Markets Correct On Pharmaceutical Tariffs & Technology Profit-Taking, Week in Review
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Week in Review
- Asian equities were mixed for the week as Mainland China's STAR Board and Pakistan outperformed, while the Philippines and India underperformed.
- Trump signed an executive order in support of the deal to have a consortium of US technology companies, including Oracle, purchase 80% of TikTok's US operations and gain a license to its algorithm, valuing the company's US operations at $114 billion.
- Alibaba announced a $53 billion investment plan for AI and a partnership with Nvidia, though details are scant so far, which helped power STAR Market equities and other AI-related stocks higher this week.
- Xiaomi released the Xiaomi 17, which will go head-to-head with the iPhone 17 in China and includes a screen on the back, right after Apple's ecosystem suppliers experienced a significant re-rating on optimism or iPhone 17 sales.
Friday's Key News
Asian equities were mostly lower overnight as Pakistan and Indonesia outperformed, while Hong Kong and Korea underperformed.
Mainland China and Hong Kong's declines were partially driven by Trump's announcement of tariffs on pharmaceutical and furniture imports from China. However, the US President said that the tariffs would immediately be waived for companies building facilities to produce drugs in the United States for the local market. That's great! This is the kind of deal-making we have been looking for, where China's firms are invited to start up local production, which many of them already have. Health care was one of the worst-performing subsectors, though, as a result, in both Hong Kong and the Mainland.
Chip and hardware maker Luxshare fell 6% overnight and was the most heavily traded Mainland stock by value. Luxshare recently rose on news that it has been tapped by OpenAI to produce an Alexa-like home assistant device. It looks like some serious profit-taking in a great company! It is up 16% from Friday last week.
Mainland investors bought a net $1.6 billion worth of Hong Kong-listed stocks and ETFs, as their inflows turned positive after going negative briefly earlier in the week.
Last night appeared to be another bout of profit-taking in key technology names that have outperformed. Value stocks and sectors outperformed growth in Hong Kong and the Mainland. It appears that Powell's comments on stocks being somewhat overvalued (especially technology) might not have fallen on deaf ears in China. But, remember that China technology is still heavily discounted versus its US peers. For the internet sector, the earnings multiple discount for China from the US remains around 30%, despite double-digit returns this year in multiple internet names.
The TikTok deal, should it happen (fingers crossed, though it seems likely), is significant, but highlights something that we already theorized: TikTok US is not worth zero! Moreover, it was never going to be banned because Congress knows that once many of its users turn 18, they would not vote for whoever was involved in banning it. The $14 billion valuation given to the platform is likely low, as it is being sold under the proverbial "gunpoint", but it is not too shabby. TikTok US is likely not profitable currently, due to high spend on promotions, though the potential is definitely there. For ByteDance, the real opportunity is in the rest of the world for TikTok, other than India because it is actually banned there.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1.3% |
| Hang Seng Tech | HSTECH Index | -2.9% |
| Hong Kong Turnover | HKTurn Index | 2.8% |
| Hong Kong Short Sale Turnover | HKSST Index | -3% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 13.5% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 1,346.17 |
| China (Shanghai) | SHCOMP Index | -0.7% |
| China (Shenzhen) | SZCOMP Index | -1.5% |
| China (STAR Board) | Star50 Index | -1.6% |
| Mainland Turnover | .chturn Index | -9.4% |
| Northbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | -1% |
| Japan | NKY Index | -0.9% |
| India | SENSEX Index | -0.9% |
| Indonesia | JCI Index | 0.7% |
| Malaysia | FBMKLCI Index | 0.7% |
| Pakistan | KSE100 Index | 1.7% |
| Philippines | PCOMP Index | -0.3% |
| South Korea | KOSPI Index | -2.5% |
| Taiwan | TWSE Index | -1.7% |
| Thailand | SET Index | -0.7% |
| Singapore | STI Index | -0.2% |
| Australia | AS51 Index | 0.2% |
| Vietnam | VNINDEX Index | -0.3% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume as % of 1-Year Average | 123 | 129 |
| Advancing Stocks | 30 (Hang Seng) | 117 (CSI 300) |
| Declining Stocks | 55 (Hang Seng) | 169 (CSI 300) |
| Outperforming Factors | Value | Value |
| Underperforming Factors | Growth | Growth |
| Top Sectors | Financials, Energy, Industrials | Real Estate, Utilities, Materials |
| Bottom Sectors | Information Technology, Consumer Discretionary, Health Care | Information Technology, Communication Services, Health Care |
| Top Subsectors | Consumer Durables, Aerospace, Banks | Petrochemicals, Chemical Fiber, Soft Drinks |
| Bottom Subsectors | Technology Hardware, Semiconductors, Consumer Staples | Electronic Components, Computer Hardware, Internet |
| Southbound Connect Buys | Alibaba, Horizon Robotics, Tencent | N/A |
| Southbound Connect Sells | Xpeng, Hua Hong Semiconductor, Semiconductor Manufacturing (SMIC) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 151 | -1.59 |
| Communication Services | 9 | -1.23 |
| Consumer Discretionary | 28 | -2.32 |
| Consumer Staples | 13 | -0.31 |
| Energy | 7 | 0.41 |
| Financials | 23 | 0.75 |
| Health Care | 13 | -2.22 |
| Industrials | 20 | -0.09 |
| Information Technology | 10 | -6.5 |
| Materials | 10 | -0.71 |
| Real Estate | 6 | -0.31 |
| Utilities | 12 | -0.21 |
| Mainland China Listed | 404 | -1.15 |
| Communication Services | 6 | -2.28 |
| Consumer Discretionary | 31 | 0.02 |
| Consumer Staples | 24 | -0.42 |
| Energy | 13 | -0.27 |
| Financials | 64 | -0.25 |
| Health Care | 31 | -2 |
| Industrials | 64 | -1.28 |
| Information Technology | 91 | -3.26 |
| Materials | 58 | 0.33 |
| Real Estate | 6 | 0.93 |
| Utilities | 16 | 0.46 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -0.9 |
| Alibaba HK | 9988 HK Equity | -3.2 |
| JD.com HK | 9618 HK Equity | -3.7 |
| NetEase HK | 9999 HK Equity | -1.7 |
| Yum China HK | 9987 HK Equity | -0.7 |
| Baozun HK | 9991 HK Equity | 2 |
| Baidu HK | 9888 HK Equity | -1.9 |
| Autohome HK | 2518 HK Equity | -0.6 |
| Bilibili HK | 9626 HK Equity | -3 |
| Trip.com HK | 9961 HK Equity | -2.7 |
| EDU HK | 9901 HK Equity | -0.2 |
| Xpeng HK | 9868 HK Equity | 5 |
| Weibo HK | 9898 HK Equity | -2.6 |
| Li Auto HK | 2015 HK Equity | -1.9 |
| Nio Auto HK | 9866 HK Equity | -0.2 |
| Zhihu HK | 2390 HK Equity | -1.3 |
| KE HK | 2423 HK Equity | -1.6 |
| Tencent Music Entertainment HK | 1698 HK Equity | -2.3 |
| Meituan HK | 3690 HK Equity | -1.7 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | -3.2 |
| XIAOMI CORP-CLASS B | -8.1 |
| TENCENT HOLDINGS LTD | -0.9 |
| SEMICONDUCTOR MANUFACTURI-H | -5 |
| HORIZON ROBOTICS INC | -8.5 |
| HUA HONG SEMICONDUCTOR LTD-H | 3 |
| MEITUAN-CLASS B | -1.7 |
| XPENG INC - CLASS A SHARES | 5 |
| POP MART INTERNATIONAL GROUP | 1.6 |
| BYD CO LTD-H | -1.6 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| LUXSHARE PRECISION INDUSTR-A | -6.5 |
| SERES GROUP CO L-A | 5.8 |
| ZHONGJI INNOLIGHT CO LTD-A | -4.8 |
| EOPTOLINK TECHNOLOGY INC L-A | -0.5 |
| SUNGROW POWER SUPPLY CO LT-A | -1.5 |
| VICTORY GIANT TECHNOLOGY -A | -4.7 |
| CONTEMPORARY AMPEREX TECHN-A | -3.2 |
| IEIT SYSTEMS CO LTD-A | -5.3 |
| FOXCONN INDUSTRIAL INTERNE-A | -5.2 |
| ZTE CORP-A | -2.9 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 7.13 versus 7.13 yesterday
- CNY per EUR 8.34 versus 8.31 yesterday
- Yield on 10-Year Government Bond 1.88% versus 1.88% yesterday
- Yield on 10-Year China Development Bank Bond 1.96% versus 1.96% yesterday
- Copper Price -0.51%
- Steel Price -0.80%
