Tencent AI Rewarded As Alibaba’s Buyback Is Back!
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Key News
Asian equities rebounded on light volumes in advance of Micron’s widely followed results that will be released later today, as Korea bounced back, but Taiwan and Indonesia underperformed.
Hong Kong and Mainland China rebounded, though the leadership was very narrow in both markets as decliners outpaced advancers handily. Leadership was concentrated in yesterday’s decliners, as AI picks-and-shovels stocks outperformed. Hong Kong was led by semiconductor stocks, while Mainland China was led by technology hardware, electronic equipment, communications equipment, and semiconductor stocks.
The short turnover percentage on Hong Kong’s Main Board was 22%, up from a long-term historical average of 13%, as this percentage has been creeping up due to recent weakness. Shorts are pressing their bets, though conditions are feeling stretched and ripe for a positive catalyst to arrive.
In addition to healthcare stocks outperforming in both Hong Kong and Mainland China, Tencent gained +3.38% on reports of WeChat AI tests, which put AI monetization on the horizon. Alibaba gained +0.45% and bought back 952,488 US-listed shares on Monday, though it didn't report the repurchase until after the Hong Kong close on Tuesday. The company had paused its buyback due to AI capex, but the stock hitting a 52-week low suggests management believes it is cheap.
Today, Alibaba reported that it bought back 974,536 US-listed shares on the NYSE yesterday. Remember, Alibaba’s convertible issuance back in May of 2024 marked a low. Alibaba filed a lawsuit against the US government after the company was added to the US Department of Defense list of companies operating in the US and affiliated with the Chinese military. The company stated, "Alibaba is governed by an independent board, none of whom has any military affiliation”. Good for them, as the accusation is baseless and they’ll win, while others should do the same, IMO.
Alibaba was a net sell again by Mainland investors via Southbound Stock Connect. Bilibili gained +1.29% after it filed for a $300 million stock buyback this morning, before the US market opened. Battery giant CATL gained +2.49% in Hong Kong and +0.73% in Mainland China after releasing its non-lithium, sodium-ion battery. Its CFO told Bloomberg at the WEF Forum that they envision 10,000 to 20,000 EVs equipped with it this year. The benefit of sodium versus lithium is its ability to operate in extreme cold, according to the article.
Nio gained +1.56% after announcing it will convert its Hong Kong secondary listing to a primary listing, which would allow Mainland investors to buy the Hong Kong share class. A good catalyst IMO! Knowledge Atlas (known as Zhipu) gained +0.18%, though it was off intra-day highs of +16% after announcing it will raise several billion US dollars by issuing more shares following the company hitting a 52-week high on Monday and a HK$1 trillion market cap. Unfortunately, such private placements can weigh on the stock, as we saw with Xiaomi.
The healthcare sector's outperformance was driven by an analyst upgrade due to low valuations. Premier Li’s speech at the World Economic Forum’s Summer Davos in Dalian was aligned with the conference’s theme of innovation. Some headlines on the world’s fastest supercomputer were made by Shenzhen’s LineShine after outperforming the second-place finisher of Lawrence Livermore National Laboratory, El Capitan (maybe co-captain is a better name, or Captain of Junior Varsity). The most interesting thing is that the LineShine computer only uses domestically made semis and GPUs.
Jim Sutter, CEO of the US Soybean Export Council (USSEC), was interviewed by Mainland media’s Global Times while attending the China International Supply Chain Expo (CISCE). US attendees comprise the largest group according to the article. Coincidentally, a Mainland media source reported that “the General Administration of Customs on Saturday showed that China imported 1.66 million tons of soybeans from the United States in May 2026, an increase of 1.8% compared with 1.63 million tons in the same period last year.” May numbers were not great from a YoY % change, though ”In the first five months of this year, China imported 8.38 million tons of soybeans from the United States, a year-on-year decrease of 42.5%”. The US soybean imports appear to be coming from Brazil, which declined by -17.7% to 9.96mm tons. I would assume those Brazil numbers will continue to fall!
Onshore China margin balance exceeded RMB 3T for the first time in history. Before the nattering nabobs freak out on the Twittersphere, one needs to look at margin debt versus market capitalization and margin trading volume versus total trading volume. The former today is 2.83% versus the 2015 margin-driven bubble of 4.7%. The latter is 10.25% today versus 22% in 2015. Those percentages don’t seem like a lot, but the underlying values are massive. We have a long way to go before we are in bubble territory.
Trip.com reports Q1 financial results after the close. It will be interesting to hear insights on the recent Dragon Boat Festival and 3-day weekend.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.3% |
| Hang Seng Tech | HSTECH Index | 1.8% |
| Hong Kong Turnover | HKTurn Index | -3.4% |
| Hong Kong Short Sale Turnover | HKSST Index | 8.9% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 22.2% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 2011.59 |
| China (Shanghai) | SHCOMP Index | 0.1% |
| China (Shenzhen) | SZCOMP Index | 0.8% |
| China (STAR Board) | Star50 Index | 3.8% |
| Mainland Turnover | .chturn Index | -4.8% |
| Japan | NKY Index | -0.9% |
| India | SENSEX Index | 1% |
| Indonesia | JCI Index | -3.6% |
| Malaysia | FBMKLCI Index | 0.1% |
| Pakistan | KSE100 Index | 1.2% |
| Philippines | PCOMP Index | -2.2% |
| South Korea | KOSPI Index | 3.3% |
| Taiwan | TWSE Index | -2.2% |
| Thailand | SET Index | 0.5% |
| Singapore | STI Index | 0.2% |
| Australia | AS51 Index | 0.2% |
| Vietnam | VNINDEX Index | 0.5% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 119% | 141% |
| Advancing Stocks | 169 | 1326 |
| Declining Stocks | 349 | 3759 |
| Outperforming Factors | None | Momentum, Liquidity, EPS Revision |
| Underperforming Factors | Growth, Value, Buyback | Low Volatility, Value, Dividend Yield |
| Top Sectors | Tech, Healthcare, Communication | Tech, Materials, Healthcare |
| Bottom Sectors | Financials, Utilities, Materials | Financials, Utilities, Real Estate |
| Top Subsectors | Semis, Pharmaceuticals, Electrical Equipment | Semis, Building Materials, Computer Hardware |
| Bottom Subsectors | Chemical Industry, Machinery, Banks | Office Supplies, Agricultural, Education |
| Southbound Connect Buys | HK Tracker ETF (Massive), KB Laminates, Kingboard (Very Large), HS Tech ETF, Gigadevice, SMIC (Moderate), Tencent (Small) | N/A |
| Southbound Connect Sells | Alibaba (Large), Hua Hong Semi (Moderate) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | 0.44 |
| Communication Services | 11 | 2.72 |
| Consumer Discretionary | 28 | -0.15 |
| Consumer Staples | 13 | 0.03 |
| Energy | 6 | 0.41 |
| Financials | 25 | -2.15 |
| Health Care | 16 | 2.98 |
| Industrials | 22 | -0.48 |
| Information Technology | 12 | 3.06 |
| Materials | 14 | -1.06 |
| Real Estate | 7 | 0.15 |
| Utilities | 11 | -1.24 |
| Mainland China Listed | 386 | 0.32 |
| Communication Services | 8 | -1.02 |
| Consumer Discretionary | 26 | -2.06 |
| Consumer Staples | 19 | -1.69 |
| Energy | 12 | -0.09 |
| Financials | 64 | -2.73 |
| Health Care | 31 | 0.97 |
| Industrials | 58 | -0.67 |
| Information Technology | 95 | 2.8 |
| Materials | 52 | 1.37 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 3.4 |
| Alibaba HK | 9988 HK Equity | 0.5 |
| JD.com HK | 9618 HK Equity | -1.7 |
| NetEase HK | 9999 HK Equity | -0.2 |
| Yum China HK | 9987 HK Equity | -0.4 |
| Baozun HK | 9991 HK Equity | 2.9 |
| Baidu HK | 9888 HK Equity | 2.3 |
| Autohome HK | 2518 HK Equity | 4.6 |
| Bilibili HK | 9626 HK Equity | 1.3 |
| Trip.com HK | 9961 HK Equity | 1.6 |
| EDU HK | 9901 HK Equity | 0.3 |
| Xpeng HK | 9868 HK Equity | -0.4 |
| Weibo HK | 9898 HK Equity | 1.3 |
| Li Auto HK | 2015 HK Equity | 2.3 |
| Nio Auto HK | 9866 HK Equity | 1.6 |
| Zhihu HK | 2390 HK Equity | -3.3 |
| KE HK | 2423 HK Equity | 0.5 |
| Tencent Music Entertainment HK | 1698 HK Equity | 1.9 |
| Meituan HK | 3690 HK Equity | -2.7 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| SEMICONDUCTOR MANUFACTURI-H | 8.9 |
| TENCENT HOLDINGS LTD | 3.4 |
| HUA HONG GRACE SEMICONDUCTOR | 15.5 |
| ALIBABA GROUP HOLDING LTD | 0.5 |
| KINGBOARD HOLDINGS LTD | -0.8 |
| KNOWLEDGE ATLAS TECHNOLOGY-H | 0.2 |
| KINGBOARD LAMINATES HLDG LTD | 7.2 |
| YANGTZE OPTICAL FIBRE AND-H | -1.3 |
| XIAOMI CORP-CLASS B | 1.5 |
| MEITUAN-CLASS B | -2.7 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| VISUAL CHINA GROUP CO LTD-A | -2.6 |
| SHANTUI CONSTRUCTION MACHI-A | -1.1 |
| GIGADEVICE SEMICONDUCTO-CL A | 10 |
| ZHONGJI INNOLIGHT CO LTD-A | 0.2 |
| LUXSHARE PRECISION INDUSTR-A | 8.2 |
| BOE TECHNOLOGY GROUP CO LT-A | 4.4 |
| JCET GROUP CO LTD-A | 10 |
| EOPTOLINK TECHNOLOGY INC L-A | 0.6 |
| SEMICONDUCTOR MANUFACTURIN-A | 6.9 |
| CAMBRICON TECHNOLOGIES-A | 2.8 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.81 versus 6.78 yesterday
- CNY per EUR 7.72 versus 7.73 yesterday
- Yield on 10-Year Government Bond 1.75% versus 1.74% yesterday
- Yield on 10-Year China Development Bank Bond 1.82% versus 1.82% yesterday
- Copper Price -0.88%
- Steel Price -0.03%
