China and Hong Kong Equities
Greater China Sales Traders
- May recorded a net outflow totalling 53.7 Billion RMB (7.78 Billion USD) from Northbound trading, almost three times as much the 18.0 Billion outflow in April (which was already a 28-month high as of last month)
- In the month of 18 trading days, only 2 days closed with net buying which amounted to 11% only of the tradeable days
- The accelerating outflow is a direct consequence of the escalating trade tensions which was set off by the new round of tariff on US$200 billion of Chinese goods imposed by the US since 12-May-2019.
- US Commerce Department has also put 5G developer Huawei on an “Entity List” based on national security reasons and restricted US chipmakers in the names of Qualcomm and Xilinx from supplying component to the Chinese Telcom equipment producer.
- Surveillance technology giants like Hikvision Digital and Dahua Technology have also been impacted in a similar way as the ban on US component supply rippled across the 5G space.
- Many speculated China will adopt a series of retaliatory measures including restricting rare earth exports to the US, similar tariffs on further American imports and “cheaper” fixing for offshore Yuan against the Dollar
- However, in contrast to the recent pessimism over the US-China trade front, some still believe the China A-shares’ growing inclusion in MSCI indexes will support valuation over the longer term and thus inflow into the China stocks will return.