TAL Education Q1 Earnings Overview

Online education company TAL Education missed on the big three (revenue, net income, and earnings per share (EPS)), despite topline revenue growth increasing by +42% year-over-year (YoY), as selling, marketing, administrative expenses increased to $336 million from $24 million YoY, which weighed on bottom line net income and EPS. The company only used $13.1mm of its $490.7mm share repurchase program, which is strange to me. Thus far, no analyst has asked management about relisting in Hong Kong. I will provide a Hong Kong relisting update via Twitter (@ahern_brendan).

• Revenue increased +42% to $610 million from $429 million, versus expectations of $632 million
• Adjusted net income fell -85% to $7 million from $48.01 million versus expectations of $50.4 million
• Adjusted EPS fell -85% to $0.01 from $0.08 versus expectations of $0.08

Key News

Asian stocks were lower, except for Vietnam, which outperformed the region. This followed roller coaster comments yesterday, as President Trump suggested tariff rollbacks could be in the cards soon.

China's Ministry of Commerce (MoC) threw cold water on President Trump's suggestion that talks are already in motion. The MoC said, "There are no economic and trade negotiations between China and the United States, at present”. The comments indicate a lack of understanding that the "Art of the Deal" requires Kabuki theatre, drama, and showmanship. Hopefully, the two sides will communicate with one another at the IMF and World Bank meetings in DC this week.

Premier Li and the State Council once again reiterated that it is necessary to “stabilize the stock market and continue to promote the stable and healthy development of the real estate market." Mainland media outlet Yicai noted that US shipments of liquid natural gas (LNG) to China went to zero in March, versus 412,500 tons in March of 2024, as China’s 99% LNG tariff and 94% oil tariff take hold. The European container shipping index futures fell -9% overnight. It is hard to know whether fewer boats going to the US means more supply for Europe, leading to the price decline, or indicating the trade war is weighing on the global economy. Regardless, the two sides should get talking, in my humble opinion!

Without question, the biggest news was declines in Meituan and JD.com shares, which fell -5.15% and -6.19%, respectively, overnight, as JD reported a substantial uptick in its new restaurant delivery service. The likely price war is apt to weigh on the companies’ financials. JD.com, as the leader in online electronic sales, was well-positioned to benefit from the new electronic subsidies through the expansion into restaurant delivery, curbing investor enthusiasm. The price action seems to be an instance of "shooting first and asking questions later, " as investors recall self-defeating battles, including that between Didi and Uber. Internet stocks were off, as defensive plays such as banks, nonferrous metals, mining, and telecom outperformed. It is worth noting that Southbound Stock Connect had $436 million worth of net buying, concentrated in Alibaba and Meituan.

Mainland investors now hold 8.64% of Alibaba’s shares outstanding. Southbound Stock Connect's percentage ownership continues to rise. Tencent is 11.78% owned by Mainland investors, Kuaishou is 15.76% owned, and Meituan is 10.96% owned, based on shares outstanding. Today, 43% of Hong Kong’s turnover was via Southbound, which indicates the lack of foreign investor participation, which was out of sight, and out of mind.

Mainland China had a non-eventful night, as banks and insurance outperformed, battery giant CATL gained +1.51%, and Midea gained +1.53%. These were rare growth outperformers in the current market. Software and technology, including electronic equipment and communications equipment, underperformed. The National Team’s favored ETFs had very light volumes. Carmaker BYD reports tomorrow.

Last Night's Performance

Country/Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	-0.7%
Hang Seng Tech	HSTECH Index	-1.5%
Hong Kong Turnover	HKTurn Index	-21.4%
Hong Kong Short Sale Turnover	HKSST Index	-25.4%
Short Turnover as a % of Hong Kong Turnover	N/A	13%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	-64.4
China (Shanghai)	SHCOMP Index	0%
China (Shenzhen)	SZCOMP Index	-0.7%
China (STAR Board)	Star50 Index	-0.9%
Mainland Turnover	.chturn Index	-10.1%
Nouthbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	Not Available
Jing Daily China Global Luxury Index	CHINALUX Index	-0.3%
Japan	NKY Index	0.5%
India	SENSEX Index	-0.4%
Indonesia	JCI Index	-0.3%
Malaysia	FBMKLCI Index	0.4%
Pakistan	KSE100 Index	-1.7%
Philippines	PCOMP Index	-0.2%
South Korea	KOSPI Index	-0.1%
Taiwan	TWSE Index	-0.8%
Thailand	SET Index	-0.6%
Singapore	STI Index	0%
Australia	AS51 Index	0.6%
Vietnam	VNINDEX Index	1%

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	146%	1
Advancing Stocks	370	3,009
Declining Stocks	111	1,965
Outperforming Factors	Liquidity, Momentum, Large Cap, Growth	Liquidity, Momentum, Small Cap, Growth
Underperforming Factors	Value, Dividend Yield	Low Volatility, Value, Quality
Top Sectors	Tech, Discretionary, Communication	Discretionary, Tech, Industrials
Bottom Sectors	Real Estate, Materials	Real Estate, Communications, Materials
Top Subsectors	Tech Hardware, Consumer Services, Auto	Auto Parts, Motorcycle, Industrial Machinery
Bottom Subsectors	Telecom, Non Ferrous Metals	Precious Metals, Agricultural, Retail
Southbound Connect Buys	Meituan (moderate)
Southbound Connect Sells	HK Tracker ETF and HS China Enterprise ETF (massive), China Mobile (large), Xiaomi (moderate), Alibaba, SMIC and Tencent (small)

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	151	-0.67
Communication Services	9	-0.56
Consumer Discretionary	28	-2.08
Consumer Staples	13	-0.39
Energy	7	-0.49
Financials	23	0.21
Health Care	13	2.02
Industrials	20	-0.12
Information Technology	10	0.84
Materials	10	0.07
Real Estate	6	0
Utilities	12	-0.48
Mainland China Listed	404	0.01
Communication Services	6	-0.55
Consumer Discretionary	31	-0.34
Consumer Staples	24	0.17
Energy	13	0.7
Financials	64	0.71
Health Care	31	0.15
Industrials	64	0.34
Information Technology	91	-1.5
Materials	58	-0.26
Real Estate	6	-0.08
Utilities	16	0.82

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	-0.7
Alibaba HK	9988 HK Equity	-1.9
JD.com HK	9618 HK Equity	-6.2
NetEase HK	9999 HK Equity	0.4
Yum China HK	9987 HK Equity	-1
Baozun HK	9991 HK Equity	0
Baidu HK	9888 HK Equity	0.2
Autohome HK	2518 HK Equity	2.2
Bilibili HK	9626 HK Equity	-0.7
Trip.com HK	9961 HK Equity	-1.9
EDU HK	9901 HK Equity	1.7
Xpeng HK	9868 HK Equity	-0.6
Weibo HK	9898 HK Equity	1.9
Li Auto HK	2015 HK Equity	-2.3
Nio Auto HK	9866 HK Equity	3.7
Zhihu HK	2390 HK Equity	0.4
KE HK	2423 HK Equity	1
Tencent Music Entertainment HK	1698 HK Equity	2
Meituan HK	3690 HK Equity	-5.2

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
XIAOMI CORP-CLASS B	6.9
ALIBABA GROUP HOLDING LTD	-1.9
MEITUAN-CLASS B	-5.2
TENCENT HOLDINGS LTD	-0.7
JD.COM INC-CLASS A	-6.2
HORIZON ROBOTICS INC	-4.3
BYD CO LTD-H	3.9
AKESO INC	7.6
SEMICONDUCTOR MANUFACTURING	0.4
XPENG INC - CLASS A SHARES	-0.6

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
BYD CO LTD -A	4.8
LAKALA PAYMENT CO LTD-A	8.3
CONTEMPORARY AMPEREX TECHN-A	1.5
NINGBO SHUANGLIN AUTO PART-A	1.4
HONGBAOLI GROUP CORP LTD-A	2.8
HYUNION HOLDING CO LTD-A	10
EOPTOLINK TECHNOLOGY INC L-A	12.5
VICTORY GIANT TECHNOLOGY -A	0
EAST MONEY INFORMATION CO-A	0.3
QINGDAO KINGKING APPLIED -A	2.2

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 7.28 versus 7.28 yesterday
• CNY per EUR 8.29 versus 8.31 yesterday
• Yield on 10-Year Government Bond 1.66% versus 1.66% yesterday
• Yield on 10-Year China Development Bank Bond 1.70% versus 1.70% yesterday
• Copper Price -0.13%
• Steel Price +0.23%