Week in Review

• Asian equities were mixed but mostly higher for the week as Hong Kong’s Hang Seng Tech Index was the region’s top-performing benchmark, up +8.43%, followed by Indonesia, while Australia and Korea underperformed.
• China’s National People’s Congress (NPC), also known as the “Two Sessions,” kicked off this week. Leaders from five separate ministries held a preliminary joint press conference to provide more details on how expanding the fiscal deficit will boost consumption, investment, and confidence in the stock market.
• JD.com reported earnings that beat expectations for both top-line revenue and bottom-line net income as management noted increasing demand for home appliances thanks to trade-in subsidies.
• China’s manufacturing activity growth, as measured by the Purchasing Managers’ Index (PMI), reported on Monday, exceeded expectations for February, as exporters continued to fill more orders amid tariff uncertainty.

Key News

Asian equities were mostly lower overnight following the downdraft on Wall Street yesterday as the Philippines and Thailand outperformed and Japan and Australia underperformed.

Hong Kong was higher to start the session but ended near worst levels by the end of the day. There was a mild factor rotation into value after a strong week for growth and technology and an especially strong day yesterday. Mainland markets also traded sideways, following Hong Kong. Bond yields came down, though, potentially indicating a shift to stocks as Mainland investors bought the dip again in Hong Kong to the tune of $1.5 billion worth of net buying through Southbound Stock Connect.

China’s exports reached a new record high of half a trillion US dollars for the first two months of this year as importers rushed to make purchases ahead of tariffs. Meanwhile, China’s imports stalled in February as retaliatory tariffs bite.

The NPC meetings appear to be going well so far, as the markets have certainly cheered all this talk of consumption support. Some opinions came out that the step-up in consumption support is due to Trump’s tariffs, which we had suggested might nudge policymakers to do what they were going to do anyway on an expedited timeline. Paradoxically, this is great for internet and consumer names. China needs to supercharge domestic demand to make up for some potential loss of external demand.

Baidu proposed the issuance of convertible bonds this morning in USD, targeting up to $2 billion. We believe they could be used to fund both share repurchases and investments in AI and the cloud. The company states that the proceeds from the bond offering will be used to pay down existing debts, though the company has a significant amount of cash on hand in local currency. Alibaba's USD convertible bond sales were a huge success, which likely led to Baidu's decision to join the party.

We spoke to Baidu’s investor relations director this morning, who said the company is about to roll out some of the most advanced AI agents that the world has seen. Meanwhile, robotaxi operations in Wuhan continue to break even and are benefitting from 24/7 operation thanks to battery swapping technology. The company is also looking to expand the Apollo robotaxi program abroad, likely targeting the UAE first.

Trump’s former ambassador to China, Terry Branstad, made many constructive comments about the possibility of a US-China trade deal during our lunch meeting on Tuesday here in New York. He said that Trump’s main goal is, without a doubt, the re-industrialization of the United States, which means that anyone who wants to build in the US and employ Americans will ultimately not be tariffed. However, he stressed that a “Phase Two” Trade Deal of the same ilk as the Phase One Trade Deal reached in 2020 was no longer on the table. He also pointed out that investment restrictions and protocols, as mentioned in a recent White House memo on the Committee on Foreign Investment in the United States (CFIUS), would likely be included in any deal, though semiconductor export controls were likely to remain non-negotiable.

The Hang Seng and Hang Seng Tech indexes both closed lower by -0.57% and -0.52%, respectively, on volume that increased +2% from yesterday. Mainland investors bought a net $1.5 billion worth of Hong Kong-listed stocks and ETFs via Southbound Stock Connect. The top-performing sectors were Materials, which gained +1.40%, Energy, which gained +0.77%, and Utilities, which gained +0.42%. Meanwhile, the worst-performing sectors were Industrials, which fell -1.57%, Communication Services, which fell -1.49%, and Real Estate, which fell -1.29%.

Shanghai, Shenzhen, and the STAR Board all closed lower by -0.25%, -0.53%, and -1.24%, respectively, overnight. The top-performing sectors were Consumer Staples, which gained +1.25%, Materials, which gained +1.07%, and Energy, which gained +0.91%. Meanwhile, the worst-performing sectors were Real Estate, which fell -1.72%, Communication Services, which fell -1.15%, and Information Technology, which fell -1,06%.

Country/Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	-0.6%
Hang Seng Tech	HSTECH Index	-0.5%
Hong Kong Turnover	HKTurn Index	1.6%
HK Short Sale Turnover	HKSST Index	2.4%
Short Turnover as a % of HK Turnovr	N/A	14.6%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	0
China (Shanghai)	SHCOMP Index	-0.3%
China (Shenzhen)	SZCOMP Index	-0.5%
China (STAR Board)	Star50 Index	-1.2%
Mainland Turnover	.chturn Index	-4.6%
Nouthbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	Not Available
Jing Daily China Global Luxury Index	CHINALUX Index	-0.8%
Japan	NKY Index	-2.2%
India	SENSEX Index	0%
Indonesia	JCI Index	0.3%
Malaysia	FBMKLCI Index	-0.7%
Pakistan	KSE100 Index	0.5%
Philippines	PCOMP Index	1.3%
South Korea	KOSPI Index	-0.5%
Taiwan	TWSE Index	-0.6%
Thailand	SET Index	1%
Singapore	STI Index	-0.1%
Australia	AS51 Index	-1.8%
Vietnam	VNINDEX Index	0.6%

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	152	-0.57
Communication Services	9	-1.49
Consumer Discretionary	30	0.05
Consumer Staples	13	-0.63
Energy	7	0.77
Financials	23	-0.42
Health Care	13	-0.32
Industrials	19	-1.57
Information Technology	10	-0.93
Materials	10	1.4
Real Estate	6	-1.29
Utilities	12	0.42
Mainland China Listed	432	-0.17
Communication Services	9	-1.15
Consumer Discretionary	31	-0.36
Consumer Staples	27	1.25
Energy	16	0.91
Financials	63	-0.43
Health Care	40	-0.88
Industrials	69	-0.18
Information Technology	85	-1.06
Materials	68	1.07
Real Estate	7	-1.72
Utilities	17	-0.08

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	-1.9
Alibaba HK	9988 HK Equity	-0.6
JD.com HK	9618 HK Equity	-5
NetEase HK	9999 HK Equity	-1.6
Yum China HK	9987 HK Equity	-2.2
Baozun HK	9991 HK Equity	-0.8
Baidu HK	9888 HK Equity	-0.4
Autohome HK	2518 HK Equity	-1.2
Bilibili HK	9626 HK Equity	2
Trip.com HK	9961 HK Equity	2.6
EDU HK	9901 HK Equity	0.1
Xpeng HK	9868 HK Equity	4.6
Weibo HK	9898 HK Equity	-0.5
Li Auto HK	2015 HK Equity	0.5
Nio Auto HK	9866 HK Equity	-1.3
Zhihu HK	2390 HK Equity	1
KE HK	2423 HK Equity	-0.2
Tencent Music Entertainment HK	1698 HK Equity	-3.8
Meituan HK	3690 HK Equity	1.8

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
ALIBABA GROUP HOLDING LTD	-0.6
TENCENT HOLDINGS LTD	-1.9
XIAOMI CORP-CLASS B	-1
MEITUAN-CLASS B	1.8
KUAISHOU TECHNOLOGY	4.8
SEMICONDUCTOR MANUFACTURING	-3
JD.COM INC-CLASS A	-5
BYD CO LTD-H	-1.8
LI AUTO INC-CLASS A	0.5
HONG KONG EXCHANGES & CLEAR	-1.6

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
TALKWEB INFORMATION SYSTEM-A	-10
HAND ENTERPRISE SOLUTIONS-A	1.9
SHANGHAI STONEHILL TECHNOL-A	-0.3
BLUEFOCUS INTELLIGENT COMM-A	3.9
ZHEJIANG HAIKONG NANKE HUATI	10
EAST MONEY INFORMATION CO-A	-2.2
ZHEJIANG DAHUA TECHNOLOGY-A	6.5
LEO GROUP CO LTD-A	6.6
YONYOU NETWORK TECHNOLOGY-A	10
OFILM GROUP CO LTD-A	2.7

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.23 versus 7.24 yesterday
• CNY per EUR 7.86 versus 7.81 yesterday
• Yield on 10-Year Government Bond 1.80% versus 1.75% yesterday
• Yield on 10-Year China Development Bank Bond 1.81% versus 1.76% yesterday
• Copper Price -0.30%
• Steel Price -0.74%