This morning after the Hong Kong close, Bloomberg News reported that the CSRC, China’s SEC, is working with other Chinese regulators “…to give U.S. regulators full access to auditing reports of the majority of the 200-plus companies listed in New York as soon as mid-this year” according to “people familiar with the process”. The plan would differentiate private companies and State Owned Enterprises as the former has no state secrets/sensitive information while the latter might.
With that said, big global mutual fund families can buy the US China ADRs without their investors knowing they did until the end of June when they have to show their top ten holdings. If the names go up, you keep them and the fund families could say look how smart we are! If the stocks go down, one could sell them before the end of June and no one would know you ever owned them. Hedge funds don’t have that problem buying the names because they can hedge their long positions with short positions.
China is closed Monday and Tuesday while Hong Kong is closed Tuesday leading to light volumes. What’s interesting? Market shrugged off a weak Caixin Manufacturing PMI release of 48.1 versus expectations of 49.9 an Feb’s 50.4. Why? Stimulus coming and effect of covid. Interesting travel related stocks had a good day in China and Hong Kong. Cities with lockdowns won’t be traveling but China is a big country so maybe more folks are traveling more than anticipated.
The Hang Seng Index opened -1.38%, reached an intra-day low of -1.99% though grinded higher all day to close +0.19%. Volumes were very light -7.65% from yesterday which is only 63% of the 1-year average as China and Hong Kong have a market holiday early next week. Southbound Stock Connect was closed today which usually accounts for 10% to 14% of Hong Kong turnover. Hong Kong short selling turnover was below the 1-year average.