Asian equities had a mixed day, as Hong Kong and Pakistan outperformed while India and China were off small.
Asian equities had a mixed day, as Hong Kong and Pakistan outperformed while India and China were off small. Hong Kong was once again led by internet stocks as the Hang Seng Tech jumped +2.65% versus the Hang Seng Index’s +1.35%. Today’s rally was accompanied by strong volume, up +29% from yesterday, which is a good sign though off from the 1-year average. Jack Ma’s vacation in Spain is being cited as a sign regulation is loosening, though the company’s new chip for its cloud computing business is a more realistic sign. We also have Alibaba’s Singles Day sales event, the largest e-commerce event globally, in a few weeks. The biggest factor is investors’ significant underweight to the space based on our air pocket thesis: investors have moved to the sidelines and not tried to catch a falling knife until there is more regulatory certainty. Overnight a global investment bank made China an overweight in the Asia Pac country model for the first time since last summer. If this rally gets some legs we are apt to see more strategists do the same. Investors are overweight India which is now the most expensive market by valuation in Asia Pacific. While China’s coal issues garner apocalyptic attention, there is no attention to the reality that 71% of India’s electricity is generated by coal according to Bloomberg New Energy Finance (BNEF puts China at 61%).
