Delin's Weekly Observation

The US Department of Labor announced that the year-on-year increase in the consumer price index (CPI) in March accelerated from 3.2% in February to 3.5%, higher than the expected 3.4%, and maintained a month-on-month increase of 0.4%. The increase was also greater than the expected 0.3%. Excluding food and energy, the core CPI remained at 3.8% year-on-year, which was different from the forecast of falling to 3.7%, rising 0.4% month on month, exceeding expectations. America's core CPI over the past three months has increased by 4.5% at an annual rate, the highest since May last year. The year-on-year increase in the US producer price index (PPI) in March accelerated from 1.6% in February to 2.1%, but rose 2.2% lower than expected, while monthly growth slowed from 0.6% in February to 0.2%, slightly lower than expected; during the period, the annual increase in core PPI accelerated from 2.1% in February to 2.4%, higher than the expected 2.3% increase, while monthly growth slowed from 0.3% to 0.2%, in line with expectations.

US inflation is improving slowly. The initial value of the University of Michigan consumer confidence index fell from 79.4 the previous month to 77.9, lower than the original estimate of 79. The inflation forecast for the next year rose to 3.1% from 2.9% in February, higher than the 2.9% forecast, and the 5-10-year inflation forecast accelerated from 2.8% to 3%, higher than the estimated 2.8%. New York Federal Reserve Bank President John Williams (John Williams) pointed out that the Federal Reserve still has work to do to reduce inflation, indicating that there is no need to cut interest rates “in the very short term.” Neel Kashkari (Neel Kashkari), president of the Federal Reserve Bank of Minneapolis, also said that if inflation remains high, interest rates should remain unchanged indefinitely.

The Islamic Revolutionary Guard Corps of Iran launched a large-scale missile and drone attack on Israel last Saturday (13th). This is the first time in Iran's history that it has directly attacked Israel, and tension in the Middle East has once again escalated. According to Israeli military radio, Iran dispatched 185 drones and fired 110 surface-to-surface missiles and 36 cruise missiles at Israel. According to Bloomberg, the US and Britain are helping Israel intercept drones. An Israeli armed forces spokesman said Israel had intercepted 99% of the more than 300 missiles fired by Iran and was prepared for “any further developments and circumstances.” As far as the global oil market is concerned, Iran's retaliatory attack on Israel will prompt investors to once again pay attention to the flow of crude oil through the Strait of Hormuz. The Strait of Hormuz is the only waterway into the Persian Gulf and an important route for transporting commodities.

The People's Bank of China released financial data for the first quarter. It added 3.09 trillion yuan in loans in March (RMB, same below), which is 800 billion yuan less than the same period last year, and lower than the median estimate of 3.6 trillion yuan; in March, the scale of social financing increased by 4.87 trillion yuan, a year-on-year decrease of 514.2 billion yuan, higher than the forecast of 4.7 trillion yuan. Demand for credit was lower than in the same period last year, mainly due to weak consumer spending and investment-related loans. As of the end of March, the broad currency (M2) balance reflecting current, time deposits, and currency in circulation was 304.8 trillion yuan, up 8.3% year-on-year, which is lower than the expected increase of 8.7%, while the narrow currency (M1) balance reflecting demand deposits and currency in circulation was 68.58 trillion yuan, up 1.1%. The M2 growth rate was far higher than M1, which meant that large amounts of capital were still in reserve, and there were relatively few circulating currencies used by residents for investment and consumption.

China's General Administration of Customs announced that in US dollars, exports fell 7.5% year-on-year in March, far below market expectations by 1.9%, the biggest decline since August 2023; imports fell 1.9%, also lower than the market estimate of a 1% increase; and the trade surplus was 58.55 billion US dollars, lower than the original estimate. The total value of mainland exports to major trading partners generally fell in March. The total value of EU exports fell 5.7%, the US fell 1.3%, South Korea fell 9.3%, and Japan fell 8.7%.

The National Bureau of Statistics announced that the National Consumer Price Index (CPI) rose 0.1% year-on-year in March, down 0.6 percentage points from February, and lower than the 0.4% increase expected. In the first quarter of this year, the Mainland's CPI remained the same as the same period last year. The Industrial Producer Ex-Factory Price Index (PPI) declined for 18 consecutive months and fell 2.8% year-on-year in March, in line with expectations. In terms of food prices, the year-on-year decline reached 2.7% last month, an increase of 1.8 percentage points over February, affecting the CPI decline by about 0.52 percentage points from year to year. Non-food prices rose 0.7% year-on-year last month. Among them, service prices rose 0.8%, down 1.1 percentage points from February, mainly the price of travel services.

According to data from the China Passenger Vehicle Market Information Association, retail sales of passenger cars in the narrow sense of the word reached 1.687 million units in March, an increase of 6% year-on-year and surged 52.8% month-on-month; retail sales in the first quarter increased 13.1% year-on-year to 4.829,000 units. According to the data, NEV sales performance was outstanding in March, with retail channel sales reaching 709,000 units, an increase of nearly 30% year-on-year and surging by more than 80% month-on-month. The penetration rate of new energy vehicles in domestic retail sales also increased by 7.6 percentage points year-on-year to 41.6%.

Kenty Wong, Deputy CEO of Delin Securities, observed that the Hong Kong stock market moved southward to bring expectations to investors at the beginning of last week. The Hang Seng Index did rise above the 17,000 level level as expected by the market. However, it began to weaken last Thursday. Finally, the Hang Seng Index fell for two consecutive days, falling to around 16,700 points, summarizing that the Hang Seng Index fell slightly by 2 points at the end of the week. On the sector side, investors were taken aback by the performance of domestic housing and property management stocks. Longhu (00960.HK) fell 8% last Friday, the biggest blue chip decline. In addition, Country Garden Services (06098.HK) also fell 4%. Due to the heavy war in the Middle East, news spurred gold prices to reach new highs. Lingbao Gold (03330.HK) surged 11% last Friday. I believe precious metals stocks will be a sector worth watching in the short term, so investors can pay more attention.

Looking ahead to this week, I believe Hong Kong stocks will fluctuate as the market watches the peripheral situation. Iran launches its first direct attack on Israel in nearly half a century, once again heating up the chances of a conventional war breaking out in the Middle East. In addition, the chances of the US Federal Reserve cutting interest rates seem to be getting lower and lower. I believe there will be very little news favorable to the market, and Hong Kong stocks are not optimistic in the short term.

There were only 12 IPOs in the first quarter of this year, and the amount raised decreased by nearly 30% year-on-year to HK$4.7 billion. As a result, Hong Kong has fallen to 10th place in the global IPO ranking, the lowest since 2009. In terms of rankings, New York and Nasdaq ranked first and second respectively, while India ranked fourth with 17.8 billion dollars; Shanghai ranked fifth with 16.2 billion. However, as the Hong Kong IPO market began to pick up in March, market participants predict that 80 new shares will be listed throughout the year, with the goal of maintaining a capital raised level of around 100 billion dollars. They believe there is an opportunity for Hong Kong to enter the top five again.

Summarizing the 12 IPOs listed in Hong Kong in the first quarter, Chinese brokerage firms participated in most of the market share. Looking at foreign-funded institutions, only J.P. Morgan Chase acted as the IPO sponsor. In addition, there are also reports that many traditional foreign investment banks have successively withdrawn from the IPO underwriting business in recent years, including Goldman Sachs withdrawing from the fourth paradigm last year, the overall coordinator of the Kodi Group and Pharmacist Gang, Merrill Lynch as the overall coordinator of Gurivat, and Motong as the overall coordinator of Tiantu Investments.

This situation is unimaginable for Hong Kong stock IPOs in the past few decades, but it is not difficult to understand in today's quiet environment of Hong Kong stocks. Since overall global coordinators and underwriters play the most important role in the procurement process, they are responsible for finding cornerstone investors and anchoring investors, so if they are worried about not being able to reach enough investors who are willing to subscribe, they can only choose to quit. This is a very painful situation for many investment banks.

If today's investment banks want to survive, they must let go of their burdens and get back on the road, including actively participating in large and small placements, mergers, acquisitions and restructuring, and financing projects. Some small projects I couldn't look forward to before, but now we have to take the initiative to communicate, and we must not let go of any opportunity.

A shares recorded a four-day decline during the five trading days last week. The overall decline was not significant. Due to shrinkage, the money loss effect has already appeared. In the short term, it seems that there are new themes every day, but the rotation is fast.

“Certain Opinions on Strengthening Supervision and Risk Prevention and Promoting High-Quality Development of the Capital Market” was issued. It is the third “National Nine Rules” in the capital market. The opinion issued by the State Council this time implements the arrangements of the Central Financial Work Conference. It is a capital market guidance document issued by the State Council again after the two “Nine National Rules” in 2004 and 2014. Each one is a pain point directly hitting the current stock market. The random inspection rate for startup companies will be increased from 5% to 20%. The next step is to moderately increase indicators such as operating income and net profit of companies listed on the Main Board and GEM. Improve the financial indicators of listed companies. After the delisting, the number of listed companies will decrease, and only then will there be a big bull market after the previous two national nine regulations.

China Construction Bank: As of April 10, 2024, Huijin has increased its holdings by 71.45 million shares. Bank of China: Huijin recently increased its holdings by more than 330 million shares. The announcement from CCB and the Bank of China after the market on Friday indicated that Huijin is still protecting the market. It is expected that the market will continue to consolidate around 3,000 points in the future.

The State Council issued a new “National Nine Rules” for the capital market to promote high-quality development of the capital market. This capital market guidance document covers nine major parts, including admission to the issuance and listing of new shares, continuous supervision of listed companies, delisting supervision, and promotion of medium- to long-term capital entry into the market. Shortly after the publication of the “National 9 Rules”, the Shanghai Stock Exchange and the Shenzhen Stock Exchange announced a number of new regulations, such as raising listing standards and adjusting delisting indicators. The China Securities Regulatory Commission also solicited comments on various regulations.

After the A-share market closed on Friday, the State Council issued “Certain Opinions on Strengthening Supervision and Risk Prevention and Promoting High-Quality Development of the Capital Market”. This is an opinion draft issued by the mainland capital market after a lapse of ten years after 2014. It is also the third “National Nine Rules” in history. The first “National Nine Rules” were published in 2004.

Wu Qing, chairman of the China Securities Regulatory Commission, said that in response to outstanding issues in institutional mechanisms, supervision and enforcement revealed by stock market fluctuations since August last year, the new “National Nine Rules” promptly address shortcomings, strengths and weaknesses, respond to investors' concerns, promote the resolution of deep-seated conflicts accumulated over a long period of time in the market, and accelerate the construction of a safe, standardized, transparent, open, dynamic and resilient capital market.

The new “National Nine Rules” put “strict issuance and listing entry” first, and proposed further improvements to the issuance and listing system, including raising the main board and GEM listing standards, improving the quality and efficiency of issuance and listing guidance, and strict supervision and separation of listings. In addition, it is also necessary to step up supervision of issuance and underwriting, strengthen supervision of all aspects of the issuance of new shares, price inquiries, pricing, and placement; rectify market chaos such as high price overrecruitment and group price pressure; strictly strengthen the supervision of information disclosure and supervision of fund-raising projects; and strictly crack down on illegal escrow, surprise stock entry at abnormal prices, and transfer of benefits.

The new “National Nine Rules” also focus on the regulation of listed companies. The authorities intend to improve the system of rules for reducing holdings and introduce administrative measures to reduce the holdings of listed companies to regulate the reduction of holdings by the majority shareholders, especially those who are controlling shareholders or actual controllers. The authorities also plan to require listed companies to increase dividends by strengthening the supervision of cash dividends. Relevant measures include restricting majority shareholders of companies that have not paid dividends for many years or that have a low dividend ratio to reduce their holdings, increasing incentives for companies with high-quality dividends, and taking more measures to increase dividend rates. At the same time, the authorities are also studying the integration of the market value management of listed companies into the internal and external assessment and evaluation system of enterprises.

The new “National Nine Rules” include content that has attracted the attention of the market: vigorously promoting the entry of medium- to long-term capital into the market. The document proposes developing equity public funds, enriching the types of assets and investment portfolios that public funds can invest in, optimizing the policy environment for insurance fund equity investment, and implementing and improving performance evaluation methods for state-owned insurance companies to better encourage long-term equity investment. In addition, the authorities are also planning to increase the flexibility of investing in corporate pensions and personal pensions; encourage bank financial management and trust funds to actively participate in the capital market and increase the scale of equity investment. In terms of strengthening delisting supervision, the document mentions that the authorities plan to deepen the reform of the delisting system and accelerate the formation of a normalized delisting pattern where exhaustion should be withdrawn and cleared in a timely manner.

As for the rest of the new “National Nine Rules”, it covers expanding and optimizing the mechanism for cross-border interconnection of capital markets, broadening financing channels for overseas listing of enterprises, improving mechanisms for dealing with risk of bond default, and stepping up joint crackdowns on securities and futures crimes.

As Hong Kong approved the issuance of cryptocurrency spot exchange-traded funds (ETFs), new developments have been reported. According to some sources, the regulators announced as soon as today that they will allow direct investment in cryptocurrency Bitcoin spot ETFs and Ethereum spot ETFs. According to reports, at least two issuers have been approved to issue ETFs for the above two spot cryptocurrencies at the same time, and the new products are expected to be officially launched by the end of the month.

Bloomberg quoted sources yesterday as saying that at least two issuers were approved by regulators as soon as today, giving the green light to launch a Bitcoin spot ETF and an Ether spot ETF at the same time. The approved issuers are Harvest International and the issuer established by HashKey Capital, an asset management company under HashKey Group, an operator of a licensed virtual asset trading platform. The report mentioned that the issuers mentioned above are still awaiting approval from the Hong Kong Securities Regulatory Commission to launch spot cryptocurrency ETF products. They also need to finalize the details of the listing with the Hong Kong Stock Exchange. The relevant issuers plan to launch the new products at the end of this month. However, the source added that the product release schedule has not yet been finalized, and there is an opportunity for changes. Both issuers and the Securities Regulatory Commission did not respond to the report, while the Hong Kong Stock Exchange said it would update the market with the latest developments.

According to data from the US Commodity futures Trading Commission (CFTC), the number of yen net short positions held by hedge funds and fund managers increased to nearly 143,900 in the week ending April 2, a record high since January 2007. Despite repeated verbal intervention by Japanese officials recently, Tanyou still bet that the interest rate spread between the US and Japan will be difficult to narrow significantly, and the yen is expected to depreciate further.

Furthermore, due to the acceleration of inflation, real wages in Japan fell 1.3% year-on-year in February, falling for 23 months. Although the decline was slightly less than the 1.4% expected, wage pressure continued to drag down consumption, which meant that the Bank of Japan would keep interest rates unchanged for the time being. Nominal wages increased by 1.8%, in line with expectations. Salaries of full-time employees not including bonuses and overtime pay increased by 2.1% during the period, increasing by 2% or more for 6 consecutive months.

After the US released stronger inflation data than expected, it fell below 153. Japan's Ministry of Finance's Deputy Minister of Finance, Masato Kanda, said that regardless of whether intervention in the foreign exchange market is involved or not, the authorities are always prepared for any situation. Excessive exchange rate fluctuations are not good for the economy, while the benefits of a weak yen are waning, and the market has changed rapidly recently. Japan's Finance Minister Shunichi Suzuki also said on the same day that officials are monitoring the foreign exchange market with a high degree of urgency. Excessive exchange rate changes are not a good thing, and the exchange rate should stabilize and reflect basic factors.

The US performance period for the new quarter has officially begun. Three major Wall Street banks, J.P. Morgan, Citibank, and Wells Fargo, have all performed better than market expectations, but some net interest income is under pressure.

In terms of market capitalization and assets, J.P. Morgan Chase's net profit for the first quarter rose 6% year-on-year to US$13.42 billion, earning US$4.44 per share, higher than the market forecast of US$4.17; revenue rose 9% to US$41.93 billion, higher than the forecast of US$41.69 billion. J.P. Morgan's net interest income (NII) increased 11% to $23.08 billion, but declined quarterly and was lower than the market estimate of $23.13 billion; bank deposits increased 2% to $2.43 trillion. Motong expects net interest income for the full year of this year to be similar to last year, reflecting rising interest rates putting increasing pressure on bank loan business. Higher interest rates have boosted loan revenue, while interest on deposits has risen much more slowly than interest on loans, driving Motong's profit to a record high last year. However, financial director Jeremy Barnum (Jeremy Barnum) warned during the performance conference that customers began to transfer their deposits from low-interest checking and savings accounts to high-yield products such as certificates of deposit, which would slow down Motong's marginal profit. In terms of other business, investment bank revenue increased 21% year-on-year to $2 billion. Most of the increase was due to bond underwriting, while advisory fee revenue declined. Consumer banking revenue increased 7%, while profits fell 8%. Motong's overall expenditure for the first quarter was US$22.8 billion, an increase of 13% year-on-year. The bank expects to spend US$91 billion for the full year of this year, up from US$87 billion last year.

Another major bank, Citi's net profit in the first quarter fell sharply by 27%, to 3.37 billion US dollars, earning 1.58 US dollars per share, better than analysts' estimates of 1.23 US dollars; revenue fell 2% to 21.1 billion US dollars, which is still higher than the market forecast of 20.46 billion US dollars; net interest income for the period reached 13.5 billion US dollars, higher than expected. In other business areas, overall transaction revenue fell 7% to US$5.4 billion; among these, revenue from bond, foreign exchange, and commodity transactions decreased by 10%, while revenue from stock trading increased by 5%. Revenue from banking businesses, including mergers and acquisitions advisors, stock and bond underwriting, and corporate loans, increased 49% to US$1.7 billion; revenue from the US consumer banking business increased 10% to US$5.2 billion, mainly due to growth in the credit card business. Revenue from the wealth management business was 1.7 billion US dollars, down 4%.

As for Wells Fargo's net profit for the first quarter fell 7% year-on-year to US$4.62 billion, with earnings per share of US$1.2 billion; revenue rose 1% to US$20.9 billion, both of which beat expectations. However, net interest income for the period fell 8% year-on-year to US$12.2 billion, slightly lower than the forecast of US$12.3 billion, reflecting a slowdown in loan growth and pressure to raise interest on deposits, offsetting the benefits brought by rising interest rates. Rich countries spent 14.3 billion US dollars last quarter, more than market expectations, and provided 938 million US dollars for credit losses. CEO Charlie Scharf (Charlie Scharf) pointed out that the first quarter results were steady, and the increase in non-interest income exceeded the decline in net interest income.