Rotation From AI “Picks & Shovels” To Physical AI, Week in Review
6 Min. Read Time
Week in Review
- Asian equities were mixed but mostly lower for the week as Mainland China and Singapore outperformed, while Indonesia and Hong Kong underperformed.
- Presidents Trump and Xi held a 2-day summit in Beijing, during which they made significant bilateral achievements, including allowing the export of Nvidia's H200 chips to China and establishing trade and investment councils.
- Alibaba and Tencent reported mixed Q1 earnings results this week, as cloud investment remains a top priority for both internet giants, though short-term profitability remains challenged.
- JD.com beat estimates in its Q1 report on Monday, as the E-Commerce and logistics conglomerate indicated an improvement in profitability following a margin-crushing subsidy competition over the past year.
Friday's Key News
Asian equities ended the week with a thud, as the US dollar strengthened, led lower by South Korea, though today’s drawdown of -6% leaves the KOSPI up only +71% year-to-date (YTD). Meanwhile, Indonesia remained closed for Ascension Day.
Western media continues to paint President Trump’s China trip in a negative light, which is in sharp contrast to Chinese media and the White House’s X account. The continued lack of an Iran resolution was a factor in market action overnight, as investors appear to be pricing in energy prices as remaining higher for longer.
Regionally, there was a rotation out of AI capex recipients, i.e., the AI "picks & shovels", including semiconductors and technology hardware, and into physical AI plays, such as robotics. Both Hong Kong and Mainland China's markets were off on poor breadth, as semiconductors and technology hardware underperformed, along with non-ferrous metals.
For both Hong Kong and Mainland China, a factor in the semiconductor and technology hardware drawdown was the financial results of Hua Hong Semiconductor, which fell -8.74% in Hong Kong and -4.93% in Mainland China after growing revenue +22% year-over-year (YoY), though missing analyst expectations, and providing disappointing guidance. Semiconductor Manufacturing (SMIC) reported better results, sending its Hong Kong-listed shares only slightly lower by -0.49% and sending its Mainland A-share listing higher by +0.95%.
Another factor was President Xi’s article in the important Qiushi Magazine titled "Strengthening, Improving and Expanding the Real Economy". The article emphasized that “manufacturing is the foundation of the real economy” and pointed out that “new growth engines, such as next-generation information technology, artificial intelligence, biotechnology, new energy, new materials, high-end equipment, and green environmental protection” are of utmost importance to his government. Robotics and semiconductor equipment makers were seen as the article’s beneficiaries, including the Hong Kong-listed UB Tech, which gained +3.36%, Hengli Hydraulic, which gained +6.38%, and Innovance, which gained +3.90%.
Apart from Tencent, which gained+0.33%, Hong Kong-listed internet stocks had a disappointing session, as the growth sell-off weighed on the space, as Alibaba fell -4.06% and Meituan fell -3.50%. Today’s broad risk-off session was indiscriminate, though disappointing regardless.
Mainland investors bought a net $3.19 billion worth of Hong Kong-listed stocks and ETFs, including a massive $1.65 billion net purchase of the Hong Kong Tracker ETF.
55 Hong Kong-listed companies repurchased their shares today on weakness.
The ETFs favored by the "National Team", i.e., investment firms associated with China's sovereign wealth, had average volumes, indicating no intervention by institutional investors to buy the dip.
We will provide a full Trump-Xi summit wrap on Monday!
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1.6% |
| Hang Seng Tech | HSTECH Index | -2.7% |
| Hong Kong Turnover | HKTurn Index | 6.1% |
| Hong Kong Short Sale Turnover | HKSST Index | 63.5% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 22% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 3187.15657726692 |
| China (Shanghai) | SHCOMP Index | -1% |
| China (Shenzhen) | SZCOMP Index | -0.9% |
| China (STAR Board) | Star50 Index | -1.7% |
| Mainland Turnover | .chturn Index | -0.6% |
| Japan | NKY Index | -2% |
| India | SENSEX Index | -0.2% |
| Indonesia | JCI Index | -2% |
| Malaysia | FBMKLCI Index | -0.3% |
| Pakistan | KSE100 Index | -0.4% |
| Philippines | PCOMP Index | -0.6% |
| South Korea | KOSPI Index | -6.1% |
| Taiwan | TWSE Index | -1.4% |
| Thailand | SET Index | -1.4% |
| Singapore | STI Index | -0.1% |
| Australia | AS51 Index | -0.1% |
| Vietnam | VNINDEX Index | -0.2% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 125 | 200 |
| Advancing Stocks | 106 | 1448 |
| Declining Stocks | 400 | 3598 |
| Outperforming Factors | Value | Value |
| Underperforming Factors | Momentum, Growth, EPS Revision | EPS Revision, Momentum, Growth |
| Top Sectors | Energy, Communication Services, Utilities | Utilities, Energy, Communication Services |
| Bottom Sectors | Materials, Tech, Consumer Discretionary | Materials, Real Estate, Tech |
| Top Subsectors | Household Appliances, Machinery, Coal | Leisure Products, Auto Parts, Coal |
| Bottom Subsectors | Consumer Staples Distribution, Non Ferrous Metal, Tech Hardware | Precious Metals, Base Metals, Building Materials |
| Southbound Connect Buys | HK Tracker ETF (Massive), HS Tech ETF, China Enterprise ETF(Very Large), Hua Hong Semi (Large), Montage Tech, SMIC (Moderate), Tencent (Small) | N/A |
| Southbound Connect Sells | Alibaba, YOFC (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 164 | -1.92 |
| Communication Services | 11 | -0.43 |
| Consumer Discretionary | 28 | -2.8 |
| Consumer Staples | 12 | -2.14 |
| Energy | 6 | -0.21 |
| Financials | 25 | -1.16 |
| Health Care | 16 | -1.93 |
| Industrials | 19 | -1.14 |
| Information Technology | 15 | -4.59 |
| Materials | 14 | -5.42 |
| Real Estate | 1 | -1.66 |
| Utilities | 6 | -0.71 |
| Mainland China Listed | 11 | -1.6 |
| Communication Services | 11 | -0.19 |
| Consumer Discretionary | 26 | -0.58 |
| Consumer Staples | 18 | -1.53 |
| Energy | 11 | 0.08 |
| Financials | 64 | -1.43 |
| Health Care | 29 | -1.04 |
| Industrials | 60 | -0.55 |
| Information Technology | 113 | -2.15 |
| Materials | 58 | -3.5 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 0.3 |
| Alibaba HK | 9988 HK Equity | -4.1 |
| JD.com HK | 9618 HK Equity | -1.7 |
| NetEase HK | 9999 HK Equity | -2.6 |
| Yum China HK | 9987 HK Equity | -1.3 |
| Baozun HK | 9991 HK Equity | -1 |
| Baidu HK | 9888 HK Equity | -3.6 |
| Autohome HK | 2518 HK Equity | -6.8 |
| Bilibili HK | 9626 HK Equity | -8.1 |
| Trip.com HK | 9961 HK Equity | -2.1 |
| EDU HK | 9901 HK Equity | -3.3 |
| Xpeng HK | 9868 HK Equity | -1.5 |
| Weibo HK | 9898 HK Equity | -3.4 |
| Li Auto HK | 2015 HK Equity | -1.6 |
| Nio Auto HK | 9866 HK Equity | -1.4 |
| Zhihu HK | 2390 HK Equity | -1.3 |
| KE HK | 2423 HK Equity | -5 |
| Tencent Music Entertainment HK | 1698 HK Equity | -1.2 |
| Meituan HK | 3690 HK Equity | -3.5 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | 0.3 |
| ALIBABA GROUP HOLDING LTD | -4.1 |
| SEMICONDUCTOR MANUFACTURI-H | -0.5 |
| HUA HONG SEMICONDUCTOR LTD-H | -8.7 |
| YANGTZE OPTICAL FIBRE AND-H | -12.1 |
| XIAOMI CORP-CLASS B | -3.2 |
| MONTAGE TECHNOLOGY CO LTD-H | -7 |
| MEITUAN-CLASS B | -3.5 |
| KINGBOARD LAMINATES HLDG LTD | -7.4 |
| ZIJIN MINING GROUP CO LTD-H | -5.5 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -2.6 |
| MONTAGE TECHNOLOGY CO LTD-A | -6.5 |
| SUZHOU TFC OPTICAL COMMUNI-A | 2 |
| SUNGROW POWER SUPPLY CO LT-A | 13.3 |
| FOXCONN INDUSTRIAL INTERNE-A | -1.4 |
| GIGADEVICE SEMICONDUCTO-CL A | 5.4 |
| EOPTOLINK TECHNOLOGY INC L-A | -1.3 |
| SUZHOU DONGSHAN PRECISION-A | -5.4 |
| CAMBRICON TECHNOLOGIES-A | -4.1 |
| VICTORY GIANT TECHNOLOGY -A | -4.1 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 6.81 versus 6.79 yesterday
- CNY per EUR 7.92 versus 7.95 yesterday
- Yield on 10-Year Government Bond 1.77% versus 1.76% yesterday
- Yield on 10-Year China Development Bank Bond 1.84% versus 1.83% yesterday
- Copper Price -1.68%
- Steel Price 0.09%
