Growth Stocks Rebound On Strong Retail Sales
6 Min. Read Time
Key News
Asian equities exhibited resiliency overnight despite escalating tensions in the Middle East.
Both Hong Kong and Mainland China opened lower but finished higher, led by growth stocks. There was another factor rotation, as growth and momentum factors outperformed value, dividend, and low-volatility strategies.
Several catalysts drove markets, with the most important being the release of economic data and the National Bureau of Statistics (NBS) press conference. Retail sales were a strong beat, while industrial production missed expectations. Real estate was a top performer in both markets after the NBS press conference concluded with a discussion on further measures needed for the sector. I remain a believer in real estate bonds over real estate stocks, given their attractive yields—currently double those of U.S. high-yield bonds—but the market remains indifferent.
This week’s Lujiazui Forum is focused on financial markets, and we may receive some policy guidance. Goldman Sachs released three reports on China’s “Prominent 10”—internet and growth stocks with strong revenue growth and inexpensive valuations compared to the U.S. “Magnificent 7”—which garnered significant attention locally. The NBS press conference also highlighted the upcoming 618 (June 18) e-commerce event, underscoring the government’s emphasis on online consumption.
There is increased chatter about Hong Kong-listed stocks relisting in Mainland China, though it remains unclear whether internet companies can do so due to their variable interest entity (VIE) structures. I will continue to monitor this and report back tomorrow. These companies would likely be highly sought after by local investors, as brokers had a strong day.
Xiaomi rose 4.23% after founder Lei Jun announced that the YU7 SUV price will be released at the end of the month. Kuaishou gained 3.45% following an analyst upgrade on Kling AI revenue. Mainland investors bought $731 million worth of Hong Kong-listed stocks via Southbound Stock Connect. Household appliances lagged despite confirmation that subsidies will continue through year-end. Trading volumes were lower compared to Friday’s index rebalance.
May Economic Data Highlights:
- New Home Prices Month-over-Month: -0.22% (April: -0.12%)
- Used Home Prices Month-over-Month: -0.5% (April: -0.41%)
- Retail Sales Year-over-Year: +6.4% (April: +5.1%; consensus: 4.9%)
- Online Retail Sales Year-over-Year: +8.5%
- Industrial Production Year-over-Year: +5.8% (April: 6.1%, consensus: 6.0%)
- Fixed Asset Investment Year-to-Date Year-over-Year: 3.7% (April: 4.0%, consensus: 4.0%)
- Property Investment Year-to-Date Year-over-Year: -10.7% (April: -10.3%, consensus: -10.5%)
- Residential Property Sales Year-to-Date Year-over-Year: -2.8% (April: -1.9%)
Key Takeaways from the NBS Press Conference:
- Officials acknowledged that China’s economy has not been immune to the global slowdown and “uncertainty of trade policies.” The Communist Party of China (CPC) Central Committee remains focused on “more active and promising macro policies,” stabilizing employment, enterprises, markets, and expectations, while expanding domestic demand and promoting innovation.
- Consumption subsidies continue to support retail sales, with home appliances, audio-visual equipment, communication equipment, cultural and office supplies, and furniture all posting year-over-year growth between 25.6% and 53%.
- The 618 (June 18) online shopping festival was highlighted, with online retail sales now accounting for 24.5% of total retail sales of consumer goods.
- Falling commodity prices are impacting import growth, as China is a major importer of energy and raw materials.
- Innovation-driven development was emphasized, with industrial robot output up 32% year-over-year from January to May.
- China’s trade with ASEAN, the European Union, and Belt and Road Initiative countries increased by 9.1%, 2.9%, and 4.2%, respectively, from January to May.
- In Q4 2024, the CPC Central Committee decided to “stop the real estate market from falling and stabilize it,” implementing several policies. The real estate market is improving but remains in a period of adjustment, with confidence still recovering. The government will “promote urban renewal and renovation of dilapidated houses” and increase the supply of “good houses,” signaling more policy support is likely on the way.
I will continue to monitor developments, especially around the potential relisting of Hong Kong-listed stocks in Mainland China and further policy signals from the Lujiazui Forum.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.7% |
| Hang Seng Tech | HSTECH Index | 1.1% |
| Hong Kong Turnover | HKTurn Index | -22.1% |
| Hong Kong Short Sale Turnover | HKSST Index | -42.4% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 12.4% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 0 |
| China (Shanghai) | SHCOMP Index | 0.3% |
| China (Shenzhen) | SZCOMP Index | 0.6% |
| China (STAR Board) | Star50 Index | -0.2% |
| Mainland Turnover | .chturn Index | 5.5% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 0.5% |
| Japan | NKY Index | 1.3% |
| India | SENSEX Index | 0.8% |
| Indonesia | JCI Index | -0.7% |
| Malaysia | FBMKLCI Index | 0.1% |
| Pakistan | KSE100 Index | 0% |
| Philippines | PCOMP Index | -0.6% |
| South Korea | KOSPI Index | 1.8% |
| Taiwan | TWSE Index | -0.1% |
| Thailand | SET Index | -0.7% |
| Singapore | STI Index | -0.1% |
| Australia | AS51 Index | 0% |
| Vietnam | VNINDEX Index | 1.7% |
| Indicator | A | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 119 | 95 |
| Advancing Stocks | 316 | 3208 |
| Declining Stocks | 159 | 909 |
| Outperforming Factors | Growth, Large Cap, Momentum | Momentum, Liquidity, Large Cap |
| Underperforming Factors | Liquidity, Buybacks, Low Volatility | Low Volatility, Dividend Yield, Buybacks |
| Top Sectors | Tech, Real Estate, Financials | Communication, Real Estate, Financials |
| Bottom Sectors | Healthcare, Materials, Energy | Healthcare, Materials, Utilities |
| Top Subsectors | Consumer Staples Distribution, Tech Hardware, Steel | Power Generation, Software, Cultural Media |
| Bottom Subsectors | Healthcare Equipment, Non Ferrous Metal, Electrical Equipment | Motorcycle, Precious Metals, Petrochemical |
| Southbound Connect Buys | Meituan (Large), Alibaba, Pop Mart (Small) | |
| Southbound Connect Sells | Xiaomi (Large), Tencent (Moderate) |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 152 | 0.73 |
| Communication Services | 9 | 0.19 |
| Consumer Discretionary | 28 | 0.6 |
| Consumer Staples | 13 | 1.08 |
| Energy | 6 | -0.28 |
| Financials | 24 | 1.5 |
| Health Care | 12 | -1.65 |
| Industrials | 21 | 0.13 |
| Information Technology | 10 | 3.48 |
| Materials | 10 | -1.36 |
| Real Estate | 7 | 1.78 |
| Utilities | 12 | 0.2 |
| Mainland China Listed | 395 | 0.27 |
| Communication Services | 7 | 2.62 |
| Consumer Discretionary | 29 | -0.38 |
| Consumer Staples | 24 | -0.37 |
| Energy | 13 | -0.16 |
| Financials | 64 | 1.22 |
| Health Care | 32 | -1.01 |
| Industrials | 61 | -0.19 |
| Information Technology | 90 | 1.05 |
| Materials | 54 | -0.65 |
| Real Estate | 6 | 2.18 |
| Utilities | 15 | -0.43 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -0.1 |
| Alibaba HK | 9988 HK Equity | 0.8 |
| JD.com HK | 9618 HK Equity | 0.8 |
| NetEase HK | 9999 HK Equity | -0.6 |
| Yum China HK | 9987 HK Equity | -0.9 |
| Baozun HK | 9991 HK Equity | 3.9 |
| Baidu HK | 9888 HK Equity | 0.2 |
| Autohome HK | 2518 HK Equity | -0.5 |
| Bilibili HK | 9626 HK Equity | 2.9 |
| Trip.com HK | 9961 HK Equity | 1.1 |
| EDU HK | 9901 HK Equity | 0.5 |
| Xpeng HK | 9868 HK Equity | 1.9 |
| Weibo HK | 9898 HK Equity | 0.4 |
| Li Auto HK | 2015 HK Equity | 1.3 |
| Nio Auto HK | 9866 HK Equity | 1.9 |
| Zhihu HK | 2390 HK Equity | 1 |
| KE HK | 2423 HK Equity | -0.1 |
| Tencent Music Entertainment HK | 1698 HK Equity | 1.2 |
| Meituan HK | 3690 HK Equity | 0.4 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| XIAOMI CORP-CLASS B | 4.2 |
| ALIBABA GROUP HOLDING LTD | 0.8 |
| TENCENT HOLDINGS LTD | -0.1 |
| MEITUAN-CLASS B | 0.4 |
| POP MART INTERNATIONAL GROUP | 0.9 |
| CHINA CONSTRUCTION BANK-H | 2 |
| BYD CO LTD-H | -1 |
| KUAISHOU TECHNOLOGY | 3.4 |
| ZHONGAN ONLINE P&C INSURAN-H | 12.6 |
| CNOOC LTD | -0.2 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| SUZHOU DONGSHAN PRECISION-A | 10 |
| ZHONGJI INNOLIGHT CO LTD-A | 3.4 |
| EOPTOLINK TECHNOLOGY INC L-A | 6.6 |
| KWEICHOW MOUTAI CO LTD-A | -0.3 |
| EAST MONEY INFORMATION CO-A | 1.9 |
| BEIJING ENLIGHT MEDIA CO L-A | 20 |
| SHENZHEN FORMS SYNTRON INF-A | 20 |
| VICTORY GIANT TECHNOLOGY -A | 6.5 |
| LAKALA PAYMENT CO LTD-A | 15.3 |
| AVIC CHENGDU AIRCRAFT CO L-A | -0.2 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.18 versus 7.18 Friday
- CNY per EUR 8.31 versus 8.26 yesterday
- Yield on 10-Year Government Bond 1.64% versus 1.64% yesterday
- Yield on 10-Year China Development Bank Bond 1.72% versus 1.70% yesterday
- Copper Price -0.13%
- Steel Price +0.51%
