PCAOB comes to Hong Kong, EU regulations drive down solar stocks

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Asian equities were mixed but mostly down overnight as uncertainty surrounding US interest rates continues to permeate global markets.

Today was a reversal from yesterday as Hong Kong managed a gain while mainland markets fell. According to reports, a team from the United States Public Company Accounting Oversight Board (PCAOB) arrived in Hong Kong this week to examine the audit books of China-based companies listed in the United States since the last financial year. According to mainland Chinese media, Chinese banks have lowered the deposit rates offered to their customers. This makes sense as it is further proof of the country’s easing policies, to be contrasted with Western countries.

Xi Jinping, India’s Narendra Modi and Vladimir Putin met at the China-led Shanghai Cooperation Summit in Uzbekistan to discuss various topics of global importance, including the war in Ukraine. China continues to take a neutral external stance on the nearly eight-month-old conflict. CNH, the Chinese currency that trades during US trading hours, broke through the psychologically important level of 7 CNY/USD. This is entirely due to the strength of the US dollar. The People’s Bank of China (PBOC) has worked diligently to maintain exchange rate stability and the central bank has done a decent job as the Chinese currency has held up better than most other Asian currencies. We believe that this exchange rate only means that Chinese assets are trading at an even more attractive discount.

The European Union has announced new measures that could prevent the import of solar panels from the Chinese region of Xinjiang. The move sent solar stocks in mainland China plummeting overnight, including Sun Grow, which fell -8.5% overnight. The new EU measures are general and not specific, so we cannot be certain of their possible impact on China’s solar energy stocks. It is important to remember the strong dependence of the United States and the EU on solar panels produced by manufacturers based in China.

Moderna’s CEO said the company is in talks with the Chinese government about supplying its mRNA vaccine, but no decision has yet been made. China’s local mRNA vaccine is also under development. CSPC Pharmaceutical is accelerating its Phase III trial of a new mRNA vaccine, which could receive emergency approval for distribution to the Chinese public.

Reuters reported that Biden plans to expand U.S. export bans on China’s semiconductor industry, including Lam Research.
LRCX
and applied materials
AMAT
. The Commerce Department has sent letters to Nvidia and AMD to ban their export of AI chips to China. The scope and implementation of this plan remains to be determined. More than 30% of US semiconductor industry revenue comes from sales in China, according to GlobalData. The Boston Consulting Group (BCG) estimates that US companies would lose 18% of their global market share and 37% of their revenues, resulting in the loss of 15,000 to 40,000 highly skilled national jobs, if Washington pursues technological decoupling. strict and completely prohibited national markets. semiconductor companies to sell to Chinese customers.

The Hang Seng and Hang Seng Tech gained +0.44% and +0.25% in volume -12.71% from yesterday, or 64% of the 1-year average. 220 stocks rose while 251 fell. Hong Kong short selling turnover fell -25.78% overnight, representing 70% of the 1-year average, with short selling accounting for 19% of total trades. Growth and value factors were mixed, with large caps underperforming large caps. The main sectors were real estate +4.17%, healthcare +2.95% and basic products +0.82%, while utilities -2.08%, energy -0.84% and industry -0.69%. The top subsectors were biotechnology, property developers and cement, while solar, semi-finished and wind power were among the worst. Southbound Stock Connect volumes were light as mainland investors bought $275 million worth of Hong Kong shares, with Wuxi Biologics a big buy for the third day, while Tencent and Meituan were small net buys.

Shanghai, Shenzhen and STAR Board fell -1.16%, -2.34% and -3.03% respectively on volume +27.69% from yesterday, or 90% of the 1-year average . Only 495 stocks rose while 4,112 fell. Real estate and financials gained +2.69% and +0.32% while technology -3.91%, industry -3.35% and discretionary -2.73%. The main sub-sectors were related to real estate, finance such as insurance and coal mining, while solar energy, batteries, tractor-trailers and auto parts were among the worst. Foreign investors sold -$591 million of mainland stocks today via Northbound Stock Connect. The CNY fell -0.45% against the US dollar to 6.99 from 6.95, Treasuries were flat and copper was down -0.32%.

Last night’s exchange rates, prices and yields

  • CNY/USD 6.99 vs. 6.96 yesterday
  • CNY/EUR 6.98 vs. 6.96 yesterday
  • 10-year government bond yield 2.66% vs. 2.66% yesterday
  • China Development Bank 10-year bond yield 2.82% vs. 2.82% yesterday
  • Copper price -0.32% overnight
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