Ministry of Finance announces issuance of ultra-long bonds ahead of weekend meeting

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Asian stocks were mixed but mostly higher overnight as Hong Kong outperformed Mainland China and most Asian markets.

Stocks listed in mainland China recovered after a significant decline over the past two days as high hopes for the National Development and Reform Commission (NDRC) led to some disappointment. As we said before, it is important to remember that the NDRC does not make decisions about fiscal expenditure, it only decides what to do with the money when it comes to issues such as infrastructure development.

The Ministry of Finance (MF) today announced plans to issue a sixth round of ultra-long-term bonds tomorrow (11 October) with a yield of 2.19% for 30 years. Liquidity will remain sufficient in the system and the timing is also interesting. Tomorrow’s issuance will come just one day before the Finance Minister holds his conference on Saturday. Policy makers are working overtime (this weekend) to make up for the week-long holiday.

The PBOC started the first round of its swap program, worth RMB 500 billion, overnight. Securities firms, asset management firms and insurance companies can now request additional liquidity to finance their share purchases.

All sectors recorded higher values, except Technology and Real Estate on the Mainland. Meanwhile, all sectors recorded higher levels in Hong Kong.

Meituan was the second most traded stock in Hong Kong, based on Hang Seng index constituents, and gained +5% as Morgan Stanley raised its price target and growth forecasts for the local services giant. Meituan saw a jump in activity on its platforms during the National Holiday or “Golden Week”. This is the latest in a series of analyst upgrades for China internet stocks, which could continue depending on consumer tax policies to be announced.

The Hang Seng and Hang Seng Tech indices closed up +2.98% and +2.05% overnight respectively, with volume down -23% from yesterday. The best performing sectors were Energy, which gained +4.64%, Financials, which gained +4.40%, and Consumer Staples, which gained +4.32%. Meanwhile, the worst performing sectors were Communication Services, which gained +1.00%, Healthcare, which gained +1.40%, and Information Technology, which gained +1.90%.

Shanghai, Shenzhen and STAR Council diverged to close +1.32%, -0.37% and -4.38% respectively on volume that decreased -27% from yesterday. The best performing sectors were Energy, which gained +4.45%, Utilities, which gained +2.52%, and Industrials, which gained +2.50%. Meanwhile, the worst performing sectors were Information Technology, which fell -2.25%, Real Estate, which fell -1.55%, and Healthcare, which gained +0.03%.

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Last night’s performance

Exchange rates, prices and last night’s yields

• CNY for US$7.08 versus 7.08 yesterday
• CNY for EUR 7.74 against 7.74 yesterday
• 10-year government bond yield 2.14% versus 2.18% yesterday
• China Development Bank 10-year bond yield 2.23% versus 2.27% yesterday
• Copper price +0.03%
• Steel Price +0.29%