Mainland Investors Pour $1.5 Billion Into Hong Kong Stocks
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Key News
Asian equities were mixed overnight as the US dollar strengthened versus local currencies. President Trump’s July 9th tariff love letters are set to be mailed.
President Trump made his presence felt at the BRICS conference in Brazil, announcing that countries implementing anti-American policies would receive an extra 10% tariff. For the US-China relationship, positives include the impending TikTok sale, and Treasury Secretary Bessent mentioning that he would meet with his Chinese counterpart soon. Meanwhile, brandy has become a bargaining chip in trade talks between China and the EU.
Hong Kong and Mainland China’s markets were basically flat overnight, as traders wait for further tariff clarity. Volumes were light, though Mainland investors bought a very healthy $1.5 billion worth of Hong Kong-listed stocks and ETFs, focusing on growth stocks, accounting for 53% of Hong Kong’s volume via Southbound Stock Connect. Year-to-date (YTD), Mainland investors have purchased $96.6 billion worth of Hong Kong stocks, following Friday’s net buy of $851 million. Buying was focused on the Hong Kong Tracker ETF, Meituan, which fell -1.49%, Alibaba, which gained +0.29%, Guotai Junan, which gained +10.77%, Tencent, which gained +1.05%, Xiaomi, which fell -0.35%, and Semiconductor Manufacturing International Co. (SMIC), which gained +0.8%. This was the first net buy for Tencent since April 22nd.
Tencent, among other widely-held Connect stocks, might be funding Hong Kong’s IPO boom. Insurer FWD Group, the latest offering, gained +1.1% after raising HKD 3.5 billion. The company’s founder, Richard Li, is the son of legendary businessman Li Ka-shing.
Meanwhile, restaurant delivery competition is leading to a spike in volume. Alibaba announced Taobao Instant Commerce reached 80 million orders in early July, up from 60 million at end of June, as daily average users reached 200 million. Meituan announced that its delivery service had 120 million orders on Saturday. Bubble tea store stocks appeared to be the main beneficiaries of the company-led subsidized consumption.
Tariff-sensitive sectors were lower overnight, including Mainland technology hardware stocks, which were off, while Chinese healthcare stocks were off, too.
After the close, the Ministry of Finance (MoF) announced it will issue RMB 40 billion worth of 20-year and RMB 83 billion worth of 30-year special ultra-long term government bonds. I assume the proceeds will be used to support consumer subsidy programs after several provinces ran low on funds.
Utilities have been hot, as China’s summer heat wave is increasing electricity demand as locals crank the AC.
Over the weekend, it was reported that 688 mainland-listed companies have borrowed RMB 135.9 billion from banks, following policy supporting stock buy backs.
China’s foreign exchange reserves increased in June to $3.32 trillion, up from May’s $3.29 trillion, though this is a non-event and not newsworthy unless it is declining. Several June economic data releases are coming over the next few days, including the consumer price index (CPI) and the producer price index (PPI), New Loans, Aggregate Financing, and Money Supply.
Reuters’ Nick Carey and Norihiko Shirouzu wrote a must-read article titled “How China's new auto giants left GM, VW and Tesla in the dust”. While all Western media attribute the rise of China's electric vehicle (EV) industry to government subsidies, this article examines the innovation and prowess of the automakers. A great line from the article states, “The U.S. and Europe have imposed tariffs to shield their car industries, alleging China unfairly subsidizes EVs. But, Reuters found that Chinese automakers’ development speed has emerged as the biggest factor in their cost and technological advantages over foreign competitors.” A worthwhile read!
Last Night’s Performance
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -0.1% |
| Hang Seng Tech | HSTECH Index | 0.3% |
| Hong Kong Turnover | HKTurn Index | -27.6% |
| Hong Kong Short Sale Turnover | HKSST Index | 11.8% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 15.5% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 532.9 |
| China (Shanghai) | SHCOMP Index | 0% |
| China (Shenzhen) | SZCOMP Index | -0.1% |
| China (STAR Board) | Star50 Index | -0.7% |
| Mainland Turnover | .chturn Index | -15.4% |
| 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 | -0.6% |
| India | SENSEX Index | 0% |
| Indonesia | JCI Index | 0.5% |
| Malaysia | FBMKLCI Index | -0.8% |
| Pakistan | KSE100 Index | 0.9% |
| Philippines | PCOMP Index | 0.5% |
| South Korea | KOSPI Index | 0.2% |
| Taiwan | TWSE Index | -0.5% |
| Thailand | SET Index | 0.3% |
| Singapore | STI Index | 0.5% |
| Australia | AS51 Index | -0.2% |
| Vietnam | VNINDEX Index | 1.1% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 97 | 92 |
| Advancing Stocks | 209 | 2910 |
| Declining Stocks | 253 | 2020 |
| Outperforming Factors | Value, Growth, Large Caps | Low Volatility, Value, Dividend Yield |
| Underperforming Factors | Quality, Liquidity, Buybacks | Liquidity, Growth, Quality |
| Top Sectors | Real Estate, Utilities, Communication | Real Estate, Communication, Utilities |
| Bottom Sectors | Materials, Healthcare, Tech | Healthcare, Energy, Tech |
| Top Subsectors | Consumer Services, Household/Personal Products, Consumer Durables/Apparel | Real Estate, Household Products, Environmental Protection |
| Bottom Subsectors | Non Ferrous Metals, Pharmaceutical, Paper/Packaging | Biotech, Motorcycle, Precious Metals |
| Southbound Connect Buys | HK Tracker ETF (Very Large), Meituan (Large), SMIC, Tencent (Moderate), Alibaba, Guotai Junan, Innovent Bio, Xiaomi (Small) | N/A |
| Southbound Connect Sells | Alibaba (Large), Tencent, Xiaomi (Moderate), Guotai Junan (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 152 | 0.11 |
| Communication Services | 9 | 0.83 |
| Consumer Discretionary | 30 | 0.29 |
| Consumer Staples | 13 | -0.32 |
| Energy | 7 | -0.42 |
| Financials | 23 | 0.15 |
| Health Care | 13 | -2.59 |
| Industrials | 19 | -0.43 |
| Information Technology | 10 | -0.65 |
| Materials | 10 | -3.14 |
| Real Estate | 6 | 1.54 |
| Utilities | 12 | 1.11 |
| Mainland China Listed | 432 | -0.42 |
| Communication Services | 9 | 0.93 |
| Consumer Discretionary | 31 | -0.32 |
| Consumer Staples | 27 | -0.75 |
| Energy | 16 | -1.19 |
| Financials | 63 | 0.18 |
| Health Care | 40 | -1.42 |
| Industrials | 69 | -0.46 |
| Information Technology | 85 | -1.05 |
| Materials | 68 | -0.59 |
| Real Estate | 7 | 1.16 |
| Utilities | 17 | 0.66 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 1 |
| Alibaba HK | 9988 HK Equity | 0.3 |
| JD.com HK | 9618 HK Equity | 0.5 |
| NetEase HK | 9999 HK Equity | -0.6 |
| Yum China HK | 9987 HK Equity | 3.2 |
| Baozun HK | 9991 HK Equity | 5.2 |
| Baidu HK | 9888 HK Equity | 0 |
| Autohome HK | 2518 HK Equity | 0 |
| Bilibili HK | 9626 HK Equity | 0.8 |
| Trip.com HK | 9961 HK Equity | 2 |
| EDU HK | 9901 HK Equity | -0.9 |
| Xpeng HK | 9868 HK Equity | 2.7 |
| Weibo HK | 9898 HK Equity | -0.3 |
| Li Auto HK | 2015 HK Equity | 2.8 |
| Nio Auto HK | 9866 HK Equity | 0.6 |
| Zhihu HK | 2390 HK Equity | -4 |
| KE HK | 2423 HK Equity | 1.3 |
| Tencent Music Entertainment HK | 1698 HK Equity | 1.7 |
| Meituan HK | 3690 HK Equity | -1.5 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| MEITUAN-CLASS B | -1.5 |
| ALIBABA GROUP HOLDING LTD | 0.3 |
| GUOTAI JUNAN INTERNATIONAL | 0.9 |
| TENCENT HOLDINGS LTD | 1 |
| XIAOMI CORP-CLASS B | 0.3 |
| SEMICONDUCTOR MANUFACTURING | -2.6 |
| KUAISHOU TECHNOLOGY | 1.8 |
| BYD CO LTD-H | -0.2 |
| HONG KONG EXCHANGES & CLEAR | -1.4 |
| CHINA CONSTRUCTION BANK-H | 2.9 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -4.4 |
| EAST MONEY INFORMATION CO-A | -0.7 |
| SHENZHEN FORMS SYNTRON INF-A | -3.4 |
| VICTORY GIANT TECHNOLOGY -A | -2.2 |
| EOPTOLINK TECHNOLOGY INC L-A | -1.7 |
| RONGFA NUCLEAR EQUIPMENT C-A | 6.6 |
| CONTEMPORARY AMPEREX TECHN-A | -0.4 |
| NORTHKING INFORMATION TECH-A | 3.4 |
| HUAFON MICROFIBRE SHANGHAI-A | 10.7 |
| TIANFENG SECURITIES CO LTD-A | -2.9 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.17 versus 7.17 Friday
- CNY per EUR 8.42 versus 8.44 Friday
- Yield on 10-Year Government Bond 1.64% versus 1.64% Friday
- Yield on 10-Year China Development Bank Bond 1.69% versus 1.69% Friday
- Copper Price -0.82%
- Steel Price -0.49%
