closing slightly down and the latter up. However, this follows yesterday's significant losses, and volume was down significantly from the 1-year average. There was positive news in some sectors, with real estate, materials, and tech all seeing gains. However, communication, industrials, and staples were all down. Southbound Stock Connect volumes were light, but Mainland investors were net-buyers of Hong Kong stocks today. Tencent saw moderate buying, while Meituan saw moderate to light selling.

What a difference a day makes! Yesterday, the Shanghai, Shenzhen, and STAR Board stock markets all saw declines. Today, however, all three markets are up, with gains of 1.36%, 1.21%, and 1.11%, respectively. Volume is also up, by 13.54%, which is 84% of the 1-year average. 3,128 stocks advanced today while 1,334 stocks declined. Growth factors outperformed value factors, and large caps outpaced small caps. The top sectors were materials (up 2.32%), real estate (up 2.1%), and discretionary (up 1.83%). Healthcare and financials were off by -0.27% and -0.09%, respectively. The top sub-sectors were solar, power generation, and petrochemical. Biotech and several healthcare sub-sectors were among the worst performers. Northbound Stock Connect volumes were moderate/light as foreign investors sold -$560 million of Mainland stocks. Treasury bonds rallied, CNY fell to 6.95 versus the US $, and copper gained +1.47%.

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Last night's exchange rates, prices, and yields

  • The Chinese Yuan has weakened against the US dollar, despite a strong showing by the Chinese economy. This may be due to concerns about the ongoing trade war between the US and China.
  • The euro continued to weaken against the Chinese yuan on Monday, falling to its lowest level in nearly two weeks.
  • The yield on 10-Year Government Bond is expected to remain relatively stable in the near future. However, there is some potential for slight movement up or down depending on market conditions.
  • The yield on 10-Year China Development Bank Bond fell to 2.78% on Friday, down from 2.80% the previous day.
  • Copper prices rose sharply on Wednesday, with the metal hitting a new three-year high.