Tariff Turnaround, Week in Review
7 Min. Read Time
Week in Review
- Asian equities were mixed for the week as Korea and Japan outperformed while Thailand and Malaysia underperformed.
- This week saw Q1 earnings reports from Meituan, which beat estimates, PDD, which missed, Kuaishou, whose report was mixed, and Li Auto, which beat estimates on revenue and net income on vehicle deliveries up 16% year-over-year (YoY).
- Asian equities cheered the US’ Court of International Trade’s decision Wednesday that President Trump’s use of the International Emergency Economic Powers Act of 1977 was not legal.
- Mainland media noted strong preliminary sales for the 6:18 (June 18th) sales festival, with multiple online retailers participating, which increased 4X from last year.
Friday’s Key News
Yesterday’s enthusiasm was short-lived as the US Court of Appeals for the Federal Circuit stated that tariffs can remain in place while the US Court of International Trade’s decision that tariffs weren’t imposed legally is appealed. President Trump announced on social media that other means for implementing tariffs would be examined, which shouldn’t have surprised anybody. Not helping risk asset sentiment was Treasury Secretary Bessent’s interview on Fox News that US-China trade talks were “stalled” and likely needed a conversation between President Trump and President Xi. President Trump’s June 14th birthday and President Xi’s June 15th birthday could provide such an opportunity.
Asian stocks were weak as the US dollar strengthened, Taiwan was closed for the Dragon Boat Festival, and Indonesia continued to be closed for Ascension Day. However, for the month, Asian markets posted small gains.
Today is the official start of summer for international traders as today’s MSCI Semi Annual Index rebalance occurs. For domestic traders, June 20th, triple witching day (the expiration of index and stock options and futures), is the official start, in my opinion. The power of passive was on full display as 92.9 million shares of Alibaba traded at the close in Hong Kong versus the total day’s volume of 202 million shares, yesterday’s volume of 74 million shares, and the 1-year average volume of 88 million shares. Despite its weight increasing in MSCI indexes, Alibaba’s Hong Kong shares fell by -3.56% overnight, as Hong Kong-listed growth stocks, especially Apple’s supplier ecosystem, took the tariff news on the chin.
It was a fairly ugly day in Hong Kong with few bright spots. Nonetheless, Li Auto gained +3.79% after yesterday’s Q1 financial results, CSPC Pharma gained +6.3%, Fosun Pharma gained +9.89%, and real estate developers were mostly higher. BYD fell -3.25%, despite a fantastic rebuttal from their PR General Manager Li Yunfei after Great Wall’s CEO accused BYD of being an auto industry Evergrande. He compared the company’s financials, including revenue, debt-to-asset ratio, and liabilities, to those of global companies, highlighting the company’s strong financial position. Bravo!
Mainland investors bought today’s dip with a healthy $1.2 billion worth of net buying via Southbound Stock Connect. Interestingly, Meituan, which fell -1.5%, has seen healthy buying via Southbound Stock Connect over the last two weeks. Mainland China had fewer banks, as technology and growth names were weak, especially in electronic equipment, semiconductors, biotechnology, and software.
Volumes in the ETFs favored by China’s “National Team”, i.e. investment firms associated with sovereign wealth, were below average, though two ETFs have seen strong inflows in the last week.
The 2025 Lujiazui Forum, taking place on June 18th and June 19th, will include speakers from the People’s Bank of China (PBOC), the Banking and Insurance Regulatory Commission (CBIRC), the China Securities Regulatory Commission (CSRC), the State Administration of Foreign Exchange (SAFE), and the Shanghai Municipal Government. Let’s hope they announce further economic and policy support!
May purchasing managers’ indexes (PMIs) will be released this weekend.
A mainland media source noted that, within President Trump’s budget bill, which the House passed, are provisions to “significantly increase the foreign investment tax rate for ‘discriminatory’ countries, up to 20 percentage points based on the statutory tax rate”, which threatens to “escalate the trade ware into a capital war”. Article 899 would allow the Treasury Secretary to label foreign country taxes on digital services as discriminatory, allowing for an additional 5% tax increase per year to a maximum of 20% on income earned by foreign individuals and companies from US investments, including interest and dividends. The concern is the effect on foreign investors’ appetite for US Treasury bonds and, to a lesser degree, US stocks. Bloomberg wrote about it yesterday, stating that the countries in focus include Canada, the UK, France, and Australia. The belief is that foreign investors from targeted countries will exit their US Treasury positions, which would also weigh on the US dollar. I don’t see anything mentioning capital gains, as interest and dividends are the focus. Regardless, this sounds like a terrible idea!
I am off to Asia for work this weekend! I look forward to providing more insights from on the ground next week.
Last Night’s Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1.2% |
| Hang Seng Tech | HSTECH Index | -2.5% |
| Hong Kong Turnover | HKTurn Index | 19.7% |
| Hong Kong Short Sale Turnover | HKSST Index | 9.4% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 13.8% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 140.3 |
| China (Shanghai) | SHCOMP Index | -0.5% |
| China (Shenzhen) | SZCOMP Index | -1.1% |
| China (STAR Board) | Star50 Index | -0.9% |
| Mainland Turnover | .chturn Index | -3.9% |
| Northbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | -0.4% |
| Japan | NKY Index | -1.2% |
| India | SENSEX Index | -0.2% |
| Indonesia | JCI Index | -0.3% |
| Malaysia | FBMKLCI Index | -0.7% |
| Pakistan | KSE100 Index | 0.6% |
| Philippines | PCOMP Index | -1.1% |
| South Korea | KOSPI Index | -0.8% |
| Taiwan | TWSE Index | 0% |
| Thailand | SET Index | -1.3% |
| Singapore | STI Index | -0.6% |
| Australia | AS51 Index | 0.3% |
| Vietnam | VNINDEX Index | -0.7% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 145 | 91 |
| Advancing Stocks | 138 | 1046 |
| Declining Stocks | 338 | 3945 |
| Outperforming Factors | Value, Low Volatility, Dividend Yield | Value, Low Volatility, Dividend Yield |
| Underperforming Factors | Growth, Liquidity, EPS Revisions | Growth, Liquidity, Momentum |
| Top Sectors | Real Estate | Financials, Hardware |
| Bottom Sectors | Consumer Discretionary, Communication Services, Consumer Staples | Technology, Consumer Discretionary, Communication Services |
| Top Subsectors | Household & Personal Products, Paper & Packaging | Highways, Soft Drinks, Pharmaceuticals |
| Bottom Subsectors | Textiles, Media & Entertainment, Software | Internet, Industrial Machinery, Leisure Products |
| Southbound Connect Buys | Meituan, CSPC Pharmaceuticals, Xiaomi, Alibaba, Li Auto, ZA Online | N/A |
| Southbound Connect Sells | Tencent | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 151 | -2.03 |
| Communication Services | 9 | -2.71 |
| Consumer Discretionary | 28 | -2.81 |
| Consumer Staples | 13 | -2.2 |
| Energy | 7 | -0.65 |
| Financials | 23 | -0.55 |
| Health Care | 13 | -0.17 |
| Industrials | 20 | -1.07 |
| Information Technology | 10 | -2.17 |
| Materials | 10 | -1.82 |
| Real Estate | 6 | 0.04 |
| Utilities | 12 | -1.12 |
| Mainland China Listed | 404 | -0.58 |
| Communication Services | 6 | -1.02 |
| Consumer Discretionary | 31 | -1.14 |
| Consumer Staples | 24 | -0.58 |
| Energy | 13 | -0.21 |
| Financials | 64 | 0.08 |
| Health Care | 31 | 0.05 |
| Industrials | 64 | -0.61 |
| Information Technology | 91 | -1.61 |
| Materials | 58 | -0.64 |
| Real Estate | 6 | -0.52 |
| Utilities | 16 | -0.32 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -2.4 |
| Alibaba HK | 9988 HK Equity | -3.6 |
| JD.com HK | 9618 HK Equity | -2.2 |
| NetEase HK | 9999 HK Equity | -4.7 |
| Yum China HK | 9987 HK Equity | -0.4 |
| Baozun HK | 9991 HK Equity | -3.3 |
| Baidu HK | 9888 HK Equity | -3.7 |
| Autohome HK | 2518 HK Equity | -0.2 |
| Bilibili HK | 9626 HK Equity | -3.9 |
| Trip.com HK | 9961 HK Equity | -3.2 |
| EDU HK | 9901 HK Equity | -3.6 |
| Xpeng HK | 9868 HK Equity | -5 |
| Weibo HK | 9898 HK Equity | -3.2 |
| Li Auto HK | 2015 HK Equity | 3.8 |
| Nio Auto HK | 9866 HK Equity | -4.4 |
| Zhihu HK | 2390 HK Equity | 2.1 |
| KE HK | 2423 HK Equity | 1.1 |
| Tencent Music Entertainment HK | 1698 HK Equity | -4.8 |
| Meituan HK | 3690 HK Equity | -1.5 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | -3.6 |
| TENCENT HOLDINGS LTD | -2.4 |
| XIAOMI CORP-CLASS B | -1.5 |
| BYD CO LTD-H | -3.3 |
| MEITUAN-CLASS B | -1.5 |
| NETEASE INC | -4.7 |
| CSPC PHARMACEUTICAL GROUP LT | 6.3 |
| ZHONGAN ONLINE P&C INSURAN-H | -8.5 |
| LI AUTO INC-CLASS A | 3.8 |
| IND & COMM BK OF CHINA-H | 0 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| BYD CO LTD -A | -2.4 |
| SHENZHEN FORMS SYNTRON INF-A | 7.3 |
| LAKALA PAYMENT CO LTD-A | 3.4 |
| CONTEMPORARY AMPEREX TECHN-A | -0.7 |
| KUNMING YUNNEI POWER CO-A | -2.5 |
| KWEICHOW MOUTAI CO LTD-A | -1.2 |
| GUANGZHOU HAIGE COMMUNICAT-A | 8 |
| FUJIAN SNOWMAN GROUP CO-A | 3 |
| VICTORY GIANT TECHNOLOGY -A | 2.6 |
| CAMBRICON TECHNOLOGIES-A | -1.5 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.19 versus 7.19 yesterday
- CNY per EUR 8.15 versus 8.11 yesterday
- Yield on 10-Year Government Bond 1.67% versus 1.69% yesterday
- Yield on 10-Year China Development Bank Bond 1.72% versus 1.73% yesterday
- Copper Price -0.31%
- Steel Price -0.27%
