Escalation Threat Sends Risk Assets on the Down Escalator
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Key News
Yesterday, we voiced surprise at how resilient many Asian equity markets were to rising tensions in the Middle East and the US $ showing strength. Overnight, Asian equity markets, except South Korea, felt the full effect of President Trump’s threat of US involvement, while a hawkish Fed snuffed out hopes for US interest rate cuts. The US dollar rallied versus Asian currencies, except China’s renminbi.
Despite falling yesterday, Hong Kong and Mainland China were not immune to further weakness as Hong Kong’s heat map looks like a crime scene (virtually all red) as volume increased, all sectors were negative in both markets, except the Mainland Energy sector, and terrible breadth as only 2 of Hang Seng Index stocks rose while 83 fell.
JD.com fell by -3.63% after the announcement that the E-Commerce company will enter online travel, which also weighed on Trip.com -4.02%. The company’s entry into the food delivery business has weighed on Meituan due to fears of price competition. According to China Daily, Alibaba -1.96% and JD.com fell despite strong initial data from the 618 (June 18th) E-Commerce sales event. JD announced smartphone sales between RMB 4k and RMB 6k rose 50% year-over-year (YoY), while international sales via JD Global Sales rose by +236% YoY.
Alibaba announced that Tmall sales, a business-to-consumer E-Commerce website, across products receiving consumer subsidies, including home appliances, mobile phones, and digital products, rose by +283% YoY. Tmall noted that 453 brands sold more than RMB 1B, a 24% YoY increase. Guangxi’s Department of Commerce announced it had to suspend consumer subsidies as they’ve run out of money, though they anticipate funds to be replenished. Morgan Stanley’s exclusion of Pop Mart on its favored Chinese stock list weighed on the company -5.33%. Stepping back, the Shanghai Composite and Hang Seng Index are still above their pre-Liberation Day levels, while the growth Shenzhen Composite and HS Tech have fallen below. Hopefully, the Middle East situation will cool off, allowing markets to move again.
Despite the return of animal spirits in Hong Kong, the rise of IPOs is a slight concern as they need to be funded from somewhere. The HKEX CEO Chen Yiting noted that 160 companies are looking to list on the Hong Kong Exchange, with forty submitting paperwork in May. A Mainland media source reported that Deloitte China Capital Market Services Group stated forty Hong Kong IPOs thus far this year, which is +33% YoY, having raised HK $102.1B, with 77% going to four Mainland listed companies listing in Hong Kong and one Hong Kong IPO.
The HKEX has raised more than Nasdaq’s HK $71.3B and the NYSE’s HK $59B. Deloitte’s 2nd half 2025 forecast is a simplistic forty more Hong Kong IPOs and another HK $100B raised. No news from the Lujiaizui Forum, though I wonder if we’ll receive further clarification of Hong Kong stocks listing on the Shanghai and Shenzhen Stock Exchanges. Southbound Stock Connect makes Hong Kong stocks available to Mainland institutional and individual investors with a brokerage balance of RMB 500k. Mainland availability would open ownership to the Mainland’s masses.
A reporter noted that President Trump hasn’t played golf in several weeks, which got my tiny brain hamster running on the wheel. According to Perplexity, President Trump hasn’t visited Mar-a-Lago since March 28th. At Mar-a-Lago, I assume Trump is surrounded by billionaire business friends, i.e., corporate America. Who is he surrounded by in Washington, D.C.? It makes you wonder if there is a correlation on policy based on his location.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -2% |
| Hang Seng Tech | HSTECH Index | -2.4% |
| Hong Kong Turnover | HKTurn Index | 21% |
| Hong Kong Short Sale Turnover | HKSST Index | 33.5% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 14.4% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 46.4 |
| China (Shanghai) | SHCOMP Index | -0.8% |
| China (Shenzhen) | SZCOMP Index | -1.5% |
| China (STAR Board) | Star50 Index | -0.5% |
| Mainland Turnover | .chturn Index | 5% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | -0.9% |
| Japan | NKY Index | -1% |
| India | SENSEX Index | -0.1% |
| Indonesia | JCI Index | -2% |
| Malaysia | FBMKLCI Index | -0.7% |
| Pakistan | KSE100 Index | -0.4% |
| Philippines | PCOMP Index | 0.3% |
| South Korea | KOSPI Index | 0.2% |
| Taiwan | TWSE Index | -1.6% |
| Thailand | SET Index | -2.4% |
| Singapore | STI Index | -0.7% |
| Australia | AS51 Index | -0.1% |
| Vietnam | VNINDEX Index | 0.4% |
| Indicator | A | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 114 | 98 |
| Advancing Stocks | 31 | 713 |
| Declining Stocks | 461 | 4357 |
| Outperforming Factors | Low Volatility, Dividend Yield, Large Cap | Low Volatility, Quality, Large Caps |
| Underperforming Factors | Buybacks, Growth, Liquidity | Buybacks, Liquidity, Value |
| Top Sectors | Energy | |
| Bottom Sectors | Materials, Staples, Healthcare | Real Estate, Materials, Industrials |
| Top Subsectors | Food | Energy Equipment, Gas, Oil/Gas |
| Bottom Subsectors | Consumer Durables, Consumer Staples Distribution, Household/Personal Products | Diversified Financials, Leisure Products, Office Supplies |
| Southbound Connect Buys | Xiaomi (Moderate), CNOOC (Small) | |
| Southbound Connect Sells | Pop Mart, Tencent (Large), Alibaba, Meituan, Shandong Molong (Small) |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 152 | -2.3 |
| Communication Services | 9 | -1.89 |
| Consumer Discretionary | 28 | -2.72 |
| Consumer Staples | 13 | -3.47 |
| Energy | 6 | -2.25 |
| Financials | 24 | -1.99 |
| Health Care | 12 | -2.92 |
| Industrials | 21 | -2.42 |
| Information Technology | 10 | -1.61 |
| Materials | 10 | -3.47 |
| Real Estate | 7 | -2.52 |
| Utilities | 12 | -2.36 |
| Mainland China Listed | 395 | -0.86 |
| Communication Services | 7 | -0.85 |
| Consumer Discretionary | 29 | -1.03 |
| Consumer Staples | 24 | -0.48 |
| Energy | 13 | 0.03 |
| Financials | 64 | -0.8 |
| Health Care | 32 | -1.01 |
| Industrials | 61 | -1.22 |
| Information Technology | 90 | -0.8 |
| Materials | 54 | -1.25 |
| Real Estate | 6 | -1.54 |
| Utilities | 15 | -0.5 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -2 |
| Alibaba HK | 9988 HK Equity | -2 |
| JD.com HK | 9618 HK Equity | -3.6 |
| NetEase HK | 9999 HK Equity | -0.4 |
| Yum China HK | 9987 HK Equity | -2.2 |
| Baozun HK | 9991 HK Equity | -5.7 |
| Baidu HK | 9888 HK Equity | -1.4 |
| Autohome HK | 2518 HK Equity | 0 |
| Bilibili HK | 9626 HK Equity | -3.6 |
| Trip.com HK | 9961 HK Equity | -4 |
| EDU HK | 9901 HK Equity | -2.6 |
| Xpeng HK | 9868 HK Equity | -2.8 |
| Weibo HK | 9898 HK Equity | -2.1 |
| Li Auto HK | 2015 HK Equity | -2.1 |
| Nio Auto HK | 9866 HK Equity | -2.8 |
| Zhihu HK | 2390 HK Equity | -2.7 |
| KE HK | 2423 HK Equity | -2.9 |
| Tencent Music Entertainment HK | 1698 HK Equity | 1.4 |
| Meituan HK | 3690 HK Equity | -3.8 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -2 |
| MEITUAN-CLASS B | -3.8 |
| POP MART INTERNATIONAL GROUP | 1.6 |
| ALIBABA GROUP HOLDING LTD | -2 |
| XIAOMI CORP-CLASS B | -0.4 |
| HONG KONG EXCHANGES & CLEAR | -2.3 |
| CHINA CONSTRUCTION BANK-H | 0 |
| JD.COM INC-CLASS A | -3.6 |
| BYD CO LTD-H | -1.2 |
| SEMICONDUCTOR MANUFACTURING | -1.1 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | 4.8 |
| SHENZHEN FORMS SYNTRON INF-A | 0.5 |
| EAST MONEY INFORMATION CO-A | -2.7 |
| WUS PRINTED CIRCUIT KUNSHA-A | 10 |
| EOPTOLINK TECHNOLOGY INC L-A | 4.8 |
| HENGBAO CO LTD-A | 5.9 |
| LAKALA PAYMENT CO LTD-A | -6.1 |
| SUZHOU DONGSHAN PRECISION-A | 5.1 |
| GCL ENERGY TECHNOLOGY CO L-A | -8.4 |
| VICTORY GIANT TECHNOLOGY -A | 5.3 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.18 versus 7.18 yesterday
- CNY per EUR 8.25 versus 8.26 yesterday
- Yield on 10-Year Government Bond 1.64% versus 1.64% yesterday
- Yield on 10-Year China Development Bank Bond 1.71% versus 1.71% yesterday
- Copper Price -0.17%
- Steel Price +0.10%
