Key News

Asian equities were largely higher overnight, led by Thailand, Pakistan, and Taiwan, while Japan underperformed and Hong Kong was closed for the Hong Kong Special Administrative Region (SAR) Establishment Day, which marks the handover of the territory to China by the UK following 156 years of colonial rule.

Mainland China opened lower, but grinded higher on good volumes and mixed breadth.

President Xi headed the Central Committee for Financial and Economic Affairs’ sixth meeting, which was focused on several economic areas. The release states the government should “govern the low-price and disorderly competition of enterprises in accordance with laws and regulations” and “promote the orderly exit of backward production capacity”. This is aligned with recent government regulators’ talk on addressing overcapacity in the auto industry. Coincidentally, the China Automobile Dealers Association’s investor warning index increased +3.9% to 56.6%. Levels above 50 indicate auto dealers are holding high levels of inventory, which exposes them to liquidity risk. The statement may also be referencing the recent increase in E-Commerce competition.  JD.com entered restaurant delivery and online travel by slashing prices and losing money in order to garner market share.

While execution and implementation of this guidance will be important, it should be cheered by investors as it would raise profit margins. It would also address President Trump’s and the EU’s concerns on excess auto production. The release also referenced growing the marine industry, including offshore wind power, as electricity companies outperformed.

Mainland healthcare stocks outperformed after the National Healthcare Security Administration and National Health Commission released "Several Measures to Support the High-Quality Development of Innovative Drugs".

Real estate was off, as the China Index Academy announced that year-to-date (YTD) sales through June from the top 100 real estate “enterprises” were RMB 1.8 trillion, which is down -11.8% year-over-year (YoY). June sales were off -18.5% YoY, though improved +1.2% from May. Construction companies underperformed today on the real estate release.

Banks were higher, as investors are anticipating high dividend payments, based on high balance sheet cash positions.

Aerospace was hit with profit-taking after recent outperformance. Semiconductors and software both underperformed, as well, though I did not see a negative catalyst.

June new energy vehicle (NEV), a category that includes both electric vehicles (EVs) and hybrid electric vehicles, delivery figures were released this morning. The below is courtesy of CnEVPost:

• NIO: 24,925 units
• Li Auto: 36,279 units, -24% YoY
• Zeekr: 43,012 units
• XPeng: 34,611 units, +224% YoY
• Leapmotor: 48,006 units, +138% YoY
• Xiaomi: 25,000 units

Tesla is increasing the price of its Model 3 in China to RMB 285,500 from RMB 275,500. Tesla China also announced the installation of V4 super chargers in several cities.

Today’s anniversary of the turnover of Hong Kong reminds me of how little is taught in the West of the Opium Wars and the colonial powers' invasion of China. I understand why, as it isn’t that pretty. I did not know very much about it until joining KraneShares, where, out of curiosity, I educated myself by reading several books. I’ve included an image below of the Shanghai International Settlement flag that includes the colonial powers that owned a piece of Shanghai. It is something that might be worth examining as it explains an element of today’s geopolitical tensions.

Last Night's Performance

Country/Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	Closed
Hang Seng Tech	HSTECH Index	Closed
Hong Kong Turnover	HKTurn Index	Closed
Hong Kong Short Sale Turnover	HKSST Index	Closed
Short Turnover as a % of Hong Kong Turnover	N/A	Closed
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	Closed
China (Shanghai)	SHCOMP Index	0.4%
China (Shenzhen)	SZCOMP Index	0.2%
China (STAR Board)	Star50 Index	-0.9%
Mainland Turnover	.chturn Index	-1.4%
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	-1.2%
India	SENSEX Index	0.1%
Indonesia	JCI Index	-0.2%
Malaysia	FBMKLCI Index	0.6%
Pakistan	KSE100 Index	2.2%
Philippines	PCOMP Index	0.9%
South Korea	KOSPI Index	0.6%
Taiwan	TWSE Index	1.3%
Thailand	SET Index	1.9%
Singapore	STI Index	0.6%
Australia	AS51 Index	0%
Vietnam	VNINDEX Index	0.1%

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	Closed	114
Advancing Stocks	Closed	2428
Declining Stocks	Closed	2466
Outperforming Factors	Closed	Value, Dividend, Low Volatility
Underperforming Factors	Closed	Liquidity, Growth
Top Sectors	Closed	Healthcare, Utilities, Materials
Bottom Sectors	Closed	Communication, Tech, Real Estate
Top Subsectors	Closed	Motorcycle, Precious Metals, Education
Bottom Subsectors	Closed	Business Services, Internet, Software
Southbound Connect Buys	Closed	N/A
Southbound Connect Sells	Closed	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	152	Closed
Communication Services	9	Closed
Consumer Discretionary	30	Closed
Consumer Staples	13	Closed
Energy	7	Closed
Financials	23	Closed
Health Care	13	Closed
Industrials	19	Closed
Information Technology	10	Closed
Materials	10	Closed
Real Estate	6	Closed
Utilities	12	Closed
Mainland China Listed	432	0.29
Communication Services	9	-0.45
Consumer Discretionary	31	-0.17
Consumer Staples	27	-0.08
Energy	16	0.36
Financials	63	0.8
Health Care	40	0.96
Industrials	69	-0.1
Information Technology	85	-0.39
Materials	68	0.9
Real Estate	7	-0.38
Utilities	17	0.96

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
EAST MONEY INFORMATION CO-A	-1.1
SHENZHEN FORMS SYNTRON INF-A	-9.5
CAMBRICON TECHNOLOGIES-A	-6.4
NORTH INDUSTRIES GROUP RED-A	3.7
TIANFENG SECURITIES CO LTD-A	-2.6
INNER MONGOLIA FIRST MACHI-A	-0.2
SUZHOU DONGSHAN PRECISION-A	10
ANHUI GREAT WALL MILITARY -A	10
ZHONGJI INNOLIGHT CO LTD-A	-0.4
HENGBAO CO LTD-A	-4

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 7.16 versus 7.16 yesterday
• CNY per EUR 8.45 versus 8.44 yesterday
• Yield on 10-Year Government Bond 1.64% versus 1.65% yesterday
• Yield on 10-Year China Development Bank Bond 1.69% versus 1.70% yesterday
• Copper Price 0.31%
• Steel Price -0.73%