Are markets back in calm waters?
Last weekend’s Trump-Xi meeting and the lifting of the ban on Huawei helped most Asian markets yesterday. The US markets also gained, and the S&P 500 hit new highs. Apple (AAPL) and chipmakers provided the fuel for the 0.76% rally in the S&P 500 yesterday. Apple gained 1.83% yesterday, while Micron Technology (MU) closed 3.9% up as trade worries eased.
While it may seem like life is back to normal, economic data has something else to say, as global PMI fell to its lowest since October 2012. China’s manufacturing sector also slipped into contraction in June. Chinese investors shifted their focus from the trade deal to the government’s stimulus to boost the economy.
Hong Kong’s protests turned violent yesterday with protestors marching into the Legislative Council building. The police had to forcefully evict the protestors from the building. Yesterday was the 22nd anniversary of Britain’s handover of Hong Kong to China.
China’s key Shanghai Composite Index ended flat today as investors stayed cautious. The index opened slightly higher but remained choppy throughout the day. 649 stocks in the index gained while 764 stocks fell.
The tech-heavy Shenzhen component gained 0.16% today even after opening lower. However, market breadth for the index was negative with 14 companies gaining and 22 companies losing.
Hong Kong’s Hang Seng Index rose today after yesterday’s holiday. The index gained 1.17% today in spite of yesterday’s protests as the benefits of the trade truce seemed to outweigh the risk of escalating protests in investors’ minds.
Stocks and ETFs
Alibaba (BABA) was a star yesterday in Chinese indexes listed in the US. Alibaba gained 3.3%, adding billions to investors’ wealth in a single day. JD.com (JD), Alibaba’s Chinese competitor, gained 3% yesterday.
The iShares MSCI China ETF (MCHI), which has invested in Alibaba and JD.com, gained 2% yesterday on the NASDAQ. The iShares China Large-Cap ETF (FXI) gained 1.4% yesterday while the tech-focused KraneShares CSI China Internet ETF (KWEB) was the biggest gainer among the three with a 2.43% gain. KWEB also invests in Alibaba and JD.com.
The Hong Kong-focused iShares MSCI Hong Kong ETF (EWH) gained 0.97% yesterday in spite of the protests in Hong Kong.