Substantial Progress, Tariffs Reduced To 10% For 90 Days

Key News

Asian equities cheered the initial positive comments concerning the US-China trade meeting over the weekend and the India-Pakistan truce, as the Renminbi appreciated nearly +0.5% versus the US dollar. Indonesia, Thailand, and Singapore were closed for Vesak Day, celebrating the birth, Enlightenment, and death of the Buddha.

After Japan, South Korea, Taiwan and Mainland China’s Shanghai and Shenzhen markets closed today, Hong Kong stocks went vertical once the 3 pm local time press conference from Treasury Secretary Bessent and US Trade Representative Greer revealed the larger than expected 90-day drop in US tariffs on Chinese goods from 145% to 10%, though it appears a 20% additional levy could remain pending progress on curbing fentanyl precursor imports, and China’s tariffs on US goods from 125% to 10%. Bessent said that “substantial progress” had been made, though Vice Premier He Lifeng, China’s Minister of Commerce, did not elaborate beyond the joint statement. With Treasury Secretary Bessent’s comments on supply chain independence in “strategic industries,” we can assume that this includes steel, aluminum, semiconductors, and pharmaceuticals.

The Hang Seng, Hang Seng Tech, Shanghai, and Shenzhen indexes all closed above, i.e. “filled the gap”, from their pre-Liberation Day levels. Hong Kong-listed Healthcare stocks constituted the only negative sector, after President Trump’s Executive Order on lowering drug costs. Wuxi AppTec, with its US facilities, was a rare healthcare gainer. All things growth, consumer, and capital markets were on fire, including electric vehicles, hybrids, E-Commerce, household appliances, semiconductors, brokerages, and beverages were all higher.

Hong Kong-listed growth stocks ripped higher on volume that increased +99% from Friday to 172% of the 1-year average, led by the most heavily traded stocks by value Alibaba, which gained +6.15%, Tencent, which gained +4.63%, Xiaomi, which fell -1.46%, Meituan, which gained +2.48%, BYD, which gained +7.39%, and Hong Kong Exchanges, which gained +3.38%. Mainland investors sold a net -$2.38 billion worth of Hong Kong-listed stocks and ETFs today. Despite closing prior to the press conferences from Bessent, Greer, and the Ministry of Commerce.

Mainland China had a good day, led by growth stocks, especially electronic equipment makers. Battery giant CATL gained +3.52% in advance of their Hong Kong relisting. JD.com reports tomorrow after the close in Hong Kong.

China’s delegation, led by Vice Premier He Lifeng, stated, “The high-level talks between China and the United States were frank, in-depth and constructive, reached an important consensus and made substantial progress. Both sides agreed to establish a Sino-US economic and trade consultation mechanism. China and the United States will finalize the relevant details as soon as possible and will issue a joint statement reached in the talks on May 12.”  Today’s positive announcement is a small step toward better US-China political relations, while dampening the geopolitical headwind that has kept many US investors from owning Chinese equities. I suspect US ownership of Chinese equities is at or near all-time lows, though an improving relationship could bring investors off the sidelines. 

Congress’s view of China is abysmal, which raises the positive knock-on effects of President Trump’s effort, as numerous former Republican politicians failed to support his agenda. This won’t happen overnight, obviously, but it is an underestimated detour in the re-rating of China's stocks.

The Wall Street Journal had a worthwhile read titled “How Tariffs Are Crushing Small Businesses: ‘Nobody in Power Seems to Care’”. The article provides examples of small businesses reliant on Chinese goods or inputs, while lacking lobbyist support in Washington, DC. I stumbled upon a Buzzfeed article titled “Tariff Sticker Shock: Real Receipts From Americans” that looked at receipts from individuals and small businesses that show the additional tariff costs from Twitter and other social media.  From Mother Day’s flowers to business suits to MAGA hats, the tariffs on goods from numerous countries left readers shocked, based on their comments.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	3%
Hang Seng Tech	HSTECH Index	5.2%
Hong Kong Turnover	HKTurn Index	99.5%
Hong Kong Short Sale Turnover	HKSST Index	120.1%
Short Turnover as a % of Hong Kong Turnover	N/A	13.7%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	0
China (Shanghai)	SHCOMP Index	0.8%
China (Shenzhen)	SZCOMP Index	1.7%
China (STAR Board)	Star50 Index	0.5%
Mainland Turnover	.chturn Index	9.9%
Northbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	Not Available
Jing Daily China Global Luxury Index	CHINALUX Index	1.1%
Japan	NKY Index	0.4%
India	SENSEX Index	3.7%
Indonesia	JCI Index	0.1%
Malaysia	FBMKLCI Index	0.2%
Pakistan	KSE100 Index	9.1%
Philippines	PCOMP Index	1.1%
South Korea	KOSPI Index	1.2%
Taiwan	TWSE Index	1%
Thailand	SET Index	0.4%
Singapore	STI Index	0.7%
Australia	AS51 Index	0%
Vietnam	VNINDEX Index	1.3%

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	99	106
Advancing Stocks	392	3752
Declining Stocks	91	1182
Outperforming Factors	Liquidity, Growth, Momentum	Liquidity, Growth, Small Caps
Underperforming Factors	Low Volatility, Dividend Yield, Quality	Low Volatility, Large Caps, Dividend Yield
Top Sectors	Consumer Discretionary, Communication Services, Real Estate	Industrals, Technology, Consumer Discretionary
Bottom Sectors	Health Care
Top Subsectors	Aerospace, Aitos, Household Appliances	Aerospace, Heavy Machinery , Electronic Components
Bottom Subsectors	Consumer Services, Household & Personal Products, Pharmaceuticals	Soft Drinks, Pharmaceuticals, Agriculture
Southbound Connect Buys		N/A
Southbound Connect Sells	Tencent, Hong Kong Tracker ETF, SMIC, Xiaomi, Meituan, Xpeng, Alibaba	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	151	3.36
Communication Services	9	4.35
Consumer Discretionary	28	5.05
Consumer Staples	13	1.45
Energy	7	2.19
Financials	23	2.21
Health Care	13	-3.93
Industrials	20	2.9
Information Technology	10	1.21
Materials	10	0.85
Real Estate	6	2.93
Utilities	12	0.82
Mainland China Listed	404	1.53
Communication Services	6	1.18
Consumer Discretionary	31	1.95
Consumer Staples	24	0.89
Energy	13	0.7
Financials	64	1.44
Health Care	31	0.26
Industrials	64	2.4
Information Technology	91	2.27
Materials	58	1.37
Real Estate	6	0.94
Utilities	16	0.23

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	4.6
Alibaba HK	9988 HK Equity	6.1
JD.com HK	9618 HK Equity	6.4
NetEase HK	9999 HK Equity	3.2
Yum China HK	9987 HK Equity	1.1
Baozun HK	9991 HK Equity	-1.3
Baidu HK	9888 HK Equity	5
Autohome HK	2518 HK Equity	-0.8
Bilibili HK	9626 HK Equity	6.6
Trip.com HK	9961 HK Equity	5.9
EDU HK	9901 HK Equity	2.9
Xpeng HK	9868 HK Equity	10.6
Weibo HK	9898 HK Equity	3.8
Li Auto HK	2015 HK Equity	7.2
Nio Auto HK	9866 HK Equity	7.7
Zhihu HK	2390 HK Equity	0.4
KE HK	2423 HK Equity	3.4
Tencent Music Entertainment HK	1698 HK Equity	1.4
Meituan HK	3690 HK Equity	2.5

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
ALIBABA GROUP HOLDING LTD	6.1
TENCENT HOLDINGS LTD	4.6
XIAOMI CORP-CLASS B	-1.5
MEITUAN-CLASS B	2.5
BYD CO LTD-H	7.4
HONG KONG EXCHANGES & CLEAR	3.4
SEMICONDUCTOR MANUFACTURING	3.4
CHINA CONSTRUCTION BANK-H	1.5
JD.COM INC-CLASS A	6.4
XPENG INC - CLASS A SHARES	10.6

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
EAST MONEY INFORMATION CO-A	4.3
AVIC CHENGDU AIRCRAFT CO L-A	20
LUXSHARE PRECISION INDUSTR-A	6.4
CONTEMPORARY AMPEREX TECHN-A	3.5
EOPTOLINK TECHNOLOGY INC L-A	3.3
BYD CO LTD -A	1.9
CHINA CSSC HOLDINGS LTD-A	9.5
SHIJIAZHUANG CHANGSHAN BEI-A	3.4
AVIC SHENYANG AIRCRAFT CO -A	8.4
SUNGROW POWER SUPPLY CO LT-A	7.4

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 7.21 versus 7.24 Friday
• CNY per EUR 8.02 versus 8.14
• Yield on 10-Year Government Bond
• Yield on 10-Year China Development Bank Bond
• Copper Price 0.48%
• Steel Price 0.53%