Is the yen signaling a once-in-a-decade market transformation?

Top news

Asian stocks rebounded as the Yen fell -1.88% against the US Dollar overnight after BoJ Deputy Governor Shinichi Uchida said they would not raise rates further if there was market turmoil. That to me means there will be more hikes at some point.

A higher yen would mean that “the only playbook you can throw out is the one you’ve had for decades,” according to consultant Stephen Miller in a Bloomberg article. Could that have an impact on other perennial winners, such as the 15-year winning streak of U.S. stocks versus non-U.S. stocks and the stronger U.S. dollar since 2011? Time will tell, though no one is prepared for a regime change.

July exports were up 7%, compared with expectations of 9.5% and June’s 8.6%, although imports of 7.2% beat expectations of 3.2% and June’s -2.3%. Notice how all the headlines focus on the export bust and none on imports? When it bleeds, it leads, as they say! Weaker exports indicate the global economy is slowing, while domestic demand may be strengthening, although higher commodity prices will boost imports. The Chinese government will “add controls and regulations on the production of three chemicals used to make illicit fentanyl” in what the National Security Council called the “third significant” action under U.S.-China drug cooperation.

Hong Kong had a good day, with all sectors positive on decent volume and breadth. Mainland investors bought a healthy $1.497 billion of mostly Hong Kong ETFs and Tencent via the Southbound Stock Connect. Top-traded Hong Kong stocks by value were Tencent, up +2.54%, Alibaba, up +1.66%, Meituan, up +0.38%, China Construction Bank, up +1.5% and BYD, up +0.09%. Tomorrow we have the State Council press conference on services consumption.

The mainland market was mixed on overseas sales via the Northbound Stock Connect as markets struggle to shake off their slump. The national team seemed to have an off day, given the thin volumes in their favorite ETFs. The South China Morning Post carried an article noting that “despite Beijing’s repeated determination, including the Politburo’s semi-annual economic review emphasizing consumption as the focus over boosting domestic demand, business and consumer confidence remains fragile.” It looks like more fiscal support is needed! Mainland media noted that Guangzhou is the first tier-1 city, a megacity, to promote affordable housing in a bid to stabilize property prices. The measures would include those with “quasi-hukou,” i.e. non-city citizens would be granted full city citizenship upon purchasing a flat. More on this soon!

Lost in the chaos on Monday was the Caixin Services PMI for July, which beat expectations at 51.5, coming in at 52.1, up from June’s 51.2. The drivers were improving employment and new orders, although input prices rose and foreign demand weakened. It’s clear that the report had no impact on Monday’s trade, though it’s worth noting.

Hang Seng and Hang Seng Tech are up +1.38% and +1.19% on volume of -0.82% since yesterday, which is 94% of the yearly average. 348 stocks are up, while 124 are down. Main Board short trade is up +34.64% since yesterday, which is 135% of the yearly average, as 25% of the volume was short trade (HK short trade includes ETF short volume, which is driven by market maker ETF hedges). Large caps and momentum outperformed today. All sectors were up, led by Utilities, up +3.49%, Energy, up +2.53%, and Communication Services, up +2.18%. The top subsectors were Media, Utilities, and Energy, while Food/Staples were the only negative. Southbound Stock Connect volumes were light as mainland investors bought Hong Kong stocks worth a total of $1.497 billion, with the Hong Kong Tracker ETF recording a massive net buy and Tencent, HS China Enterprise ETF and HS Tech all recording large net buys.

Shanghai, Shenzhen and STAR Board posted mixed results of +0.09%, -0.06% and -0.88% respectively, on volume down -9.44% from yesterday, 73% of the yearly average. 2,219 stocks rose, while 2,587 fell. Large and value stocks outperformed small and growth stocks. The only positive sectors were utilities and energy, up +0.69% and +0.66%, while technology fell -1.46%, communication services fell -1.3% and real estate fell -1.16%. Top sub-sectors were motorcycles, education and communication equipment, while computer equipment, food service/tourism and agriculture were the worst performers. Northbound Stock Connect volumes were light as foreign investors were net sellers of Mainland shares, and Kweichow Moutai was a small/moderate net buyer, while BYD and CATL were small net sellers. CNY and the Asian Dollar Index fell against the US Dollar Index. Treasuries rose. Copper gained and steel fell.

Upcoming Webinar

Join us on Thursday, August 8th at 1:00 PM ET for:

A Look at Hedgeye’s Proprietary Risk Range™ Signals and a New ETF to Help Manage Risk in US Stocks

To register, click here

Join us on Thursday, August 15th at 11:00 AM ET for:

The Path to Artificial General Intelligence and Investment Opportunities in the AI ​​Ecosystem

To register, click here

New content

Read our latest article:

China’s FinTech Ecosystem Update: Is This a New Era?

Click here to read

Yesterday’s performance

Yesterday’s exchange rates, prices and yields

• CNY per USD 7.18 vs 7.15 yesterday
• CNY per EUR 7.83 compared to 7.80 yesterday
• Yield on 10-year government bond 2.14% vs. 2.14% yesterday
• China Development Bank’s 10-year bond yield 2.19% vs. 2.21% yesterday
• Copper price: +0.45%
• Steel price: -0.69%