November Retail Sales Show Strength In Autos, Home Appliances

Key News

Asian equities started the week with a thud on light volumes as the U.S. dollar strengthened.

Mainland China and Hong Kong had weak sessions following the mid-morning November economic data release, as the retail sales expectations miss was widely cited. Yes, retail sales’ 3% missed expectations of 5% and October’s 4.8%, which was widely cited as the culprit for today’s market action as it implies the necessity for more policy support geared to domestic consumption.

Investors did not look beyond the headline number, as several categories showed strength year-over-year (YoY), including auto, which increased +6.6%; furniture, which increased +10.5%; and restaurants, which increased +4%.

Singles Day had a much earlier pre-sales period versus last year, thereby pulling November sales into October. October retail sales increased by +4.8%, handily beating expectations of 3.8%. It is bizarre that not one of the 22 economists who submitted an estimate incorporated the Singles Day effect into their estimate. Singles Day clearly helped boost household electronics sales, which increased +22.2% year-over-year (YoY). Online retail sales increased +7.4% year-to-date YoY. Personally, I would average November retail sales of RMB 4.376 trillion and October’s RMB 4.54 trillion together, which is RMB 4.458 trillion versus the 2024 monthly average of RMB 4.024 trillion.

Markets slumped on the economic release despite a significant amount of verbal support from policymakers.

Premier Li hosted the State Council Executive Meeting on implementing the agenda from the Central Economic Work Conference (CEWC) as the PBOC and NDRC met as well, separately. Following Wednesday’s Fed cut, it would not be surprising to see further rate cuts implemented in China. The verbal support is nice though domestic and foreign investors clearly want actual policy as favored growth stocks underperformed as China’s 10 Year Treasury Bond yield another 52 week and all time low of 1.72%. This is the ninth consecutive day the 10 Year yield has hit a new low.

Mainland investors sold a net $49 million worth of Hong Kong-listed stocks and ETFs while the National Team’s favored ETFs had below average volumes.

The U.S.-China Economic Working Group met at the G20 Finance and Central Bank meeting in Johannesburg, in a sign of diplomatic thaws. This follows the U.S. and China renewing their Science and Tech Cooperation Pact.

The Hang Seng and Hang Seng Tech indexes fell -0.88% and -1.45%, respectively, on volume that decreased -15.4% from Friday, which is 102% of the 1-year average. One-hundred and forty stocks advanced while 348 stocks declined. Main Board short turnover decreased -14% from Friday, which is 107% of the 1-year average, as 16% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The value factor and large caps “outperformed” (i.e. fell less than) the growth factor and small caps. The top-performing sectors were Utilities, which gained +0.45%, Energy , which gained +0.22%, and Financials, which gained +0.14%. Meanwhile, the worst-performing sectors were Technology, which fell -2.61%, Real Estate, which fell -2.57%, and Health Care, which fell -2.44%. The top-performing subsectors were paper/packaging, consumer durables, and telecom, while technology hardware, national defense, and pharmaceuticals were among the worst-performing subsectors. Southbound Stock Connect volumes were 1.5x pre-stimulus levels, as Mainland investors sold a net -$49 million worth of Hong Kong-listed stocks and ETFs.

Shanghai, Shenzhen, and the STAR Board fell -0.16%, -1.03%, and -1.47%, respectively, on volume that declined -17.88% from Friday, which is 167% of the 1-year average. 1,711 stocks advanced, while 3,215 stocks declined. The value factor and large caps fell less than the growth factor and small caps. The top-performing sectors were Utilities, which gained +2.15%, and Energy, which gained +1.11%. Meanwhile, the worst-performing sectors were Technology, which fell -1.4%, Health care -1.38%, and Real Estate, which fell-1.35%. The top-performing subsectors were education, highways, and retail. Meanwhile, motorcycle, aviation and leisure products were the worst. Northbound Stock Connect volumes were almost nearly 3X average. CNY and the Asia dollar index fell versus the U.S. dollar. Treasury bonds rallied. Copper and steel fell.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

CNY per USD 77.28 versus 7.28 yesterday

CNY per EUR 7.64 versus 7.63 yesterday

Yield on 10-Year Government Bond 1.72% versus 1.78% yesterday

Yield on 10-Year China Development Bank Bond 1.79% versus 1.85% yesterday

Copper Price -0.35%

Steel Price -0.65%