Foreign Freak-Out As Mainland Buys Hong Kong, Tencent Results Review

After the Hong Kong shut, Tencent (700 HK, TCEHY US) reported Q1 monetary outcomes as income beat analyst expectations although adjusted web earnings and adjusted EPS missed. There have been loads of positives together with income, web earnings, and EPS have been robust year-over-year good points, worldwide/non-China recreation income shined/+25% to RMB 13.2 billion, promoting income improved, and margins and money flows have been robust. Chairman and CEO Ma Huateng famous a “home consumption restoration” which drove the decide up in promoting and cellular funds. Quarterly income was the very best for the corporate ever. Within the administration name, Tencent famous President Xi’s April assembly and speech supportive of Chinese language web firms as evidenced by Tencent’s common recreation approvals.

Income grew 11% to RMB 149.986 billion ($21.8 billion) from RMB 135.471 billion versus analyst expectations of RMB 146.286 billion

VAS (video games) Income grew +9% to RMB 79.3 billion led by worldwide video games +23% to RMB 13.2 billion and home video games by +6% to RMB 35.1 billion

Internet marketing income grew +17% to RMB 21 billion

FinTech/Enterprise Companies grew +14% to RMB 48.7 billion

Adjusted Internet Revenue grew +27% to RMB 32.538 billion from RMB 25.545 billion versus analyst expectations of RMB 33.22 billion

Adjusted EPS grew +28% to RMB 3.35 from RMB 2.62 versus analyst expectations of RMB 3.44

Key Information

Asian equities have been combined as Taiwan outperformed whereas Hong Kong, Singapore, and Thailand underperformed. The US debt ceiling is an element as traders ponder if the 2 sides can come to an settlement resulting in risk-off, conservative positioning on gentle volumes as patrons wait to see how issues pan out. Whereas Mainland China had a combined day, Hong Kong bought off following the Nationwide Growth and Reform Fee’s (NDRC) mid-morning assertion that the whole lot in China’s financial system is enhancing. The discharge seems tone-deaf to yesterday’s underwhelming April financial launch which had raised hopes policymakers would reply with financial assist. The NDRC assertion dashed these hopes sending shares down as potential patrons of stimulus information receded whereas short-pressed their bets.

Hong Kong Foremost Board’s brief turnover accounted for 20% of the entire turnover as solely 48 shares superior whereas 453 declined. CNY bought off versus the US greenback to six.99 with the Asia greenback index off as nicely. Not serving to was tepid April property gross sales as actual property in Hong Kong was off -4.26% although off solely -0.97% within the Mainland. Excessive dividend-paying shares have been hit with profit-taking exacerbating in the present day’s transfer. After the market shut, the PBOC launched an announcement talking to China’s low inflation although talked about the financial system is enhancing incrementally and coverage instruments can be found. This could give traders confidence policymakers are conscious of the state of affairs and able to act.

Whereas macro issues are middle stage, microanalysis/bottom-up is enhancing as evidenced by JD.com, Baidu, and now Tencent’s Q1 monetary outcomes. Keep in mind Alibaba reviews tomorrow morning. We had one other “overseas investor freakout” pushed by low positioning to China attributable to geopolitical issues which allowed shorts to drive shares down within the absence of overseas patrons although Mainland Chinese language traders purchased a really wholesome $865 million of Hong Kong shares in the present day. Mainland China took the identical information and yawned in a combined day on gentle volumes. Superb to see the disparity between onshore China and the overwhelming majority of householders, Chinese language traders versus offshore China and HK-US ADRs, the bulk owned by overseas traders. International traders did purchase $241 million of Mainland shares in the present day.

The Dangle Seng and Dangle Seng Tech have been off -2.09% and -2.23% on quantity +29.61% from yesterday which is 85% of the 1-year common. 48 shares superior whereas 453 declined. Foremost Board brief promoting elevated +72.75% from yesterday which is 103% of the 1-year common as 20% of turnover was brief turnover. Worth elements outpaced progress elements as massive caps “outperformed” small caps. All sectors have been adverse with actual property -4.24%, well being care -3.57%, and utilities -2.97%. Family merchandise have been the one constructive sub-sector whereas meals, pharma, and shopper durables have been the worst. Southbound Inventory Join volumes have been gentle as Mainland traders purchased $865 million of Hong Kong shares with Tencent a reasonable web purchase, Kuiashou a small web purchase, and Meituan a really small web promote.

Shanghai, Shenzhen, and STAR Board have been combined -0.21%, +0.33%, and +0.37% on quantity -10.04% from yesterday which is 84% of the 1-year common. 3,128 shares superior whereas 1,527 shares declined. Progress elements outperformed worth elements as small caps outpaced massive caps. Tech was the one constructive sector +0.33% whereas discretionary -1.4%, financials -1.36%, and healthcare -1.29%. The highest sub-sectors have been aerospace/army, laptop {hardware}, and web whereas telecom, insurance coverage, and valuable metals have been the worst. Northbound Inventory Join volumes have been reasonable/gentle as overseas traders purchased $241 million of Mainland shares with Kweichow Moutai a small web promote, Ping An a really small web purchase, and Foxconn a really small web promote. CNY fell -0.25% to six.99 versus the US greenback together with the Asia greenback index. Treasury bonds bought off together with copper whereas metal gained.

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Final Evening’s Efficiency

Final Evening’s Trade Charges, Costs, & Yields

• CNY per USD 6.99 versus 6.96 yesterday
• CNY per EUR 7.57 versus 7.59 yesterday
• Asia Greenback Index -0.20% in a single day
• Yield on 10-12 months Authorities Bond 2.72% versus 2.71% yesterday
• Yield on 10-12 months China Growth Financial institution Bond 2.89% versus 2.88% yesterday
• Copper Value -0.71% in a single day
• Metal Value +0.38% in a single day