US AI Downdraft Weights on Asia Tech
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Key News
Asian equities must have missed Micron’s outstanding results after the US close, as growth stocks regionally were off, as South Korea underperformed.
Oracle and US AI rolling over clearly has a knock-on effect on Asia’s AI and chip ecosystem, including SK Hynix, Samsung, and TSMC. I’m less convinced that broader Asia tech is geared to the US AI spending spree, though markets are telling me I’m wrong. At the same time, holiday season volumes are getting light rapidly, as evidenced by the empty parking lot at my train station early this morning. The renminbi (CNY) hit another 52-week high versus the US dollar.
Xiaomi fell -2.47% on a broker downgrade, which, combined with the Oracle and AI concerns, weighed on growth stocks and subsectors in both Hong Kong and Mainland China. Mainland-listed technology hardware got smoked. Foxconn fell -5.24%, while Mainland semiconductors were off, as Cambricon fell -2.17%, Meta X Integrated Circuits fell -5.16%, and Moore Threads fell -1.27%. Clean technology and autos were also caught in the growth downturn. Underperforming growth gave the market an old-school value feel, as banks, insurance, oil & gas, and coal all outperformed.
Following the close, the State Administration for Market Regulation (SAMR) convened a meeting to review the outcomes of the Central Economic Work Conference (CEWC). SAMR noted that it should promote domestic consumption and “we should comprehensively rectify the 'internal competition' issue”.
Internet names were off, except for Tencent, which was flat after buying back another 1.06 million shares overnight. I would view the buyback as very good news. Meituan gained +0.1% while JD.com fell -0.09%. Sense Time fell -4.06% after raising HKD 3.15 billion ($404 million) by selling 1.75 billion shares at HKD 1.80 versus today’s close of HKD 1.87. We’ve warned that these secondary offerings and private placements are detrimental to existing shareholders and may pose a threat to Hong Kong's bull market.
Thus far, we’ve not seen a significant increase, though, combined with Hong Kong’s robust IPO market, more supply keeping demand constant means lower prices. Exhibit A is that six companies will list over the next four trading days in Hong Kong, raising HKD 7.4 billion. That HKD 7.4 billion is likely to come from existing stocks by selling them. I don’t believe the pullback since October is due to IPOs or private placements, though they do make me nervous.
Mainland investors hit the snooze bar after yesterday's $1 billion net buy, with only $161 million worth of net buying of Hong Kong-listed stocks and ETFs via Southbound Stock Connect overnight. Vice Premier He Lifeng got a reprieve from the bitter Beijing winter by opening the Hainan free trade zone. Photovoltaic exports of silicon wafers, batteries, and modules declined -13.2% year-over-year (YoY) year-to-date (YTD) through October, following 2024’s decline of -34.5% over the same time period, according to the China Photovoltaic Industry Association. The prices have stopped following due to “industry self-discipline”, i.e., anti-involution.
The Senate passed the $901 billion Defense budget, the National Defense Authorization Act (NDAA), last night, though absent from it was the SAFE (Securing American Funding and Expertise from Adversarial Research Exploitation) Research Act, which would have “denied federal funding to any US researcher working with scientists from China and several other countries”. I’m surprised that Hong Kong and Mainland China-listed healthcare stocks did not rip higher. The South China Morning Post has an excellent article on the topic, as “scholars and researchers” wrote a letter against the bill. There was very little examination of the Michigan member of Congress who proposed that bill. I wonder why. The NDAA does include limitations on US private equity in Chinese military companies, which seems logical.
In digging into the Hong Kong IPOs, a major obstacle to my efforts is that Bloomberg doesn’t break down IPOs by exchange, but rather by the type of company. CATL’s Hong Kong listing this year is considered “Emerging Asia – China” since it’s a Chinese company, though AIA’s secondary offering is considered “Developed Asia” since it is a Hong Kong-domiciled company. Both occurred on the Hong Kong Stock Exchange (HKEX), but are listed in different categories. Bloomberg also does not distinguish between Shanghai and Shenzhen names and those from Mainland China versus Hong Kong listings. Confused? Me too!
YTD, there have been $76 billion worth of secondary offerings and private placements from China-based companies and $7.25 billion from Hong Kong-domiciled companies. The largest came from BYD, at $5.60 billion (stock -14.8% since), Xiaomi at $5.50 billion (stock -22.6% since), and AIA at $3.42 billion (stock +19% since). YTD, $7.35 billion has been raised via IPOs in Hong Kong. The largest Hong Kong IPO was Zijin Gold’s $3.70 billion offering (stock +109% since). I’ll find a workaround and report back.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.1% |
| Hang Seng Tech | HSTECH Index | -0.7% |
| Hong Kong Turnover | HKTurn Index | -11.3% |
| Hong Kong Short Sale Turnover | HKSST Index | -22.1% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 18.2% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 160.60 |
| China (Shanghai) | SHCOMP Index | 0.2% |
| China (Shenzhen) | SZCOMP Index | -0.7% |
| China (STAR Board) | Star50 Index | -1.5% |
| Mainland Turnover | .chturn Index | -8.3% |
| Northbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | -0.5% |
| Japan | NKY Index | -1% |
| India | SENSEX Index | -0.1% |
| Indonesia | JCI Index | -0.7% |
| Malaysia | FBMKLCI Index | 0.3% |
| Pakistan | KSE100 Index | 0.9% |
| Philippines | PCOMP Index | -0.8% |
| South Korea | KOSPI Index | -1.5% |
| Taiwan | TWSE Index | -0.2% |
| Thailand | SET Index | -0.5% |
| Singapore | STI Index | -0.1% |
| Australia | AS51 Index | 0% |
| Vietnam | VNINDEX Index | 0.2% |
| Indicator | Hong Kong | Mainland |
|---|---|---|
| Today's Volume % of 1-Year Average | 65 | 98 |
| Advancing Stocks | 216 | 2795 |
| Declining Stocks | 260 | 2230 |
| Outperforming Factors | Quality, Low Volatility, Buyback | Value, Dividend Yield, Low Volatility |
| Underperforming Factors | Growth | Growth, Momentum, Liquidity |
| Top Sectors | Energy, Financials, Healthcare | Energy, Financials, Communication |
| Bottom Sectors | Tech, Real Estate, Discretionary | Tech, Real Estate, Discretionary |
| Top Subsectors | Coal, Transportation, Petroleum/Petrochemical | Airport, Office Supplies, Forest |
| Bottom Subsectors | Paper/Packaging, Electronical Equipment, Tech Hardware | Electric Power Grid, Electronic Components, Fine Chemicals |
| Southbound Connect Buys | Xiaomi (Large), YOFC (Small), CICC, SMIC, Tencent (Tiny) | |
| Southbound Connect Sells | China Mobile, HK Tracker ETF (Large), Alibaba (Small) |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -0.2 |
| Communication Services | 11 | 1.87 |
| Consumer Discretionary | 28 | -1.34 |
| Consumer Staples | 13 | -0.01 |
| Energy | 6 | 0.05 |
| Financials | 25 | -2.07 |
| Health Care | 15 | -0.33 |
| Industrials | 21 | 0.04 |
| Information Technology | 12 | 0.82 |
| Materials | 10 | -0.53 |
| Real Estate | 7 | 0.84 |
| Utilities | 12 | -0.9 |
| Mainland China Listed | 386 | -0.48 |
| Communication Services | 8 | -1.38 |
| Consumer Discretionary | 28 | 0.72 |
| Consumer Staples | 21 | 1.9 |
| Energy | 12 | 0.42 |
| Financials | 66 | -0.12 |
| Health Care | 33 | -1.15 |
| Industrials | 57 | 0.12 |
| Information Technology | 91 | -0.02 |
| Materials | 49 | -1.07 |
| Real Estate | 6 | 0.94 |
| Utilities | 14 | -2.28 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 0 |
| Alibaba HK | 9988 HK Equity | -1.3 |
| JD.com HK | 9618 HK Equity | -0.1 |
| NetEase HK | 9999 HK Equity | 0.7 |
| Yum China HK | 9987 HK Equity | 0.8 |
| Baozun HK | 9991 HK Equity | 2.3 |
| Baidu HK | 9888 HK Equity | -0.8 |
| Autohome HK | 2518 HK Equity | -0.7 |
| Bilibili HK | 9626 HK Equity | 0.3 |
| Trip.com HK | 9961 HK Equity | -0.8 |
| EDU HK | 9901 HK Equity | 1.5 |
| Xpeng HK | 9868 HK Equity | -1.5 |
| Weibo HK | 9898 HK Equity | -0.6 |
| Li Auto HK | 2015 HK Equity | -1.6 |
| Nio Auto HK | 9866 HK Equity | -1.5 |
| Zhihu HK | 2390 HK Equity | 0 |
| KE HK | 2423 HK Equity | -1.5 |
| Tencent Music Entertainment HK | 1698 HK Equity | 0.4 |
| Meituan HK | 3690 HK Equity | 0.1 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | -1.3 |
| TENCENT HOLDINGS LTD | 0 |
| XIAOMI CORP-CLASS B | -2.2 |
| YANGTZE OPTICAL FIBRE AND-H | -0.7 |
| CHINA MOBILE LTD-H | -0.5 |
| SEMICONDUCTOR MANUFACTURI-H | -1.9 |
| MEITUAN-CLASS B | 0.1 |
| SENSETIME GROUP INC-CLASS B | -4.1 |
| CHINA INTERNATIONAL CAPITA-H | 2.5 |
| CHINA CONSTRUCTION BANK-H | -2.1 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| EOPTOLINK TECHNOLOGY INC L-A | -4.6 |
| ZHONGJI INNOLIGHT CO LTD-A | -3.3 |
| CONTEMPORARY AMPEREX TECHN-A | -3 |
| CHINA AEROSPACE TIMES ELEC-A | 10 |
| SHENZHEN ENVICOOL TECHNOLO-A | 1.3 |
| FOXCONN INDUSTRIAL INTERNE-A | -0.3 |
| SUZHOU TFC OPTICAL COMMUNI-A | 0.5 |
| SUNGROW POWER SUPPLY CO LT-A | -3.7 |
| GIGADEVICE SEMICONDUCTO-CL A | 6.1 |
| VICTORY GIANT TECHNOLOGY -A | -0.3 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 7.04 versus 7.04 yesterday
- CNY per EUR 8.25 versus 8.25 yesterday
- Yield on 10-Year Government Bond 1.84% versus 1.83% yesterday
- Yield on 10-Year China Development Bank Bond 1.91% versus 1.91% yesterday
- Copper Price +0.39%
- Steel Price +1.20%
