Baidu Forces Investors to Revalue Its Stock, Week in Review

Week in Review

• Asian equities were mixed for the week as Korea and Pakistan outperformed, while Indonesia and the Philippines underperformed.
• This week, we had earnings releases from Baidu, Kuaishou, Xiaomi, and PDD Holdings, as Kuaishou managed a strong beat on revenue and net income, while PDD came short of expectations due to high spending and extreme competition in China commerce.
• Memory chip supplier Changxin Technology began the review process for its pending STAR Market IPO this week. The company is expected to be valued between RMB 300 billion ($42 billion) and RMB 2 trillion ($290 billion), potentially the second‑largest semiconductor listing on the STAR Market.
• Shenzhen, China's high-tech manufacturing capital in the south, released its 15th Five-Year Plan on Monday. The Plan includes reforms to the ChiNext technology board of its stock exchange.

Key News

Asian equities had a strong day on very high volumes, powered by MSCI’s global index rebalance, which occurred at the markets’ close. Japan, Taiwan, and Korea outperformed, while India and the Philippines underperformed. China's currency, the renminbi (CNY) hit another 52-week high versus the US dollar, closing at 6.76 CNY per USD.

Hong Kong's volumes spiked to 150% of the 1-year average, as index and ETF managers globally rebalance at the market’s close.

Dell’s AI server-driven results sent peer Lenovo higher by +21.95%. Lenovo has been on a tear lately, going basically parabolic on optimism.

Semiconductors and technology hardware underperformed in both Hong Kong and Mainland China amid profit-taking, as the STAR Market fell 5.04% and the Mainland's technology sector broadly declined by 3.02%.

Healthcare was a top performer in both Hong Kong and Mainland China following Pfizer’s announcement that it would acquire and develop cancer drugs from the China-based Innovent, which gained 11.36%. The agreement includes an upfront payment of $650 million to Innovent and could yield up to $10.5 billion.

Baidu gained 3.5% after its AI chip unit, Kunlunxin, selected the investment banks that will lead its listing on both the STAR Market and the Hong Kong Stock Exchange. Baidu is forcing investors to provide it a sum of the parts (SOTP) valuation, which, if you include its chip unit, should be a strong positive for its shares.

Hong Kong had a broad rally with the heat map covered in green, except for Alibaba, which fell -0.74%. Tencent gained +0.52% on continued stock buybacks. CATL gained +3.84% in Hong Kong and +2.00% in Mainland China. Hong Kong-listed auto stocks were mixed after the European Union adopted a tariff playbook to protect local auto manufacturers. Mainland investors bought a net $240 million worth of Hong Kong-listed stocks and ETFs, despite a large net sell in the Hong Kong Tracker ETF. Mainland China had poor breadth, as banks and insurance kept Shanghai lower by -0.7%. Meanwhile, semiconductors, software, metals & mining, and technology hardware all underperformed, as the STAR Board fell -5.03% and Shenzhen fell -1.9%.

May's “official” purchasing managers' indexes (PMIs) will be released by the National Bureau of Statistics (NBS)

The power of passive flows was on full display overnight. MSCI’s at-the-close index rebalance drove significant volumes. I am not predicting the stock will go up or down, but I can guarantee that Full Truck Alliance (YMM) will see outsized volumes at the US close, due to its inclusion in MSCI’s indexes.

The Wall Street Journal had a good article earlier this week titled “It’s China’s Answer to a Rolls-Royce—and It’s Stuffed With Gadgets” that focuses on Huawei’s technology despite the high-end car being made by JAC. The article is interesting because it bucks Western media’s perpetually negative coverage of China and is complimentary of the car and Huawei’s technology. The technological upgrade in cars has been amazing to witness over the last several years. I personally don’t own any of them, though I’ve been impressed by my time riding in them.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	0.7%
Hang Seng Tech	HSTECH Index	-0.1%
Hong Kong Turnover	HKTurn Index	29.7%
Hong Kong Short Sale Turnover	HKSST Index	33.1%
Short Turnover as a % of Hong Kong Turnover	N/A	17.4%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	240.62
China (Shanghai)	SHCOMP Index	-0.7%
China (Shenzhen)	SZCOMP Index	-1.9%
China (STAR Board)	Star50 Index	-5%
Mainland Turnover	.chturn Index	11.9%
Japan	NKY Index	2.5%
India	SENSEX Index	-1.4%
Indonesia	JCI Index	0%
Malaysia	FBMKLCI Index	-0.1%
Pakistan	KSE100 Index	1.2%
Philippines	PCOMP Index	-1.6%
South Korea	KOSPI Index	3.6%
Taiwan	TWSE Index	2.5%
Thailand	SET Index	0%
Singapore	STI Index	1%
Australia	AS51 Index	1.6%
Vietnam	VNINDEX Index	0%

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	175	1.5
Advancing Stocks	343	1474
Declining Stocks	169	3506
Outperforming Factors	Buyback, Liquidity, Dividend Yield	Low Volatility, Dividend Yield, Value
Underperforming Factors	Growth	Liquidity, Growth, Momentum
Top Sectors	Healthcare, Tech, Real Estate	Staples, Utilities, Healthcare
Bottom Sectors	Materials, Discretionary	Tech, Materials, Industrials
Top Subsectors	Consumer Durables/Apparel, National Defense, Household/Personal Products	Liquor, Power, Daily Chemical
Bottom Subsectors	Semis, Steel, Chemical Industry	Semis, Aerospace/Military, Industrials Machinery
Southbound Connect Buys	Pop Mart (Large), Lenovo, SMIC, Tencent (Moderate), Hua Hong, YOFC (Small)	N/A
Southbound Connect Sells	HK Tracker ETF (Very Large), Alibaba (Moderate)	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	164	0.94
Communication Services	11	0.77
Consumer Discretionary	28	-0.15
Consumer Staples	12	1.12
Energy	6	1.4
Financials	25	1.03
Health Care	16	4.29
Industrials	19	0.41
Information Technology	15	2.91
Materials	14	-0.32
Real Estate	1	2.64
Utilities	6	2.5
Mainland China Listed	11	-0.44
Communication Services	11	0.44
Consumer Discretionary	26	0.35
Consumer Staples	18	3.43
Energy	11	1.03
Financials	64	1.63
Health Care	29	2.35
Industrials	60	-0.39
Information Technology	113	-3.03
Materials	58	-1.44

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	0.5
Alibaba HK	9988 HK Equity	-0.7
JD.com HK	9618 HK Equity	-0.6
NetEase HK	9999 HK Equity	0.7
Yum China HK	9987 HK Equity	1.4
Baozun HK	9991 HK Equity	2.3
Baidu HK	9888 HK Equity	3.5
Autohome HK	2518 HK Equity	6.1
Bilibili HK	9626 HK Equity	2.9
Trip.com HK	9961 HK Equity	1.3
EDU HK	9901 HK Equity	-1.1
Xpeng HK	9868 HK Equity	-3.8
Weibo HK	9898 HK Equity	-2.9
Li Auto HK	2015 HK Equity	-4.3
Nio Auto HK	9866 HK Equity	-4.1
Zhihu HK	2390 HK Equity	1.7
KE HK	2423 HK Equity	1.8
Tencent Music Entertainment HK	1698 HK Equity	1.2
Meituan HK	3690 HK Equity	0.2

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
TENCENT HOLDINGS LTD	0.5
SEMICONDUCTOR MANUFACTURI-H	-7.5
LENOVO GROUP LTD	22
ALIBABA GROUP HOLDING LTD	-0.7
POP MART INTERNATIONAL GROUP	7.4
CHINA CONSTRUCTION BANK-H	0.1
HUA HONG SEMICONDUCTOR LTD-H	-5.1
YANGTZE OPTICAL FIBRE AND-H	8.3
XIAOMI CORP-CLASS B	-1.8
KINGBOARD LAMINATES HLDG LTD	-3.4

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
ZHONGJI INNOLIGHT CO LTD-A	-3.1
SUZHOU TFC OPTICAL COMMUNI-A	1.7
FOXCONN INDUSTRIAL INTERNE-A	-2.1
GIGADEVICE SEMICONDUCTO-CL A	-3.3
JCET GROUP CO LTD-A	-3.2
HENGTONG OPTIC-ELECTRIC CO-A	9.4
EOPTOLINK TECHNOLOGY INC L-A	-1.7
SEMICONDUCTOR MANUFACTURIN-A	-9
CONTEMPORARY AMPEREX TECHN-A	2
LUXSHARE PRECISION INDUSTR-A	0.7

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 6.77 versus 6.78 yesterday
• CNY per EUR 7.88 versus 7.89 yesterday
• Yield on 10-Year Government Bond 1.71% versus 1.72% yesterday
• Yield on 10-Year China Development Bank Bond
• Copper Price 0.76%
• Steel Price 0.16%