STAR Board & China AI Ecosystem Soar on Oracle Open AI News
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Key News
Asian stocks were largely higher, as Mainland China ripped higher, led by growth/tech stocks, and CNY’s rally versus the US dollar continues, closing at 7.1218 today.
Oracle’s Open AI announcement and the stock’s very strong performance positively affected Mainland China’s tech sector, STAR Board, growth stocks, AI, cloud supply chain, and related ecosystem stocks.
The Mainland’s big growth industry sector year-to-date (YTD) is comprised of tech hardware (electronic equipment, communication equipment +6.87%, computer hardware +6.23%), semiconductors +5.30%, and non-ferrous metals (precious metals, base metals +2.27%, mining), which today were joined by electric components +6.5%. These industries comprise the dominant three factors in China: momentum, growth, and liquidity.
There were monster/double-digit moves as the Mainland’s most heavily traded stocks by value were Victory Giant Technology +16.28%, Zhongji Innolight +14.28%, Eoptolink Technology +13.42% and Cambricon Technology +8.96%. See below the most heavily traded stocks by value (not volume).
I’m surprised that Hong Kong wasn’t as enthusiastic, though Mainland investors bought a very healthy $2.437B of Hong Kong stocks via Southbound Stock Connect. Yes, Hong Kong closed lower, though well off its intra-day lows, as the Hang Seng Index stayed above the 26,000 level.
Alibaba announced after the US close it will raise $3.2B by issuing a convertible bond, i.e. dilution, with the proceeds according to the filing, “80% directed towards enhancing its cloud infrastructure, which encompasses scaling up data centers, upgrading technology, and improving services to meet growing demand. The remaining 20% will be invested in expanding international commerce operations". S&P rated Alibaba’s convertible A+.
The Financial Times had a very complimentary article on Alibaba’s May 2024 convertible bond issue that used the proceeds to buy back stock and capped the dilution. Another very strong day of net buying of Alibaba (again) from Mainland investors via Southbound Stock Connect. Alibaba’s Amap local service effort weighed on Meituan (-5.06%).
Hong Kong advancers beat decliners, though healthcare was crushed by rumors that the US would impose tariffs on Chinese drugs. The market didn’t seem to differentiate between the few Chinese pharmaceutical names manufactured in the US. The tariff would be fun, as I suspect the US government is indirectly the largest buyer of healthcare products via Medicare and Medicaid.
The Ministry of Finance announced that EVs’ tax-free purchases will expire at year's end, though the sales tax will be 5% tax versus 10% on traditional cars. EVs costing more than RMB 300K will be taxed at 10% less than an RMB 15 discount. I suspect today’s announcement falls under the auspice of the anti-involution campaign, as auto makers' inability to curtail production arguably led the government to curb the demand. It also explains Nio’s recent stock sale. Chinese auto makers have made and sold 20 million cars YTD through August. Mexico announced tariffs on Chinese auto imports yesterday.
The State Council announced city center revitalization plans for Beijing and nine other cities.
Following yesterday’s note on members of Congress from the US House of Representatives visiting China for the first time since 2019, Reuters reports that both Marc Rubio and Peter Hasbeth spoke separately to their Chinese counterparts yesterday. Where there is smoke…
You might have noticed that the percentage of Southbound Stock Connect has suddenly dropped in half. Historically, we calculate the percentage by dividing Hong Kong turnover by Southbound turnover. In a meeting with the Hong Kong Exchanges this week, they quoted the percentage by dividing Connect turnover by two because Connect turnover is calculated by adding buy and sell turnover and then dividing by Hong Kong turnover. One could argue that you are double-counting the volume. I’ve seen the percentage calculated both ways, though I’ll defer to the methodology of the Exchange.
Today is September 11th, which will never be another day for those from or who live in New York. For the families of those taken too early, our thoughts and prayers go out to you. Gone but never forgotten. RIP B.Q.
Alibaba HK Stock Price and Net Inflow From Mainland Investors via Southbound Stock Connect
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -0.4% |
| Hang Seng Tech | HSTECH Index | -0.2% |
| Hong Kong Turnover | HKTurn Index | 12.8% |
| Hong Kong Short Sale Turnover | HKSST Index | 10.9% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 13.5% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 2425.15 |
| China (Shanghai) | SHCOMP Index | 1.7% |
| China (Shenzhen) | SZCOMP Index | 2.5% |
| China (STAR Board) | Star50 Index | 5.3% |
| Mainland Turnover | .chturn Index | 23.3% |
| Northbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 0.4% |
| Japan | NKY Index | 1.2% |
| India | SENSEX Index | 0.2% |
| Indonesia | JCI Index | 0.6% |
| Malaysia | FBMKLCI Index | -0.5% |
| Pakistan | KSE100 Index | -0.6% |
| Philippines | PCOMP Index | 0.1% |
| South Korea | KOSPI Index | 0.9% |
| Taiwan | TWSE Index | 0.1% |
| Thailand | SET Index | 0.8% |
| Singapore | STI Index | 0.2% |
| Australia | AS51 Index | -0.3% |
| Vietnam | VNINDEX Index | 0.9% |
| Indicator | Hong Kong | Mainland |
|---|---|---|
| Today's Volume % of 1-Year Average | 140% | 152% |
| Advancing Stocks | 269 | 3578 |
| Declining Stocks | 201 | 1377 |
| Outperforming Factors | Low Volatility, Dividend Yield | Momentum, Growth, Liquidity |
| Underperforming Factors | Quality, Momentum, Liquidity | |
| Top Sectors | Materials, Utilities, Staples | Tech, Materials, Financials |
| Bottom Sectors | Healthcare, Real Estate, Communication | |
| Top Subsectors | Semis, Non Ferrous Metals, Construction Materials | Communication Equipment, Electronic Components, Computer Hardware |
| Bottom Subsectors | Pharmaceuticals, Household/Personal Products, Steel | Motorcycle, Catering/Tourism, Pharmaceuticals |
| Southbound Connect Buys | Alibaba (Very Large), Meituan, SMIC (Large) | |
| Southbound Connect Sells | Tencent (Large), Akeso (Small) |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 152 | -0.54 |
| Communication Services | 9 | -0.61 |
| Consumer Discretionary | 28 | -0.59 |
| Consumer Staples | 13 | 0.39 |
| Energy | 6 | 0.16 |
| Financials | 24 | -0.25 |
| Health Care | 12 | -4.52 |
| Industrials | 21 | 0.2 |
| Information Technology | 10 | 0.14 |
| Materials | 10 | 2.14 |
| Real Estate | 7 | -0.9 |
| Utilities | 12 | 0.7 |
| Mainland China Listed | 395 | 2.35 |
| Communication Services | 7 | 0.31 |
| Consumer Discretionary | 29 | 0.88 |
| Consumer Staples | 24 | 0.88 |
| Energy | 13 | 0.31 |
| Financials | 64 | 1.51 |
| Health Care | 32 | 0.03 |
| Industrials | 61 | 1.37 |
| Information Technology | 90 | 7.16 |
| Materials | 54 | 1.65 |
| Real Estate | 6 | 0.58 |
| Utilities | 15 | 0.1 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -0.6 |
| Alibaba HK | 9988 HK Equity | 0.4 |
| JD.com HK | 9618 HK Equity | -1.7 |
| NetEase HK | 9999 HK Equity | 0.4 |
| Yum China HK | 9987 HK Equity | 1.8 |
| Baozun HK | 9991 HK Equity | -1.8 |
| Baidu HK | 9888 HK Equity | -2.4 |
| Autohome HK | 2518 HK Equity | -3.5 |
| Bilibili HK | 9626 HK Equity | -2.5 |
| Trip.com HK | 9961 HK Equity | 0.7 |
| EDU HK | 9901 HK Equity | 3.1 |
| Xpeng HK | 9868 HK Equity | -1.9 |
| Weibo HK | 9898 HK Equity | -1 |
| Li Auto HK | 2015 HK Equity | -3 |
| Nio Auto HK | 9866 HK Equity | -1.8 |
| Zhihu HK | 2390 HK Equity | 3.7 |
| KE HK | 2423 HK Equity | -1.5 |
| Tencent Music Entertainment HK | 1698 HK Equity | 1.1 |
| Meituan HK | 3690 HK Equity | -5.1 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | 0.4 |
| MEITUAN-CLASS B | -5.1 |
| TENCENT HOLDINGS LTD | -0.6 |
| SEMICONDUCTOR MANUFACTURI-H | 3.6 |
| XIAOMI CORP-CLASS B | -2.2 |
| AKESO INC | -4.7 |
| INNOVENT BIOLOGICS INC | -2.5 |
| CSPC PHARMACEUTICAL GROUP LT | -7.5 |
| POP MART INTERNATIONAL GROUP | -4.5 |
| WUXI BIOLOGICS CAYMAN INC | -4.3 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| VICTORY GIANT TECHNOLOGY -A | 12 |
| ZHONGJI INNOLIGHT CO LTD-A | 7.2 |
| EOPTOLINK TECHNOLOGY INC L-A | 6.2 |
| CAMBRICON TECHNOLOGIES-A | 3.7 |
| EAST MONEY INFORMATION CO-A | 4.1 |
| SUNGROW POWER SUPPLY CO LT-A | -1.2 |
| HYGON INFORMATION TECHNOLO-A | 20 |
| SEMICONDUCTOR MANUFACTURIN-A | 6.1 |
| FOXCONN INDUSTRIAL INTERNE-A | 10 |
| LUXSHARE PRECISION INDUSTR-A | 10 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 7.12 versus 7.12 yesterday
- CNY per EUR 8.32 versus 8.37 yesterday
- Yield on 10-Year Government Bond 1.87% versus 1.86% yesterday
- Yield on 10-Year China Development Bank Bond 1.96% versus 1.91% yesterday
- Copper Price +0.50%
- Steel Price -0.23%
