Baidu Beats Estimates on Revenue, Buys Back Shares
Asian equities were mostly lower overnight on delta variant concerns. Mainland China and Hong Kong mostly followed the rest of Asia lower, though the STAR Market managed a small gain. Volumes in Hong Kong declined by over -10% from yesterday, while Mainland volumes were slightly higher.
Baidu reported strong earnings this morning before the US market open. The company beat estimates on its top-line, though margins suffered. Baidu has returned $566 million to shareholders under the 2020 Share Repurchase Program this year, bringing the cumulative repurchase to $2.5 billion since 2020. Over the past year, Baidu has been focused on its non-search businesses, including artificial intelligence, autonomous vehicles, and more. Some of these segments have become profitable, leading, in part, to its strong earnings results in the second quarter.
- Revenue +20.4% YoY to RMB 31.35 billion
- Net Margin 9.5% versus 12.9% in Q2 2021, likely due to heightened investment in non-search businesses
- Earnings Per Share (EPS) -11.9% YoY to RMB 8.56
MSCI will be adding 41 China stocks to its indexes in its upcoming semi-annual index review.
Janet Yellen is considering a trip to China, according to a Bloomberg report.
The China Banking and Insurance Regulatory Commission (CBIRC) has launched an investigation into online insurance platforms that will seek to rectify issues such as improper marketing and inadequate licensing. Investigations into the matter are expected to conclude by September 20, 2021.
More generally, China’s Central Committee and the State Council jointly released a policy document late yesterday outlining a five-year blueprint for regulating key industries. China markets, but particularly internet names, were largely down on the news. While the earlier series of reforms have caused some uncertainty, this new framework may provide more clarity on the direction and extent of future regulation for the internet space.
The world’s third-busiest port, Ningbo Zhoushan, is partially shut down after a worker became infected with covid-19. The Ningbo container port is the second in China to be shut down due to concerns over the delta variant.
A handful of Evergrande’s creditors have announced that they will grant the real estate developer an extension on the due dates of some of its loans. The developer has also been granted a legal reprieve in the form of having all cases against it be brought to a court in Guangzhou, meaning that local courts cannot seize assets.
The Hang Seng Index lost -0.53% overnight on volumes that were -12% lower than yesterday. The top traded stocks by Mainland investors via Southbound Stock Connect were Tencent, which fell -0.41%, Geely Auto, which gained +2.12%, China Mobile, which fell 0.30%, Xiaomi, which fell -2.05%, and Hong Kong Exchanges, which fell -3.54%.
The Shanghai, Shenzhen, and STAR Board ended the session -0.22%, -0.35%, and +0.49%, respectively. The top traded stocks by foreign investors via Northbound Stock Connect were Kweichow Moutai, which fell -3.46%, Wuxi Apptec, which fell -3.00%, China Northern Rare Earth, which fell -3.23%, Sany Heavy Industry, which fell -2.06%, and electric vehicle battery maker CATL, which fell -2.95%.
Last Night’s Exchange Rates, Prices, & Yields
- CNY/USD 6.48 versus 6.48 yesterday
- CNY/EUR 7.60 versus 7.61 yesterday
- Yield on 1-Day Government Bond 1.46% versus 1.58% yesterday
- Yield on 10-Year Government Bond 2.86% versus 2.88% yesterday
- Yield on 10-Year China Development Bank Bond 3.21% versus 3.24% yesterday
- Copper Price +0.70% overnight