Key News

Asian equities were mixed but mostly lower overnight as Korea and Japan outperformed and Hong Kong and Mainland China underperformed.

Hong Kong held up better than Mainland China as markets experienced another day of likely profit taking as up sectors from yesterday’s session were mostly lower. Meanwhile, both markets experienced a rotation into value stocks and sectors. Hong Kong’s volumes, however, remained elevated as turnover increased +30% from yesterday and Mainland investors were net sellers via Southbound Stock Connect.

The animated film Ne Zha 2 broke record at the box office in China, leading its maker the A-share (Mainland) listed Beijing Enlight Media to gain +20% overnight. The movie’s success is leading to speculation that AI-powered animation techniques were used to make the movie and these techniques could have a profound impact on the animated film industry.

Baidu, up +5%, released some upgrades to its ERNIE bot large language model (LLM), including a tool called “Deep Search”, which will add multimedia inputs and outputs. The company also announced that the model will now be available to all users free of charge. This is welcome positive news for the “Google of China” after it was passed up by Apple in favor of Alibaba to develop AI tools for iPhones sold in China.

Real estate names came under pressure after a strong rally yesterday despite news of a new housing fund to be set up in Shenzhen.

China’s State Railway Group has announced plans to create trains that are specifically designed for the elderly. The idea is to make it easier and more comfortable for the elderly to travel by train, unlocking more of their spending power. These trains would come with predefined touristic routes and comprehensive onboard services, including medical care facilities.

So far this year, Southbound Stock Connect flows into Hong Kong from Mainland investors have been heavily geared towards growth and technology stocks. Specifically, stocks in the Information Technology sector have accounted for 17% and those in the Communication Services sector have accounted for 38% of the flow, for a total of 55% of flows. We saw this trend coming with the addition of Alibaba’s Hong Kong-listed shares to the program in September of last year. As such, the rally in technology and growth stocks, driven primarily by AI optimism, has been largely driven by local (Mainland) investors, as Southbound flows have accounted for nearly one-third of Hong Kong turnover in many trading days. Foreign investors’ flows have been light and there is evidence that they, overall, still prefer US equities. The unwinding of this trade could be a catalyst moving forward.

The Hang Seng and Hang Seng Tech indexes both closed lower by -0.20% and -0.87%, respectively, on volume that increased +32% from yesterday. Mainland investors sold a net -$131 million worth of Hong Kong-listed stocks and ETFs overnight via Southbound Stock Connect. The top-performing sectors were Consumer Discretionary, which gained +0.80%, Consumer Staples, which gained +0.64%, and Utilities, which gained +0.16. Meanwhile, the worst-performing sectors were Information Technology, which fell -4.99%, Real Estate, which fell -2.43%, and Health Care, which fell -1.66%.

Shanghai, Shenzhen, and the STAR Board all closed lower by  -0.42%, -0.77%, and -2.31%, respectively. The top-performing sectors were  Consumer Staples, which gained +2.42%, Utilities, which gained +0.48%, and Industrials, which gained +0.33%. Meanwhile, the worst-performing sectors were Information Technology, which fell -2.37%, Consumer Discretionary, which fell -0.78%, and Real Estate, which fell -0.28%.

Last Night’s Performance

Country/Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	-0.2%
Hang Seng Tech	HSTECH Index	-0.9%
Hong Kong Turnover	HKTurn Index	32.1%
HK Short Sale Turnover	HKSST Index	38.7%
Short Turnover as a % of HK Turnovr	N/A	13.7%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	0
China (Shanghai)	SHCOMP Index	-0.4%
China (Shenzhen)	SZCOMP Index	-0.8%
China (STAR Board)	Star50 Index	-2.3%
Mainland Turnover	.chturn Index	8.5%
Nouthbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	Not Available
Jing Daily China Global Luxury Index	CHINALUX Index	0.8%
Japan	NKY Index	1.3%
India	SENSEX Index	0%
Indonesia	JCI Index	-0.5%
Malaysia	FBMKLCI Index	-0.7%
Pakistan	KSE100 Index	-0.2%
Philippines	PCOMP Index	1.1%
South Korea	KOSPI Index	1.4%
Taiwan	TWSE Index	0.5%
Thailand	SET Index	0%
Singapore	STI Index	0.2%
Australia	AS51 Index	0.1%

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	152	-0.41
Communication Services	9	0.04
Consumer Discretionary	30	0.8
Consumer Staples	13	0.64
Energy	7	-1.24
Financials	23	-0.96
Health Care	13	-1.66
Industrials	19	-0.9
Information Technology	10	-4.99
Materials	10	-1.1
Real Estate	6	-2.43
Utilities	12	0.16
Mainland China Listed	432	-0.17
Communication Services	9	0.1
Consumer Discretionary	31	-0.78
Consumer Staples	27	2.42
Energy	16	-0.2
Financials	63	-0.04
Health Care	40	-0.05
Industrials	69	0.33
Information Technology	85	-2.37
Materials	68	-0.08
Real Estate	7	-0.28
Utilities	17	0.48

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	-0.5
Alibaba HK	9988 HK Equity	2.5
JD.com HK	9618 HK Equity	-2.9
NetEase HK	9999 HK Equity	-1.6
Yum China HK	9987 HK Equity	-2.4
Baozun HK	9991 HK Equity	3.2
Baidu HK	9888 HK Equity	5.7
Autohome HK	2518 HK Equity	1.7
Bilibili HK	9626 HK Equity	5.6
Trip.com HK	9961 HK Equity	1.3
EDU HK	9901 HK Equity	-3.3
Xpeng HK	9868 HK Equity	-2.8
Weibo HK	9898 HK Equity	-0.3
Li Auto HK	2015 HK Equity	-3
Nio Auto HK	9866 HK Equity	0.6
Zhihu HK	2390 HK Equity	-6.3
KE HK	2423 HK Equity	-1.8
Tencent Music Entertainment HK	1698 HK Equity	-0.7
Meituan HK	3690 HK Equity	2.9

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
ALIBABA GROUP HOLDING LTD	2.5
TENCENT HOLDINGS LTD	-0.5
XIAOMI CORP-CLASS B	-5.6
MEITUAN-CLASS B	2.9
KUAISHOU TECHNOLOGY	6.3
SEMICONDUCTOR MANUFACTURING	-4.1
HONG KONG EXCHANGES & CLEAR	-3
BYD CO LTD-H	-3.7
AIA GROUP LTD	5.4
BAIDU INC-CLASS A	5.7

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
TALKWEB INFORMATION SYSTEM-A	0.9
EAST MONEY INFORMATION CO-A	-1.5
SHIJIAZHUANG CHANGSHAN BEI-A	2.6
ZTE CORP-A	-5.2
SICHUAN CHANGHONG ELECTRIC-A	10
SHANGHAI ELECTRIC GRP CO L-A	2.7
CONTEMPORARY AMPEREX TECHN-A	2.4
IEIT SYSTEMS CO LTD-A	-3.6
TIANFENG SECURITIES CO LTD-A	5
MERIT INTERACTIVE CO LTD-A	1.3

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.30 versus 7.31 yesterday
• CNY per EUR 7.58 versus 7.59 yesterday
• Yield on 10-Year Government Bond 1.63% versus 1.63% yesterday
• Yield on 10-Year China Development Bank Bond 1.62% versus 1.62% yesterday
• Copper Price -0.23%
• Steel Price -0.61%