Key News

Asian equities were mixed overnight, as Pakistan outperformed and Taiwan underperformed, as the US dollar weakened.

Hong Kong struggled with a sell-off into the close, despite the US dollar weakness. The end of day downdraft could have been driven by quarterly and monthly rebalances, though it is hard to say for sure. Yes, Hong Kong-listed stocks are denominated in Hong Kong dollars, which are pegged to the US dollar. However, the underlying companies are mainly in China and generate revenues in renminbi. If the renminbi (CNY) appreciates, the underlying companies are theoretically worth more, which occurred overnight. CNY appreciated versus the US dollar overnight, closing at 7.16  per USD. A few factors explain today’s market action, especially the weakness in internet stocks: an economic release, investors fundraising to participate in IPOs, and some broker downgrades. See below.

The purchasing managers’ index (PMI) surveys are diffusion indexes measuring changes month-to-month (MoM). Values above 50 indicate growth, while values below 50 indicate contraction.  Despite Manufacturing contracting more slowly, the release was viewed as a sign of the economy recovering, which, ironically, could weigh on sentiment as it lowers expectation for stimulus. The trade war’s recent de-escalation helped, while the consumption subsidy isn’t going away.

Investors needed to fund their allocations to two IPOs today: IFHB (6603 HK) and Unisound AI (9678 HK). Coconut water company IFHB gained +42.09% after raising HKD 1.16 billion, with the offering being oversubscribed 2,682 times. Speech and language recognition company Unisound AI gained +44.59% after raising $206 million, as the offering was oversubscribed by 92 times. IPOs need to be funded from somewhere, which likely explains why large caps underperformed in Hong Kong. Meanwhile, Mainland investors were net sellers of mega caps via Southbound Stock Connect, but were net buyers overall by $664 million.

A broker downgraded Alibaba, which fell -2.05%, Meituan, which fell -3.17%, and JD.com, which fell -1.84%, citing increased competition.

Meanwhile, the Financial Times had an article on Shein and PDD’s US sales being adversely affected by the cancellation of the de minimis exemption for shipments valued at under $800. Remember, the Financial Times called PDD a fraud a year ago. Also, the article was based on data from Sensor Tower, not an original source. Real-time data on internet companies is widely available for a price, as third-party data providers can track app downloads and activity. Are we surprised that the Financial Times only published the real-time data when it was negative?

Recent market favorites had a good day, led by Xiaomi, which gained +1.7%, Guotai Junan International, which gained +13.58%, Pop Mart, which gained +3.41%, and Laopu Gold, which gained +14.94%, closing at nearly HKD 1,000.  Baidu fell -0.48%, after making the latest version of Ernie, its large language model (LLM), open source.

Mainland China grinded higher, led by growth stocks and subsectors including technology hardware, semiconductors, and electronic equipment. Meanwhile, aerospace names continue to benefit from the India-Pakistan flare-up.

It was an interesting divergence today, as Mainland China outperformed Hong Kong, which has become rare these days.

President Trump stated that TikTok will be sold, though such a transaction would require approval from China. Why not spin it off in an IPO?

Last Night’s Performance

Country/Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	-0.9%
Hang Seng Tech	HSTECH Index	-0.7%
Hong Kong Turnover	HKTurn Index	-12%
Hong Kong Short Sale Turnover	HKSST Index	-27.2%
Short Turnover as a % of Hong Kong Turnover	N/A	9.7%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	0
China (Shanghai)	SHCOMP Index	0.6%
China (Shenzhen)	SZCOMP Index	1.1%
China (STAR Board)	Star50 Index	1.5%
Mainland Turnover	.chturn Index	-3.5%
Nouthbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	Not Available
Jing Daily China Global Luxury Index	CHINALUX Index	0.2%
Japan	NKY Index	0.8%
India	SENSEX Index	-0.5%
Indonesia	JCI Index	0.4%
Malaysia	FBMKLCI Index	0.3%
Pakistan	KSE100 Index	1.2%
Philippines	PCOMP Index	-0.7%
South Korea	KOSPI Index	0.5%
Taiwan	TWSE Index	-1.4%
Thailand	SET Index	0.7%
Singapore	STI Index	0%
Australia	AS51 Index	0.3%
Vietnam	VNINDEX Index	0.3%

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	122	114
Advancing Stocks	198	3702
Declining Stocks	276	1164
Outperforming Factors	Quality, EPS Revisions, Liquidity	Liquidity, Growth
Underperforming Factors	Value, Large Cap, Momentum	Value, Low Volatility, Dividend Yield
Top Sectors	Tech, Healthcare, Utilities	Tech, Communications, Real Estate
Bottom Sectors	Discretionary, Financials, Communication	Financials
Top Subsectors	Textiles, Consumer Durables, National Defense	Aerospace/Military, Office Supplies, Leisure Products
Bottom Subsectors	Industry Conglomerates, Banks, Consumer Discretionary Distribution	Soft Drinks, Precious Metals, Securities
Southbound Connect Buys	SMIC (Moderate), Easou Tech, Meituan (Small)	N/A
Southbound Connect Sells	Alibaba (Moderate), Guotai Junan, Tencent, Xiaomi (Small)	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	152	-1.01
Communication Services	9	-1.38
Consumer Discretionary	30	-1.57
Consumer Staples	13	0.01
Energy	7	-0.5
Financials	23	-1.42
Health Care	13	0.65
Industrials	19	-0.41
Information Technology	10	1.51
Materials	10	-1.03
Real Estate	6	-1.12
Utilities	12	0.13
Mainland China Listed	432	0.5
Communication Services	9	1.56
Consumer Discretionary	31	0.45
Consumer Staples	27	0.41
Energy	16	0.16
Financials	63	-0.09
Health Care	40	0.55
Industrials	69	0.59
Information Technology	85	1.63
Materials	68	0.2
Real Estate	7	0.88
Utilities	17	0.09

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	-1.9
Alibaba HK	9988 HK Equity	-2.1
JD.com HK	9618 HK Equity	-1.8
NetEase HK	9999 HK Equity	1.5
Yum China HK	9987 HK Equity	1.7
Baozun HK	9991 HK Equity	0.1
Baidu HK	9888 HK Equity	-0.5
Autohome HK	2518 HK Equity	-1.9
Bilibili HK	9626 HK Equity	0.7
Trip.com HK	9961 HK Equity	-0.7
EDU HK	9901 HK Equity	0.5
Xpeng HK	9868 HK Equity	-1.7
Weibo HK	9898 HK Equity	0.2
Li Auto HK	2015 HK Equity	-3.3
Nio Auto HK	9866 HK Equity	2.8
Zhihu HK	2390 HK Equity	2.2
KE HK	2423 HK Equity	-2
Tencent Music Entertainment HK	1698 HK Equity	4.3
Meituan HK	3690 HK Equity	-3.2

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
XIAOMI CORP-CLASS B	1.7
ALIBABA GROUP HOLDING LTD	-2.1
TENCENT HOLDINGS LTD	-1.9
MEITUAN-CLASS B	-3.2
GUOTAI JUNAN INTERNATIONAL	13.6
SEMICONDUCTOR MANUFACTURING	-0.3
CHINA CONSTRUCTION BANK-H	-1.4
POP MART INTERNATIONAL GROUP	3.4
LAOPU GOLD CO L-H	14.9
BYD CO LTD-H	-1.4

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
ZHONGJI INNOLIGHT CO LTD-A	5.4
EAST MONEY INFORMATION CO-A	0.4
TIANFENG SECURITIES CO LTD-A	-2.6
EOPTOLINK TECHNOLOGY INC L-A	3.1
SHENZHEN FORMS SYNTRON INF-A	8.7
HENGBAO CO LTD-A	4
VICTORY GIANT TECHNOLOGY -A	1.4
BYD CO LTD -A	-0.7
LAKALA PAYMENT CO LTD-A	3.3
BEIJING COMPASS TECHNOLOGY-A	1.8

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.16 versus 7.17 Friday
• CNY per EUR 8.39 versus 8.39 Friday
• Yield on 10-Year Government Bond 1.65% versus 1.65% Friday
• Yield on 10-Year China Development Bank Bond 1.70% versus 1.69% Friday
• Copper Price 0.04%
• Steel Price 0.64%