Mainland China & Hong Kong Resilient Despite Liberation Day
6 Min. Read Time
Key News
Asian equities were lower overnight following President Trump's "Liberation Day" tariff announcements. Vietnam and Japan were hit hard, while Taiwan and Indonesia picked the right day to be closed. Hong Kong, Mainland China, and South Korea were all off, but quite resilient as all markets were down less than -2%.
I think it is important to note that both Mainland China and Hong Kong will be closed tomorrow. In the twelve years of studying this market and seven or eight years writing China Last Night, today’s market action doesn’t make the top ten drawdowns by a long shot. Why?
- Mainland China and Hong Kong are much smaller percentages of global indices, as China makes up only 3.24% of the MSCI All Country World Index as of March 31st, versus a 5.2% peak weight.
- While global investors remain underweight in Mainland China, increasingly, domestic Chinese and Asian regional investors account for a bigger percentage of ownership than in the past. Global investors continue to significantly overweight US stocks, as 31.7% of US stock ownership is held by foreign investors, according to the US Treasury as of Q2 2024.
- The China government's policy response is apt to focus on raising domestic consumption. Mainland-listed catering/restaurants and retail were top sub-sector performers.
- Mainland investors bought a vast $3.7 billion worth of Hong Kong-listed stocks and ETFs today, net of selling, including Alibaba, the Hong Kong Tracker ETF, and the Hang Seng China Enterprise ETF, which saw massive inflows today. The largest net buys were Tencent, which fell -1.23%; Semiconductor Manufacturing International (SMIC), which gained +0.78%; and Xiaomi, which gained +3.03%. Southbound Stock Connect accounted for 44% of Hong Kong's turnover.
Not all everything was rainbows and unicorns, though. Specifically:
- Apple’s supplier ecosystem was smoked, as Sunny Optical fell 6.64%, AAC Technologies fell 12.76%, and Mainland-listed GoerTek fell10%.
- Export-driven manufacturers were hit with -14.15% for textile manufacturer Shenzhou International, -12.37% for power tool maker Techtronic Industries, -7.79% for computer maker Lenovo, -8.03% for appliance makers Haier Smart Home, and -4.77% for Midea.
- Alibaba fell -5.00%, JD.com fell -5.19%, and PDD fell -5.25% pre-market after the cancellation of the de minimis exemption rule. PDD doesn’t break out its non-China revenue, so we are a bit in the dark. Alibaba’s quarter ended 12/31/2024 saw revenue of $38.381B, of which $5.173B was from Alibaba International. The company didn’t mention or break out the US revenue, though I assume it is small, as it is focused on Europe and the Middle East. JD.com did $47.5B of revenue in Q4 2024 but doesn’t break out US revenue, as I assume it is exceedingly little.
Hong Kong and Mainland China had several positive sectors, including Real Estate, as the China Index Academy reported the average price of new residential buildings in 100 cities increased +0.17% month-over-month (MoM) in March and +2.63% year-over-year (YoY). The wealth of a city was a big determining factor as, for Tier 1 cities Beijing and Shanghai, new home prices increased by +0.73% and +0.52%, respectively. Meanwhile, 2nd Tier Cities saw an average increase of +0.03%, and 3rd and 4th Tier cities actually saw a decrease of -0.09%.
March's Caixin Services purchasing managers' index (PMI) was 51.9 versus expectations of 51.5 and February’s 51.4.
The Hang Seng and Hang Seng Tech indexes fell -1.52% and -2.09%, respectively, on volume that increased +33.65% from yesterday, which is 172% of the 1-year average. 149 stocks advanced, while 322 declined. Main Board short turnover increased by +92.1% from yesterday, which is 239% of the 1-year average, as 21% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Value and dividend stocks “outperformed” (i.e. fell less than) everything else. The top-performing sectors were Real Estate, which gained +1.94%; Utilities, which gained +1.05%; and Information Technology, which gained +0.27%. Meanwhile, the worst-performing sectors were Consumer Discretionary, which fell -3.23%; Materials, which fell -2.04%; and Industrials, which fell -2.01%. The top-performing subsectors were real estate management and building. Meanwhile, household appliances and textiles were among the worst-performing subsectors. Southbound Stock Connect volumes were 3X pre-stimulus levels as Mainland investors bought a net $3.7 billion worth of Hong Kong-listed stocks and ETFs, including the Hong Kong Tracker ETF, the Hang Seng China Enterprise ETF, and Alibaba, Tencent, SMIC, Xiaomi, and Meituan.
Shanghai, Shenzhen, and the STAR Board all closed lower by -0.24%, -1.10%, and -0.46%, respectively, on volume that increased by +16.74% from yesterday, which is 95% of the 1-year average. 1,923 stocks advanced, while 3,047 declined. Volatility, value, and large caps “outperformed” (i.e. fell less than) value, growth, and small caps. The top-performing sectors were Utilities, which gained +1.37%; Consumer Staples, which gained +1.1%; and Real Estate, which gained +0.84. Meanwhile, the worst-performing sectors were Information Technology, which fell --2.76 %; Consumer Discretionary, which fell --2.18 %; and Materials, which fell -1.55%. The top-performing subsectors were agriculture, power, and catering. Meanwhile, motorcycles, electronic components, and auto parts were among the worst-performing subsectors. Northbound Stock Connect volumes were above average. CNY and the Asia dollar index fell versus the US dollar. Treasury bonds were rallied. Copper and steel fell.
Last Night's Performance
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1.5% |
| Hang Seng Tech | HSTECH Index | -2.1% |
| Hong Kong Turnover | HKTurn Index | 33.7% |
| HK Short Sale Turnover | HKSST Index | 92.1% |
| Short Turnover as a % of HK Turnovr | N/A | 21.1% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 466.3 |
| China (Shanghai) | SHCOMP Index | -0.2% |
| China (Shenzhen) | SZCOMP Index | -1.1% |
| China (STAR Board) | Star50 Index | -0.5% |
| Mainland Turnover | .chturn Index | 16.7% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | -0.6% |
| Japan | NKY Index | -2.8% |
| India | SENSEX Index | -0.4% |
| Indonesia | JCI Index | 0.6% |
| Malaysia | FBMKLCI Index | -0.5% |
| Pakistan | KSE100 Index | 0.9% |
| Philippines | PCOMP Index | -1.6% |
| South Korea | KOSPI Index | -0.8% |
| Taiwan | TWSE Index | 0.1% |
| Thailand | SET Index | -0.9% |
| Singapore | STI Index | -0.3% |
| Australia | AS51 Index | -0.9% |
| Vietnam | VNINDEX Index | -6.7% |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 151 | -1.67 |
| Communication Services | 9 | -1.18 |
| Consumer Discretionary | 28 | -3.23 |
| Consumer Staples | 13 | -0.26 |
| Energy | 7 | -0.52 |
| Financials | 23 | -1.07 |
| Health Care | 13 | -1.83 |
| Industrials | 20 | -2.01 |
| Information Technology | 10 | 0.27 |
| Materials | 10 | -2.04 |
| Real Estate | 6 | 1.94 |
| Utilities | 12 | 1.05 |
| Mainland China Listed | 404 | -0.89 |
| Communication Services | 6 | 0.51 |
| Consumer Discretionary | 31 | -2.18 |
| Consumer Staples | 24 | 1.09 |
| Energy | 13 | -0.59 |
| Financials | 64 | -0.26 |
| Health Care | 31 | -0.76 |
| Industrials | 64 | -1.29 |
| Information Technology | 91 | -2.76 |
| Materials | 58 | -1.55 |
| Real Estate | 6 | 0.83 |
| Utilities | 16 | 1.36 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -1.2 |
| Alibaba HK | 9988 HK Equity | -5 |
| JD.com HK | 9618 HK Equity | -5.2 |
| NetEase HK | 9999 HK Equity | -0.3 |
| Yum China HK | 9987 HK Equity | 1.3 |
| Baozun HK | 9991 HK Equity | 1.4 |
| Baidu HK | 9888 HK Equity | -2.4 |
| Autohome HK | 2518 HK Equity | -0.1 |
| Bilibili HK | 9626 HK Equity | -1.1 |
| Trip.com HK | 9961 HK Equity | -1.5 |
| EDU HK | 9901 HK Equity | -2.8 |
| Xpeng HK | 9868 HK Equity | -1.6 |
| Weibo HK | 9898 HK Equity | -2.2 |
| Li Auto HK | 2015 HK Equity | -2.7 |
| Nio Auto HK | 9866 HK Equity | -3 |
| Zhihu HK | 2390 HK Equity | -3.7 |
| KE HK | 2423 HK Equity | 0.6 |
| Tencent Music Entertainment HK | 1698 HK Equity | -1.9 |
| Meituan HK | 3690 HK Equity | 0.1 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | -5 |
| XIAOMI CORP-CLASS B | 3 |
| TENCENT HOLDINGS LTD | -1.2 |
| SEMICONDUCTOR MANUFACTURING | 0.8 |
| MEITUAN-CLASS B | 0.1 |
| HONG KONG EXCHANGES & CLEAR | -2.1 |
| BYD CO LTD-H | -1.7 |
| CHINA CONSTRUCTION BANK-H | -0.3 |
| HSBC HOLDINGS PLC | -2.2 |
| JD.COM INC-CLASS A | -5.2 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| LUXSHARE PRECISION INDUSTR-A | -10 |
| CONTEMPORARY AMPEREX TECHN-A | -2.4 |
| SUNGROW POWER SUPPLY CO LT-A | -7.3 |
| KWEICHOW MOUTAI CO LTD-A | 1.3 |
| HANGZHOU IRON & STEEL CO-A | 6.4 |
| ZHEJIANG HAIKONG NANKE HUATI | 5.1 |
| EAST MONEY INFORMATION CO-A | 0 |
| EOPTOLINK TECHNOLOGY INC L-A | -6.8 |
| VICTORY GIANT TECHNOLOGY -A | -9.5 |
| MIDEA GROUP CO LTD-A | -3.4 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 7.29 versus 7.27 yesterday
- CNY per EUR 8.08 versus 7.85 yesterday
- Yield on 10-Year Government Bond 1.72% versus 1.79% yesterday
- Yield on 10-Year China Development Bank Bond 1.75% versus 1.82% yesterday
- Copper Price -0.86%
- Steel Price -0.16%
