What Happened in China Markets Today (7/7)

US Treasury Secretary #Yellen says the Biden administration is seeking healthy economic competition and better communication with China, while taking appropriate measures to defend national security. She indicated her trip was meant to avoid misunderstanding or miscommunication between the two nations. Yellen has been less supportive of a confrontational approach to China in favor of a benign rivalry.

US #PCAOB audit officials reported to have started a new round of inspections of US-listed companies over the past few weeks. The PCAOB sent a team to HK to review the 2022 audit reports of close to a dozen companies, including Tencent Music $ $Tencent Music(TME)$ , $DiDi Global Inc.(DIDI)$ , and $NetEase(NTES)$ . Tech shares fell in the morning but managed to claw back most of their losses by the close.

Chinese regulators are set to impose a fine of at least $1.1 billion on @AntGroup, $Alibaba(BABA)$ ’s fintech arm, as regulatory overhaul draws to a conclusion after more than three years since the company’s record-breaking IPO was scuttled. Shares of $Alibaba(09988)$ rose 3.4% in a weak market on optimism that the fine will pave the way for Ant Group’s IPO and allow Alibaba to proceed with the spin-off of its other business units to unlock their value.

Shares of China’s top banks fell after $Goldman Sachs(GS)$ came out with a downgrade of $Agricultural Bank of China(ACGBF)$ $Agricultural Bank Of China Limited(601288)$, $ICBC(01398)$ and $Industrial Bank Co.,Ltd.(601166)$ to a “sell” recommendation. The report cited risks to banks’ profit margins on expectations they will have to take on more local government debt to reduce the exposure of smaller, less well-capitalized lenders. This resulted in a downgrade of expected yields by 2%, reducing the attractiveness of one of the highest-yielding sectors in the market.

The # $HSI(HSI)$ $Hang Seng Index - main 2307(HSImain)$ Company Limited announced it plans to include major foreign companies in the key $HSI(HSI)$ and $HSTECH(HSTECH)$ when it conducts its quarterly review in November 2023. This is a follow-up to April’s proposal by the index provider to give qualified foreign companies a chance to become blue chips through the two top indices tracked by fund managers and ETFs. Some notable foreign firms listed in the $HKEX(00388)$ include $PRADA(01913)$ , $YANCOAL AUS(03668)$, $SAMSONITE(01910)$ , $L'OCCITANE(00973)$, and $NAGACORP(03918)$. The move could encourage bigger foreign companies to list in Hong Kong in the near future.