“Buy The Rumor, Sell The News”, Week In Review
6 Min. Read Time
Week in Review
- Asian equities were mostly lower for the week as Japan and Korea outperformed, while Mainland China’s STAR Board and Vietnam underperformed.
- Presidents Trump and Xi met held a closed-door meeting in South Korea on Thursday, which resulted in the suspension of multiple tariffs and export controls for one year and the resumption of China’s purchases of US soybeans.
- The draft of China’s 15th Five-Year Plan was released on Tuesday and included special emphasis on artificial intelligence technology and self-reliance.
- Earnings season for Mainland-listed companies has begun, with notable reports this week from Luxshare, which increased net profit by 32% in the third quarter year-over-year (YoY), and Foxconn Industrial Internet, which announced a third quarter net profit surge of 62% YoY.
Friday’s Key News
Asian equities were mixed, as Japan and South Korea outperformed, while Mainland China and Hong Kong underperformed.
“Buy the rumor and sell the news” appears to have been a factor in Hong Kong’s weakness, as the Trump-Xi truce underwhelms, meeting the base case in the short-term. US Trade Representative Greer’s comments on continuing China’s adherence garnered attention from the perpetually negative Western media. Reuters published an articled titled “After trade truce, China becomes a bit more investible” that was aligned with our view that US institutions have remained on the China investing sidelines, due to the geopolitical headwinds. China’s media noted Trump’s use of the term “G2” in describing the US and China. Defense Secretary Pete Hegseth also met with his Chinese counterpart Dong Jun in Kuala Lumpur.
October’s “official” purchasing managers’ indexes (PMIs) were mixed, as Manufacturing declined month-over-month (MoM) to 49.0 versus September’s 49.8 and expectations of 49.6, led lower by production and new orders. The Non-Manufacturing PMI was unchanged month-over-month at 50.1, which met expectations with business activity rebounding while construction was a drag. Readings above 50 indicate expansion, while readings below 50 indicate contraction. The release did not help sentiment, as the government’s focus on the new Five-Year Plan might have been a distraction from implementing stimulus and/or cutting rates today.
All things growth were hit, as the Australian saying goes: “the tall poppy gets cut”. Internet, technology hardware, semiconductors, autos, electric vehicles, and electric vehicle batteries were all lower. Hong Kong’s volumes were weak, as the Hang Seng closed below the 26,000 level and the Hang Seng Tech Index closed below the 6,000 level.
The only positive sector in Hong Kong was healthcare, as biotech company 3SBio gained +11.27%, as Pfizer tests the company’s lung and colorectal cancer drugs. Biotech peer Innovent gained +7.81%, as results from their work with US pharmaceutical giant Eli Lilly are expected next week. Biotech and green energy aren’t recognized as AI plays, though I suspect they are.
Mainland investors feared not, buying $1.11 billion worth of Hong Kong-listed stocks and ETFs via Southbound Stock Connect today. There was a very similar, possibly identical, situation in Mainland China, though not quite as severe: technology hardware, semiconductors, non-ferrous metals, and insurance were all off.
Several government agency heads published articles on how their departments would implement the draft 15th 5-Year Plan, including an article from the People’s Bank of China titled “Building a scientific and prudent monetary policy system and covering a comprehensive macro–Prudential Management System". The Ministry of Finance (MoF) said it would "play the role of active fiscal policy" in a paper. The Ministry of Commerce (MoC) spoke about “Expanding high-level opening up". Finally, the Ministry of Housing and Urban-Rural Development published "Promoting the High-quality Development of Real Estate”.
The MoF’s piece jumped out. Its plan is to “First, comprehensively expand domestic demand and support the construction of a strong domestic market” and “Second, we will support high-level self-reliance in science and technology to promote the rapid development of new quality productive forces.”
Wu Qing, the Chaiman of the China Securities Regulatory Commission (CSRC), China’s SEC, wrote an article on how the financial regulator’s capital markets portions are now geared to financing science and technology companies, raising the quality of listed companies, and attracting foreign capital.
Education technology and tutoring company TAL Education reported third quarter financial results before the US open yesterday. The results speak for themselves! It is worth noting that the stock is 83% below its all-time high even after yesterday’s 7.23% rally. The highlights are as follows.
- Net Revenues increased +39.1% YoY to $861.4 million from $619.4 million versus analyst expectations of $830 million.
- Non-GAAP Net Income increased +82.7% YoY to $135.8 million from $74.3 million versus analyst expectations of $97 million.
- Non-GAAP Earnings per Share (EPS) increased +94.6% YoY to $0.24 from $0.12 versus analyst expectations of $0.16.
Last Night’s Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1.4% |
| Hang Seng Tech | HSTECH Index | -2.4% |
| Hong Kong Turnover | HKTurn Index | -27.2% |
| Hong Kong Short Sale Turnover | HKSST Index | -30.3% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 15.2% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 1,113.53 |
| China (Shanghai) | SHCOMP Index | -0.8% |
| China (Shenzhen) | SZCOMP Index | -0.3% |
| China (STAR Board) | Star50 Index | -3.1% |
| Mainland Turnover | .chturn Index | -4.2% |
| Northbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | -0.7% |
| Japan | NKY Index | 2.1% |
| India | SENSEX Index | -0.6% |
| Indonesia | JCI Index | -0.2% |
| Malaysia | FBMKLCI Index | -0.3% |
| Pakistan | KSE100 Index | 3% |
| Philippines | PCOMP Index | -0.6% |
| South Korea | KOSPI Index | 0.5% |
| Taiwan | TWSE Index | -0.2% |
| Thailand | SET Index | -0.4% |
| Singapore | STI Index | -0.2% |
| Australia | AS51 Index | 0% |
| Vietnam | VNINDEX Index | -1.8% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume as % of 1-Year Average | 107 | 137 |
| Advancing Stocks | 127 | 3598 |
| Declining Stocks | 358 | 1419 |
| Outperforming Factors | ||
| Underperforming Factors | Large Caps, Growth, Liquidity | EPS Revisions, Liquidity, Momentum |
| Top Sectors | Healthcare | Healthcare, Real Estate, Staples |
| Bottom Sectors | Communication, Discretionary, Technology | Tech, Utilities, Materials |
| Top Subsectors | Pharmaceuticals, Paper/Packaging, Healthcare Equipment | Forest, Cultural Media, Pharmaceutical |
| Bottom Subsectors | Semis, Building, Consumer Durables/Apparel | Electronic Components, Communication Equipment, Computer Hardware |
| Southbound Connect Buys | Xiaomi (Moderate), 3SBio (Tiny) | N/A |
| Southbound Connect Sells | Tencent (Large), Hua Hong Semi, SMIC (Moderate), Alibaba, Pop Mart (Small), Gangfeng Lithium (Tiny) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 151 | -2.23 |
| Communication Services | 9 | -3.08 |
| Consumer Discretionary | 28 | -2.78 |
| Consumer Staples | 13 | -0.45 |
| Energy | 7 | -0.81 |
| Financials | 23 | -1.79 |
| Health Care | 13 | 2.61 |
| Industrials | 20 | -1.79 |
| Information Technology | 10 | -2.48 |
| Materials | 10 | -1.84 |
| Real Estate | 6 | -1.26 |
| Utilities | 12 | -0.95 |
| Mainland China Listed | 404 | -1.51 |
| Communication Services | 6 | 0.33 |
| Consumer Discretionary | 31 | -0.36 |
| Consumer Staples | 24 | 0.6 |
| Energy | 13 | -0.95 |
| Financials | 64 | -0.96 |
| Health Care | 31 | 1.57 |
| Industrials | 64 | -1.61 |
| Information Technology | 91 | -3.97 |
| Materials | 58 | -1.64 |
| Real Estate | 6 | 0.72 |
| Utilities | 16 | -2.05 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -3.4 |
| Alibaba HK | 9988 HK Equity | -4.1 |
| JD.com HK | 9618 HK Equity | -2.5 |
| NetEase HK | 9999 HK Equity | -1.4 |
| Yum China HK | 9987 HK Equity | -1.8 |
| Baozun HK | 9991 HK Equity | -0.9 |
| Baidu HK | 9888 HK Equity | -2.5 |
| Autohome HK | 2518 HK Equity | -1.9 |
| Bilibili HK | 9626 HK Equity | -1.5 |
| Trip.com HK | 9961 HK Equity | -1.2 |
| EDU HK | 9901 HK Equity | 2.1 |
| Xpeng HK | 9868 HK Equity | -1.4 |
| Weibo HK | 9898 HK Equity | -2.3 |
| Li Auto HK | 2015 HK Equity | -1 |
| Nio Auto HK | 9866 HK Equity | -1 |
| Zhihu HK | 2390 HK Equity | -2.6 |
| KE HK | 2423 HK Equity | -2.3 |
| Tencent Music Entertainment HK | 1698 HK Equity | 0.1 |
| Meituan HK | 3690 HK Equity | -0.4 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | -4.1 |
| TENCENT HOLDINGS LTD | -3.4 |
| SEMICONDUCTOR MANUFACTURI-H | -5.3 |
| XIAOMI CORP-CLASS B | -2.2 |
| BYD CO LTD-H | -3.5 |
| HUA HONG SEMICONDUCTOR LTD-H | -7.4 |
| POP MART INTERNATIONAL GROUP | -3.6 |
| MEITUAN-CLASS B | -0.4 |
| CHINA CONSTRUCTION BANK-H | -2 |
| AIA GROUP LTD | 3.1 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -8.1 |
| EOPTOLINK TECHNOLOGY INC L-A | -7.9 |
| VICTORY GIANT TECHNOLOGY -A | -10.5 |
| SUNGROW POWER SUPPLY CO LT-A | -2.5 |
| FOXCONN INDUSTRIAL INTERNE-A | -7.7 |
| CONTEMPORARY AMPEREX TECHN-A | -2.4 |
| CAMBRICON TECHNOLOGIES-A | -3.3 |
| ZHEJIANG SANHUA INTELLIGEN-A | -2.5 |
| LUXSHARE PRECISION INDUSTR-A | -3.1 |
| GIGADEVICE SEMICONDUCTO-CL A | -5.2 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.12 versus 7.11 yesterday
- CNY per EUR 8.22 versus 8.22 yesterday
- Yield on 10-Year Government Bond 1.80% versus 1.81% yesterday
- Yield on 10-Year China Development Bank Bond 1.87% versus 1.88% yesterday
- Copper Price -1.45%
- Steel Price -0.38%
