US-Japan Trade Deal Sends Hong Kong Higher, Shanghai Addresses Instant Commerce

Key News

Asian equities posted strong gains overnight, led by Japan, which rallied on news of its new trade agreement with the United States.

Hong Kong stocks surged after President Trump indicated he may visit President Xi Jinping "in the not-so-distant future," and the Philippines, Thailand, Indonesia, and Taiwan also posted substantial gains. President Trump's meeting with Philippine President Ferdinand Marcos Jr. featured remarks quoted by Reuters: "We’re getting along with China very well," helping bolster market sentiment.

China’s Ministry of Commerce confirmed that Vice Premier He Lifeng will meet U.S. Treasury Secretary Scott Bessent in Stockholm from July 27th to July 30th. Progress is expected for US-China trade talks, as the August 12th tariff deadline approaches. As we have argued in the past, any renewed interest from foreign investors in China's equity market is likely to favor growth names, instead of banks or energy stocks.

Hong Kong surged on high volumes, driven by growth and internet stocks. The day’s top performers by value included Tencent Holdings (+4.94%), Alibaba Group (+2.46%), Meituan (+3.26%), Xiaomi (+0.78%), and Kuaishou Technology (+7.08%). Kuaishou announced it will be the exclusive Chinese distributor of major youth YouTube star Mr. Beast, marking a high-profile entry for the U.S. influencer into the China's market.

Beyond improving U.S.-China relations, today’s rally got an additional lift from regulatory developments. Last Friday, the State Administration for Market Regulation (SAMR) met with Alibaba’s Ele.me, JD.com, and Meituan to address the ongoing restaurant delivery price war spurred by JD.com's aggressive entry and deep subsidies. On July 1st, senior Chinese officials met to address overcapacity and price competition in steel, solar, cement, autos, and E-Commerce sectors. SAMR is now spearheading policy implementation.

Shanghai authorities announced that the main food delivery and instant commerce platforms have implemented three rectifications: the suspension of "zero Renminbi (CNY) purchase" promotions, a significant reduction in the scope of free marketing, and the establishment of a special working group for activity monitoring, price controls, and courier rights protections. While the Hang Seng Index, Shanghai Composite, and Shenzhen Component Index all remain above their pre-Liberation Day highs, the ongoing delivery price war has weighed on the Hang Seng Tech Index, with names like Alibaba, Meituan, and JD.com notably lagging.

Elsewhere, Baidu climbed 6.08% after announcing the establishment of a new artificial intelligence center in Nanjing. Home appliance stocks performed strongly, including Midea (+2.57%) and Haier (+3.15%), alongside gains for the insurance and banking sectors.

Southbound Stock Connect saw a rare net outflow, albeit modest at -$168 million. Hong Kong-listed stocks and ETFs rose consistently throughout the day, while Mainland China markets started strong but faded in the afternoon as profit-taking hit sub-sectors tied to the Yarlung Zangbo dam, including construction machinery, building materials, and steel. Banks, semiconductor companies, household appliance makers, and insurers posted gains, although the day was comparatively weak across the broader market. Trading in exchange-traded funds (ETFs) favored by the National Team saw above-average volumes, suggesting a possible “buy-the-dip” response from sovereign wealth fund arm Central Huijin.

Diplomatically, India-China relations improved. India is once again permitting Chinese tourists to apply for visas. They had been barred from doing so for five years.

In Hainan, the free trade zone announced an expanded list of goods exempt from tariffs for certain categories.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	1.6%
Hang Seng Tech	HSTECH Index	2.5%
Hong Kong Turnover	HKTurn Index	25.2%
Hong Kong Short Sale Turnover	HKSST Index	23.9%
Short Turnover as a % of Hong Kong Turnover	N/A	11.4%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	0
China (Shanghai)	SHCOMP Index	0%
China (Shenzhen)	SZCOMP Index	-0.5%
China (STAR Board)	Star50 Index	0.5%
Mainland Turnover	.chturn Index	-1.5%
Nouthbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	Not Available
Jing Daily China Global Luxury Index	CHINALUX Index	1.6%
Japan	NKY Index	3.5%
India	SENSEX Index	0.7%
Indonesia	JCI Index	1.7%
Malaysia	FBMKLCI Index	0.7%
Pakistan	KSE100 Index	-0.2%
Philippines	PCOMP Index	1.7%
South Korea	KOSPI Index	0.4%
Taiwan	TWSE Index	1.4%
Thailand	SET Index	2.3%
Singapore	STI Index	0.5%
Australia	AS51 Index	0.7%
Vietnam	VNINDEX Index	0.2%

Indicator	A	Mainland China
Today's Volume % of 1-Year Average	162%	137%
Advancing Stocks	272	1221
Declining Stocks	168	3791
Outperforming Factors	Buybacks, Liquidity, Large Caps	Momentum, Large Caps, Liquidity
Underperforming Factors		Low Volatility, Quality, Growth
Top Sectors	Communication, Discretionary, Financials	Financials, Staples, Discretionary
Bottom Sectors	Utilities	Materials, Utilities, Energy
Top Subsectors	Paper/Packaging, Software, Consumer Discretionary Distribution	Insurance, Securities, Daily Chemical
Bottom Subsectors	Construction Materials, Consumer Durables, Building	Construction Machinery, Building Materials, Aerospace/Military
Southbound Connect Buys	Alibaba, Dongfang Electronic, Guotai Junan, StarPlus Legend (Small)
Southbound Connect Sells	Meituan, Tencent, Xiaomi (Large)

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	152	2.18
Communication Services	9	4.73
Consumer Discretionary	28	1.88
Consumer Staples	13	0.63
Energy	6	0.15
Financials	24	1.58
Health Care	12	0.15
Industrials	21	0.45
Information Technology	10	0.83
Materials	10	0.06
Real Estate	7	1.44
Utilities	12	-0.61
Mainland China Listed	395	0.2
Communication Services	7	0.13
Consumer Discretionary	29	0.26
Consumer Staples	24	0.35
Energy	13	-0.33
Financials	64	1.07
Health Care	32	0.22
Industrials	61	-0.32
Information Technology	90	0.02
Materials	54	-0.64
Real Estate	6	-0.08
Utilities	15	-0.44

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	4.9
Alibaba HK	9988 HK Equity	2.5
JD.com HK	9618 HK Equity	2.8
NetEase HK	9999 HK Equity	2.6
Yum China HK	9987 HK Equity	2.1
Baozun HK	9991 HK Equity	-4.3
Baidu HK	9888 HK Equity	6.1
Autohome HK	2518 HK Equity	2.3
Bilibili HK	9626 HK Equity	2.3
Trip.com HK	9961 HK Equity	1.2
EDU HK	9901 HK Equity	2.9
Xpeng HK	9868 HK Equity	2.6
Weibo HK	9898 HK Equity	1.3
Li Auto HK	2015 HK Equity	0.6
Nio Auto HK	9866 HK Equity	9
Zhihu HK	2390 HK Equity	0.8
KE HK	2423 HK Equity	2.5
Tencent Music Entertainment HK	1698 HK Equity	0.4
Meituan HK	3690 HK Equity	3.3

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
TENCENT HOLDINGS LTD	4.9
ALIBABA GROUP HOLDING LTD	2.5
MEITUAN-CLASS B	3.3
XIAOMI CORP-CLASS B	0.8
KUAISHOU TECHNOLOGY	7.1
GUOTAI JUNAN INTERNATIONAL	1.9
PING AN INSURANCE GROUP CO-H	1.5
CHINA LIFE INSURANCE CO-H	3.3
STAR PLUS LEGEND HOLDINGS-H	24.1
POP MART INTERNATIONAL GROUP	-3.3

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
EAST MONEY INFORMATION CO-A	0.7
CHINA NORTHERN RARE EARTH -A	1.8
CITIC SECURITIES CO-A	2.9
EOPTOLINK TECHNOLOGY INC L-A	-1.4
ZHONGJI INNOLIGHT CO LTD-A	0.9
HUADIAN NEW ENERGY GROUP C-A	-2.3
TBEA CO LTD-A	-1.3
KWEICHOW MOUTAI CO LTD-A	0.7
BEIJING COMPASS TECHNOLOGY-A	2.3
INNER MONGOLIA BAOTOU STE-A	4.6

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 7.16 versus 7.17 yesterday
• CNY per EUR 8.39 versus 8.40 yesterday
• Yield on 10-Year Government Bond 1.70% versus 1.69% yesterday
• Yield on 10-Year China Development Bank Bond 1.78% versus 1.76% yesterday
• Copper Price +0.20%
• Steel Price +0.58%