A Tale of Two Chinas Revisited
6 Min. Read Time
Key News
Asian equities had a strong night as multiple markets posted gains of over 1% despite Trump's tariff threat.
December Industrial Profits increased by 5.3% YoY, up from November’s -13.1%, bringing 2025 Industrial Profits to +0.6% YoY versus 2024’s +0.1%.
Yesterday's market action was a classic “Tale of Two Chinas” scenario as Hong Kong outperformed Mainland China significantly. This highlights how onshore China (Shanghai & Shenzhen) is almost entirely owned by domestic investors, and therefore reflects what locals think of China.
Offshore China (Hong Kong & New York), which is predominantly owned by foreign investors, therefore reflects their views on China. This explains why the two markets can have different returns, as we saw today, despite efforts to slow the Mainland equity bull market, which were only slightly effective, as the STAR Board gained +1.51%.
The "National Team" refers to institutions aligned with the government, including state-owned insurance companies, sovereign wealth funds, and the Social Security Fund. The ETF that they favor had above-average volumes, though are down from the last few days. Today’s outflow across the top 7 Mainland-listed China equity ETFs in US dollars was $15.4 billion, which brings the 1-week outflow total to $56.9 billion and the one-month outflow total to $84.3 billion. Across all 1,068 Mainland-listed equity ETFs, the daily outflow was $15.9 billion, the weekly outflow $57.9 billion, and the monthly outflow is at $85.1 billion, indicating the outflows are highly concentrated in just the top ETFs. Those ETFs are predominantly large- and mega-cap stock-focused.
Tencent gained +1.25% following Chairman Pony Ma’s speech on integrating AI into its WeChat platform, with a focus on personal privacy. Tencent has repurchased 10.205 million shares in 2026 so far, at a cost of HKD 6.3 billion, accounting for more than half of the HKD 11.7 billion in Hong Kong buybacks from 108 companies. A Tencent trader also had a sizeable call option trade expiring in February, suggesting bullish sentiment ahead of Q4 earnings, along with a large net buy from Mainland investors via Southbound Stock Connect.
Alibaba gained +2.85% on the release of its Qwen 3 Max Thinking model, which lifted AI plays such as Minimax (+26.48%) and Knowledge Atlas (+7.56%). JD.com fell -2.16% and Meituan fell -0.57% on reports that Tencent had fully exited both companies as a shareholder and board member, though I assumed this was well known. Baidu fell -0.19% despite its Smart Cloud unit raising its revenue growth target to 200% from 100%. In addition to perpetually rising non-ferrous metal stocks, including Zijin Gold (+11.59%), insurance and bank stocks had a good day.
Mainland investors sold -$81 million of Hong Kong stocks via Southbound Stock Connect, marking an even rarer third day in a row of net outflow. Stock Connect accounted for only 20% of Hong Kong volume, potentially signaling foreign demand. Mainland-listed insurance stocks also had a strong day, though non-ferrous metals were mixed. Technology hardware and semiconductor stocks rebounded, led by Foxconn, which rose +2.89%. Breadth was far weaker in Mainland China than in Hong Kong, as decliners outpaced advancers by a wide margin.
UK Prime Minister Keir Starmer will become the first prime minister to visit China in eight years. According to Reuters, 50 UK companies will be on the trip, with “trade and investment documents expected to be signed” during the visit. Finland’s PM Petteri Orpo met with President Xi today in China. US Ambassador to China Perdue said a Boeing deal is coming, during a talk in Hong Kong, the South China Morning Post reported. Shouldn’t they let Trump and Xi announce this deal in April? Remember, part of our thesis is an expansion of the US-China trade truce during President Trump’s April visit. We believe this could include Chinese trade commitments such as Boeing aircraft, soybeans, and semiconductors, as well as Chinese companies investing in the US.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 1.4% |
| Hang Seng Tech | HSTECH Index | 0.5% |
| Hong Kong Turnover | HKTurn Index | -2.8% |
| Hong Kong Short Sale Turnover | HKSST Index | -22% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 11.5% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -81.04 |
| China (Shanghai) | SHCOMP Index | 0.2% |
| China (Shenzhen) | SZCOMP Index | -0.1% |
| China (STAR Board) | Star50 Index | 1.5% |
| Mainland Turnover | .chturn Index | -10.9% |
| Japan | NKY Index | 0.8% |
| India | SENSEX Index | 0.4% |
| Indonesia | JCI Index | 0.1% |
| Malaysia | FBMKLCI Index | 1.6% |
| Pakistan | KSE100 Index | 0% |
| Philippines | PCOMP Index | 0.5% |
| South Korea | KOSPI Index | 2.7% |
| Taiwan | TWSE Index | 0.8% |
| Thailand | SET Index | 2.1% |
| Singapore | STI Index | 1.3% |
| Australia | AS51 Index | 0.9% |
| Vietnam | VNINDEX Index | -0.7% |
| Indicator | Hong Kong | Mainland |
|---|---|---|
| Today's Volume % of 1-Year Average | 98% | 158% |
| Advancing Stocks | 253 | 1843 |
| Declining Stocks | 220 | 3225 |
| Outperforming Factors | Large Caps, Value, Momentum | Liquidity, Growth |
| Underperforming Factors | Buyback, Low Volatility, Value | |
| Top Sectors | Financials, Discretionary, Tech | Tech |
| Bottom Sectors | Energy, Utilities | Energy, Healthcare, Staples |
| Top Subsectors | Financial Services, National Defense, Banks | Semis, Forest, Aerospace Military |
| Bottom Subsectors | Household/Personal Products, Steel, Building | Coal, Fertilizer/Pesticide, Food |
| Southbound Connect Buys | Tencent (Large), YOFC (Small) | |
| Southbound Connect Sells | China Mobile (Large), Alibaba, SMIC (Moderate), Hua Hong Semi, Zijin Mining (Small) |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | 1.14 |
| Communication Services | 11 | 0.9 |
| Consumer Discretionary | 28 | 1.4 |
| Consumer Staples | 13 | 0.08 |
| Energy | 6 | -0.34 |
| Financials | 25 | 1.91 |
| Health Care | 15 | 0.29 |
| Industrials | 21 | 0.89 |
| Information Technology | 12 | 1.31 |
| Materials | 10 | 1.01 |
| Real Estate | 7 | 0.32 |
| Utilities | 12 | -0.07 |
| Mainland China Listed | 386 | -0.04 |
| Communication Services | 8 | -0.08 |
| Consumer Discretionary | 28 | -0.53 |
| Consumer Staples | 21 | -0.89 |
| Energy | 12 | -1.39 |
| Financials | 66 | -0.11 |
| Health Care | 33 | -1.18 |
| Industrials | 57 | -0.78 |
| Information Technology | 91 | 1.79 |
| Materials | 49 | -0.59 |
| Real Estate | 6 | -0.3 |
| Utilities | 14 | -0.88 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 1.3 |
| Alibaba HK | 9988 HK Equity | 2.8 |
| JD.com HK | 9618 HK Equity | -2.2 |
| NetEase HK | 9999 HK Equity | -0.7 |
| Yum China HK | 9987 HK Equity | 1.7 |
| Baozun HK | 9991 HK Equity | 1.2 |
| Baidu HK | 9888 HK Equity | -0.2 |
| Autohome HK | 2518 HK Equity | 1.3 |
| Bilibili HK | 9626 HK Equity | 5.9 |
| Trip.com HK | 9961 HK Equity | 1.5 |
| EDU HK | 9901 HK Equity | -0.3 |
| Xpeng HK | 9868 HK Equity | -1.3 |
| Weibo HK | 9898 HK Equity | 0.7 |
| Li Auto HK | 2015 HK Equity | -0.7 |
| Nio Auto HK | 9866 HK Equity | 1.8 |
| Zhihu HK | 2390 HK Equity | 1.4 |
| KE HK | 2423 HK Equity | -0.6 |
| Tencent Music Entertainment HK | 1698 HK Equity | -1.5 |
| Meituan HK | 3690 HK Equity | -0.6 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | 1.3 |
| ALIBABA GROUP HOLDING LTD | 2.8 |
| ZIJIN MINING GROUP CO LTD-H | 2.9 |
| SEMICONDUCTOR MANUFACTURI-H | 1.4 |
| XIAOMI CORP-CLASS B | 1 |
| CHINA LIFE INSURANCE CO-H | 6 |
| CHINA MOBILE LTD-H | -0.4 |
| PING AN INSURANCE GROUP CO-H | 2.3 |
| ZIJIN GOLD INTERNATIONAL CO | 11.6 |
| HUA HONG SEMICONDUCTOR LTD-H | 2.7 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZIJIN MINING GROUP CO LTD-A | 2.8 |
| ZHONGJI INNOLIGHT CO LTD-A | 4.4 |
| BLUEFOCUS INTELLIGENT COMM-A | 7 |
| EOPTOLINK TECHNOLOGY INC L-A | 2.7 |
| FOXCONN INDUSTRIAL INTERNE-A | 2.9 |
| CHINA AEROSPACE TIMES ELEC-A | 2.2 |
| SUZHOU TFC OPTICAL COMMUNI-A | 7.2 |
| TBEA CO LTD-A | -2.6 |
| SHENZHEN SUNWAY COMMUNICAT-A | 0.3 |
| HUNAN SILVER CO LTD-A | -2.4 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.95 versus 6.96 yesterday
- CNY per EUR 8.26 versus 8.26 yesterday
- Yield on 10-Year Government Bond 1.83% versus 1.82% yesterday
- Yield on 10-Year China Development Bank Bond 1.96% versus 1.95% yesterday
- Copper Price +0.01%
- Steel Price -0.57%
