Meituan Fine Lower Than Estimated, Mainland Market Reopens, Week In

Week in Review

• Mainland markets were closed Monday through Thursday this week in celebration of the Golden Week holiday. This led to low volumes in Hong Kong all week as Southbound Stock Connect was also closed.
• Trading in both Evergrande and Evergrande Property Services was suspended Monday as the company sold a 51% stake in its Property Services division to Hopson Development, in an effort to raise cash to pay debts.
• Charlie Munger, vice chairman of Berkshire Hathaway, doubled his position in Alibaba in Q3, according to an SEC filing released Wednesday.
• Asian equities cheered progress on extending the US debt ceiling and a proposed virtual call between Biden and Xi following US-China talks in Zurich.

Key News

Asian equities rebounded overnight except for South Korea and Taiwan, which closed lower. Meanwhile, Mainland China markets reopened for the first time since September 30^th.

After the close, the State Administration for Market Regulation (SAMR) fined Meituan $530 million for the exclusivity requirements it had been placing on merchants. It might sound crazy, but I believe this is a good outcome as the fine puts the issue to bed and is less than the market had anticipated. The fine represents 3% of 2020 revenues and only 4.7% of the $11.07 billion worth of cash on the books as of the end of Q2.

Tencent’s League of Legends is arguably the most popular video game globally though if you aren’t a Chinese teenager you might not know it exists. The mobile version of the game has been approved for launch in a positive development for the company. Mainland investors gobbled up Tencent as Southbound Stock Connect reopened today. The $227 million worth of net purchases is a little less than the $289 million worth bought on the last day of Southbound Stock Connect trading pre-Golden Week holiday. It does extend Tencent has seen net buying from mainland investors in 12 of the last 13 trading days.

Meituan also saw $178 million worth of net buying via Southbound Stock Connect, the 4^th consecutive trading session that saw net buying on the part of Mainland investors.

Internet and financial stocks led Hong Kong higher while decliners outpaced advancers in the broader Hang Seng Composite. Energy, utilities, and healthcare were weak and anything power-related, which includes wind, solar, and nuclear, was off.

China’s energy shortage is receiving the full attention of the government. Premier Li led a meeting to address the issue in advance of the coming winter months. Fortunately, the issue subsided over the Golden Week holiday as some factories and other high-power intensity…