Week in Review
- Asian equities started the week off lower and then rallied higher in the middle of the week as central bank rate hikes dominated market news, though China maintained its easing stance.
- January Manufacturing PMI, reported on Monday, was 50.1 versus expectations of 50.1 and December’s 47, while the Non-manufacturing (Service) PMI was 54.4 versus expectations of 52 and December’s 41.6. Both indicated an expansion, which was more pronounced in services.
- Baidu
announced Tuesday that it would be rolling out a Chat GPT-like AI search feature.
BIDU
- China’s currency rallied this week on reopening and an increase in demand for RMB-denominated assets.
Friday’s Key News
Asian equities had a strong night as India rebounded. Concerns of Adani’s implosion leading to a broader crisis lessened, though Mainland China and Hong Kong underperformed. Asia saw impressive equity performance overnight as Amazon
AMZN
AAPL
We had our first day of net sales by foreign investors via Northbound Stock Connect since January 3rd. Despite the sale of a net -$630 million worth of Mainland stocks today, foreign investors bought over +$5 billion worth of Mainland stocks for the week. There has been significant buzz about global investors’ allocation to Chinese stocks as many strategists have published research reports on the topic. I believe hedge funds, due to their trading focus, pivoted to go long China months ago. Meanwhile, I believe long-only funds, active mutual funds, and institutional investors are still underweight the space due to skepticism and scar tissue. Removing these underweights will take time as Q1 investment committee meetings are not until April. Yes, we are seeing a pause and a pullback, but this should provide some of those investors an opportunity to buy the dip.
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