Hong Kong Rained Out, Investors Wake Up To Importance Of US/China

Week in Review

• Asian equities were mostly lower this week as renewed concerns of another potential Fed rate hike weighed on risk assets globally.
• Trip.com reported Q2 revenue that exceeded pre-COVID (2019) levels by 29%, indicating a strong return to travel, at least domestically, for China’s consumer.
• The city of Shenyang cancelled home purchase restrictions and urged other cities to follow suit, which sent many real estate developers higher from depressed levels on Wednesday.
• China released August trade data on Thursday. While indicating a decline month-over-month, the release actually exceeded expectations in CNY terms.

Friday’s Key News

Asian equities were down except for India, which managed a gain. It was a quiet night with Hong Kong closed due to the largest amount of rain since 1884. Mainland China was off by a small amount due to an afternoon rally lifting stocks off the intra-day lows.

Stepping back, nothing has changed despite the roar of negative media attention surrounding Xi’s absence at the G20, Apple’s government employee ban, and Huawei’s phone and chip success with the Apple news weighing on US stocks. The bigger issue, in my opinion, is the stronger US economic news, which hurts the chances for a Fed pause as higher US yields propel the US dollar higher. Contacts in China were surprised by the US reaction to the iPhone ban, which hasn’t been officially confirmed. A ban shouldn’t be a surprise as many contacts didn’t believe the iPhone was popular amongst government workers nor used for official government business. iPhones are a luxury item in China due to their high cost relative to competitors. Huawei’s new Mate60 Pro is a mobile phone that can also use satellite phone and messaging when out of range of cell service. The launch is a potential threat to iPhone sales, though one should notice that Apple’s stock peaked back in late July.