The markets finally opened after the massive developments on Friday, and are just recently closed across the spectrum of markets, links and central bank data gathering. This will probably be one of my last few posts summarizing the Shanghai – Hong Kong Stock Connect data on a daily basis, I will do it later if there are more new developments (like on Friday and today) but I had originally scheduled for my last daily post on these matters to be on Friday last week. Anyhow, time to dig into the data!
- Hang Seng Index:
- Closed at 23 893, up 1.95% and with a daily high of 23 936.
- Futures had been front-running this, so they were less changed, but with a close of 23 889 and futures-implied spot high of 23 987.
- Turnover was (of course) massive at HK$105.25 billion! Whoa!
- Spreads split a lot wider, and futures-spot implied spreads expanded to around 19 index points (8 basis points) for December futures. People are probably expecting higher risk-free rates in Hong Kong at least!
- The VHSI is up to 15.7%, a 10.25% increase on Friday’s value. Volatility-fueled rallies, please?
- Hang Seng China Enterprises Index:
- Closed at 10 843, up 3.79%! Daily high was at 10 866.
- Same as above on the futures, closing at 10 806 with a futures-implied spot high matching the daily spot.
- Again, big turnover with HK$30.74 billion traded on the HSCEI!
- Same as on the HSI, the December futures spread expanded, here to 15 index points or roughly 14 basis points.
- Shanghai Stock Exchange:
- Up to 2 533, 1.85% (less than the HSI!?) with a high at 2 546.
- The A-Shares Top 50 were a lot perkier, closing at 7 806 (+2.27%) with a high at 7 893, more than 1% above the close!
- Turnover, oh what juicy turnover… RMB330.29 billion’s worth of turnover, up from less than RMB200 billion on Friday!
- The indices were very consistently up in the morning, spiked in the afternoon and then fell back towards their closing prices.
- Shanghai – Hong Kong Stock Connect:
- Northbound trading: up to RMB6.96 billion! People wanted interest-rate driven stocks and are probably hoping for les liquidity constraints going forwards, and that these IPOs in the pipeline will drag the markets higher.
- Southbound trading: A paltry RMB141 million! Naturally, the morning started with net sales, bringing the available quota up RMB10 million!
- The nearly half of gross southbound buying occurred after 3 pm CST, meaning after the mainland Chinese markets had closed! (Net this is different given the net sales after the market opening minutes).
- Hong Kong monetary base data:
- The monetary base totals increased by almost HK$1 billion, mostly on Certificates of Indebtedness.
- Closing aggregate balances were down HK$14 million. (Again, not a big deal).
- OEFBNs are up HK$24 million to adjust for this and some other cash considerations.
- The NBFI holding of OEFBNs decreased again, this time going down about HK$330 million leaving a total of HK$77.007 billion! Whoa! Financial institutions really think that there is more to collect on this market move at least given the pace that they are getting rid of HKMA liquidity!
Time for the analysis then!
Most all of the indices did what could be forecast with futures after Friday’s close, and not much more.
Worth keeping an eye out for though is the prospect of a correction tomorrow morning, given that futures gave up a lot of ground (0.5% for the HSCEI, 0.3% for the HSI) in the last 30 minutes of trading. This could largely be the general bias for profit taking that mainland Chinese investors seemed to be trading on near the end, and that spreading to Hong Kong, but the market action was so concerted on the futures market.
Any fall might be getting exacerbated by the very big long positions that NBFIs seem to have built up in Hong Kong, if these investors decide to reverse course. On top of this, the very, very big volume probably means that a lot of traders are positioned for a long move, which could be really risky given that tomorrow evening (thus affecting Asian Wednesday spot trading at the earliest) will see a rain of US data. the data rundown that I’ll be keeping an eye on tomorrow looks like this (all times GMT):
- 07:00 – Germany GDP
- 07:45 – French business sentiment
- 08:30 – Swedish PPI
- 12:45 – US Chain Store Sales
- 13:30 – US GDP and preliminary corporate profits
- 13:55 – US Retail Sales Redbook
- 14:00 – Case Shiller Home Price data
- 15:00 – Consumer Confidence Survey and Business Activity Index
Lots of data for only eight hours, and a lot of it will likely move markets. I will try to arrange a preview and expectations post on the US data dump at least, with commentary throughout the evening, and commentary on the European data as well. Lots of data has been good, but at this positioning both fundamentally and technically, there is the question of whether taking any unhedged position is a good idea.