Key News

Asian equities declined following the US attack on Iranian nuclear facilities, the threat of a potential counterattack, and concerns over Middle East oil transportation out of the Persian Gulf (hence the REM song reference in today’s title).

Despite the strength of the US dollar, Hong Kong, Mainland China, and Malaysia outperformed.

A key factor in the resilience of Hong Kong and Mainland China was the start of the 12th two-and-a-half-day meeting of the 14th Standing Committee of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC). Try saying that five times fast! The meeting, attended by the upper echelons of China’s government, will discuss “further deepening economic system reform and promoting China-style modernization,” with topics including “deepening economic system reform and promoting China’s modernization,” “promoting fertility support,” and “promoting artificial intelligence.” Policy expectations are light, though I suspect last year’s meeting set in motion the September announcements by the People’s Bank of China (PBOC) and Politburo regarding real estate policy.

It was hard not to notice that consumer-focused Hong Kong stocks and sub-sectors, such as automobiles, electric vehicles (EVs), hybrids, travel, hotels, and restaurants, performed well. Alibaba declined 0.81% despite integrating its online travel platform, Fliggy, and restaurant delivery service, Ele.me, into its core E-Commerce business, driven by strong orders. Alibaba’s weakness may also have been influenced by Meituan’s 2.18% gain after the company announced an expansion of its “instant retail business,” leveraging its massive restaurant delivery network and further overseas expansion in Saudi Arabia.

Another factor was the Hong Kong relisting initial public offering (IPO) of Mainland-listed Zhejiang Sanhua Intelligent Controls. While more supply in the market requires capital from somewhere, it was interesting that the IPO was down despite being heavily oversubscribed: 747 times by retail investors and 23 times by institutional investors.

Premier Li signed a State Council order requiring internet platforms to submit tax-related information, but this does not appear problematic, as it focuses on tax reporting by the companies themselves.

The Wall Street Journal published a nonsensical article on Wall Street’s lost love affair with US listings of Chinese companies. Meanwhile, Southbound Stock Connect saw strong inflows, with Mainland investors net buying $1.005 billion.

Hong Kong- and Mainland-listed semiconductor stocks had a strong day following Friday’s Wall Street Journal article reporting that the US will pressure ASML and Taiwan Semiconductor Manufacturing Company (TSMC) to stop producing in China. Mega-cap banks also performed well, as the exchange-traded funds (ETFs) favored by the National Team saw strong volumes. Beverages and food stocks were down, with Kweichow Moutai off 0.61%.

I thoroughly enjoyed listening to the Dwarkesh Podcast interview with Arthur Kroeber of Gavekal Dragonomics. You’ll learn more about China from listening to that two-and-a-half-hour episode than from a lifetime of reading about China in the Western media. I don’t agree with everything, but on the big picture, I found it very insightful and aligned with my own thinking.

I also enjoyed the BG2 Podcast, hosted by Altimeter’s founder and CEO Brad Gerstner and Benchmark’s former general partner Bill Gurley, interviewing Coatue’s Laffont brothers on artificial intelligence (AI), public and venture capital markets, macroeconomics, US debt, crypto, IPOs, and more. Coatue hosted its 2024 East Meets West Conference last week, focusing on AI. The investment firm generously provides its deck for free on its website, which I recommend checking out.

Yes, I had a long weekend watching my kids’ sports.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	0.7%
Hang Seng Tech	HSTECH Index	1%
Hong Kong Turnover	HKTurn Index	-10.7%
Hong Kong Short Sale Turnover	HKSST Index	-12.9%
Short Turnover as a % of Hong Kong Turnover	N/A	15.8%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	448.9
China (Shanghai)	SHCOMP Index	0.6%
China (Shenzhen)	SZCOMP Index	0.9%
China (STAR Board)	Star50 Index	0.4%
Mainland Turnover	.chturn Index	5.3%
Nouthbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	Not Available
Jing Daily China Global Luxury Index	CHINALUX Index	-0.8%
Japan	NKY Index	-0.1%
India	SENSEX Index	-0.6%
Indonesia	JCI Index	-1.7%
Malaysia	FBMKLCI Index	0.9%
Pakistan	KSE100 Index	-2.6%
Philippines	PCOMP Index	-1.9%
South Korea	KOSPI Index	-0.2%
Taiwan	TWSE Index	-1.4%
Thailand	SET Index	-0.5%
Singapore	STI Index	-0.1%
Australia	AS51 Index	-0.4%
Vietnam	VNINDEX Index	0.7%

Indicator	A	Mainland China
Today's Volume % of 1-Year Average	102%	87%
Advancing Stocks	324	4134
Declining Stocks	142	855
Outperforming Factors	Momentum, Value, Growth	Momentum, Liquidity, Buyback
Underperforming Factors	Quality, Low Volatility, Buyback	Growth, Quality, Dividend Yield
Top Sectors	Healthcare, Tech, Financials	Financials, Energy, Tech
Bottom Sectors	Staples, Utilities, Communication	Staples, Discretionary, Utilities
Top Subsectors	Semis, Household/Personal Products, Consumer Service	Comprehensive, Energy Equipment, Software
Bottom Subsectors	Food, Electrical Equipment, Household Appliances	Motorcycle, Soft Drink, Liquor
Southbound Connect Buys	Meituan (Large), SMIC (Moderate), Pop Mart, Hua Hong Semi (Small)
Southbound Connect Sells	Alibaba (Large), Tencent, Xiaomi (Small), Shandong Molong (Tiny)

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	152	0.52
Communication Services	9	-0.1
Consumer Discretionary	28	0.28
Consumer Staples	13	-0.5
Energy	6	0.36
Financials	24	1.17
Health Care	12	2.85
Industrials	21	0.69
Information Technology	10	1.43
Materials	10	0
Real Estate	7	0.75
Utilities	12	-0.35
Mainland China Listed	395	0.23
Communication Services	7	0.1
Consumer Discretionary	29	-0.49
Consumer Staples	24	-0.99
Energy	13	0.95
Financials	64	1.17
Health Care	32	0.03
Industrials	61	0.1
Information Technology	90	0.18
Materials	54	0.12
Real Estate	6	0.11
Utilities	15	-0.07

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	-0.3
Alibaba HK	9988 HK Equity	-0.8
JD.com HK	9618 HK Equity	-0.6
NetEase HK	9999 HK Equity	0.1
Yum China HK	9987 HK Equity	1.8
Baozun HK	9991 HK Equity	-2.5
Baidu HK	9888 HK Equity	0.4
Autohome HK	2518 HK Equity	0
Bilibili HK	9626 HK Equity	0.1
Trip.com HK	9961 HK Equity	-0.2
EDU HK	9901 HK Equity	1.9
Xpeng HK	9868 HK Equity	2.6
Weibo HK	9898 HK Equity	1.1
Li Auto HK	2015 HK Equity	5.5
Nio Auto HK	9866 HK Equity	0.4
Zhihu HK	2390 HK Equity	-0.6
KE HK	2423 HK Equity	1
Tencent Music Entertainment HK	1698 HK Equity	-0.3
Meituan HK	3690 HK Equity	2.2

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
XIAOMI CORP-CLASS B	1.5
MEITUAN-CLASS B	2.2
TENCENT HOLDINGS LTD	-0.3
ALIBABA GROUP HOLDING LTD	-0.8
POP MART INTERNATIONAL GROUP	1.9
SEMICONDUCTOR MANUFACTURING	4.6
HUA HONG SEMICONDUCTOR LTD	4.4
CHINA CONSTRUCTION BANK-H	0.9
HONG KONG EXCHANGES & CLEAR	1.6
CNOOC LTD	1.1

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
SHENZHEN FORMS SYNTRON INF-A	20
ZHONGJI INNOLIGHT CO LTD-A	-1.9
LAKALA PAYMENT CO LTD-A	13
HENGBAO CO LTD-A	10
EOPTOLINK TECHNOLOGY INC L-A	-2.5
EAST MONEY INFORMATION CO-A	1.1
SEMICONDUCTOR MANUFACTURIN-A	3.7
KWEICHOW MOUTAI CO LTD-A	-0.6
CHUTIAN DRAGON CO LTD -A	6.2
WUS PRINTED CIRCUIT KUNSHA-A	-1.8

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.18 versus 7.17 yesterday
• CNY per EUR 8.24 versus 8.25 yesterday
• Yield on 10-Year Government Bond 1.64% versus 1.64% yesterday
• Yield on 10-Year China Development Bank Bond 1.68% versus 1.71% yesterday
• Copper Price +0.19%
• Steel Price -0.03%