Nvidia Results Drive Mainland China’s AI Supply Chain Higher

Key News

Asian equities were mixed on light volumes, as South Korea, Mainland China, and China's Science and Technology (STAR) Board, which gained +3.77%, all outperformed on Nvidia's strong results, released yesterday after the market close in the US. Hong Kong was flat, as global investors wait for the US Federal Reserve's Warsh to give some indication of the trajectory of US interest rates. The "Four Horsemen" of the AI supply chain in China were galloping overnight, as semiconductors, semiconductor equipment, technology hardware, electronic equipment, and communication equipment all outperformed in both Hong Kong and Mainland China.

The Hong Kong-listed Z.ai gained +12.62% after claiming an anonymously released large language model (LLM), known as Ox Alpha, is actually just using their GLM 5.3-Flash LLM. Ox Alpha garnered significant attention for its capabilities and very low costs versus Western peers. Chinese media also reported that it is solely powered by domestic chips.

Baidu gained +5.34% after announcing its Hong Kong-listed shares the will become eligible for Southbound Stock Connect on September 1st. Meanwhile, optical communications giant Zhongji Innolight's Hong Kong share class became eligible for Southbound today.

Alibaba fell -0.94% and was Hong Kong's most heavily traded stock by value. However, volumes in the name were one half of normal volumes. Shares were down despite the launch of its AI agent workstation called Qoder, yesterday's Qwen 3.8-Flash update, and today's announcement, after the close, that Alibaba Cloud is up and running in Brazil. Tencent gained +0.54% overnight. Meanwhile, most Hong Kong-listed internet stocks were off.

Mainland China was led higher by the AI supply chain, i.e. the "pick & shovels". Meanwhile, banks and consumer staples underperformed.The ETFs favored by China's "National Team", i.e. investment firms associated with sovereign wealth, had light volumes, once again, as Mainland-listed China equity ETFs saw net inflows for the month, though they have been choppy in the last week.

July's Industrial Profits increased 11.2% from June's 15.1% year-over-year (YoY). The increase was led by the electronics industry's profit, which was up 1.1 times YoY, including semiconductort firms' profits, which increaed 18.5 times YoY. There was further evidence that US hyperscaler spending is being reflected on the balance sheets of Chinese companies. China's Passenger Car Association reported that auto profits fell -20% year-to-date (YTD) YoY in July despite revenues increasing +2.7%.

The Ministry of Foreign Affairs and senior government official Wang Yi met with US Ambassador David Perdue today in Beijing. The press release stated that "Under the strategic guidance of the two heads of state, China and the United States are working to build a constructive relationship of strategic stability." This follows Wang's meeting earlier this week with a US diplomatic delegation. Amazingly, there was zero coverage in Western media. I suppose good news doesn't sell newspapers or generate clicks.

Meituan reports tomorrow.

Bilibili Q2 Earnings Overview

Online gaming and video company Bilibili announced Q2 financial results after the Hong Kong close, beating analyst expectations. A pick up in advertising drove the top line growth. Bilibili closed yesterday at 16.15 versus its 2021 high of 156. The stock is -89% below its 2021 high despite this year's revenue expected to be +50% higher than in 2021. Out of sight, out of mind.

• Revenue increased +7% to RMB 7.94B ($1.17B) from RMB 7.34B, versus expectations of RMB 7.92B.
• Adjusted Net income increased +25% to RMB 703.6mm ($103mm) from RMB 562mm, versus expectations of RMB 690mm.
• Adjusted earnings per share (EPS) increased to RMB 1.58 ($0.23) from RMB 1.29, versus expectations of RMB 1.51.
• The company spent $31.3mm buying back 1.9mm shares in Q2.

Mainland-listed Companies' First Half Financial Results From Last Night:

• Appliance maker Gree announced revenue fell -8% to RMB 89.4B and net profit fell -8% to RMB 13.3B.
• Online gaming company Giant Network announced revenue increased 182% to RMB 4.7B and net profits increased 176% to RMB 2.1B.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	-0.3%
Hang Seng Tech	HSTECH Index	-0.1%
Hong Kong Turnover	HKTurn Index	-8.4%
Hong Kong Short Sale Turnover	HKSST Index	-12.7%
Short Turnover as a % of Hong Kong Turnover	N/A	20%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	406.08
China (Shanghai)	SHCOMP Index	1.1%
China (Shenzhen)	SZCOMP Index	1.7%
China (STAR Board)	Star50 Index	3.8%
Mainland Turnover	.chturn Index	17.4%
Japan	NKY Index	-0.2%
India	SENSEX Index	-0.7%
Indonesia	JCI Index	1.8%
Malaysia	FBMKLCI Index	-0.4%
Pakistan	KSE100 Index	0%
Philippines	PCOMP Index	-2.2%
South Korea	KOSPI Index	1.5%
Taiwan	TWSE Index	0.3%
Thailand	SET Index	-0.1%
Singapore	STI Index	-0.7%
Australia	AS51 Index	-1%
Vietnam	VNINDEX Index	-0.6%

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	85	85
Advancing Stocks	212	2999
Declining Stocks	309	1971
Outperforming Factors	Momentum, Liquidity, EPS Revision	Momentum, EPS Revision, Liquidity
Underperforming Factors	Dividend Yield, Quality, Value	Value, Dividend Yield, Low Volatility
Top Sectors	Energy, Utilities, Communication	Tech, Materials, Energy
Bottom Sectors	Consumer Staples, Real Estate, Materials	Real Estate, Staples, Industrials
Top Subsectors	Semis, Coal, Tech Hardware	Petrochemical, Computer Hardware, Semis
Bottom Subsectors	Food, Paper/Packaging, Consumer Services	Electric Power Grid, Land Transport, Banking
Southbound Connect Buys	Minimax (Large), Xiaomi (Moderate), SMIC (Small)	N/A
Southbound Connect Sells	Z.ai (Moderate)	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	165	-0.34
Communication Services	11	0.61
Consumer Discretionary	28	-1.03
Consumer Staples	13	-2.01
Energy	6	0.96
Financials	25	-0.69
Health Care	16	0.38
Industrials	22	-0.07
Information Technology	12	0.19
Materials	14	-1.3
Real Estate	7	-2.01
Utilities	11	0.91
Mainland China Listed	386	1.33
Communication Services	8	0.68
Consumer Discretionary	26	-0.21
Consumer Staples	19	-0.54
Energy	12	1.35
Financials	64	-0.26
Health Care	31	0.72
Industrials	58	-0.36
Information Technology	95	3.89
Materials	52	1.67

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	0.5
Alibaba HK	9988 HK Equity	-0.9
JD.com HK	9618 HK Equity	-0.9
NetEase HK	9999 HK Equity	-1.2
Yum China HK	9987 HK Equity	-3.4
Baozun HK	9991 HK Equity	-0.1
Baidu HK	9888 HK Equity	5.3
Autohome HK	2518 HK Equity	1.9
Bilibili HK	9626 HK Equity	1.7
Trip.com HK	9961 HK Equity	-0.8
EDU HK	9901 HK Equity	-0.3
Xpeng HK	9868 HK Equity	-3.3
Weibo HK	9898 HK Equity	-0.2
Li Auto HK	2015 HK Equity	1
Nio Auto HK	9866 HK Equity	-2.9
Zhihu HK	2390 HK Equity	-1.4
KE HK	2423 HK Equity	-2
Tencent Music Entertainment HK	1698 HK Equity	-0.4
Meituan HK	3690 HK Equity	-0.7

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
ALIBABA GROUP HOLDING LTD	-0.9
Z AI CO LTD	12.6
YANGTZE OPTICAL FIBRE AND-H	10.3
TENCENT HOLDINGS LTD	0.5
KINGBOARD LAMINATES HLDG LTD	10.5
MINIMAX GROUP INC	3.8
XIAOMI CORP-CLASS B	-3.4
HUA HONG GRACE SEMICONDUCTOR	4.5
SEMICONDUCTOR MANUFACTURI-H	2.3
BAIDU INC-CLASS A	5.3

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
ZHONGJI INNOLIGHT CO LTD-A	1.8
HENGTONG OPTIC-ELECTRIC CO-A	10
CXMT CORP-A	5.4
GIGADEVICE SEMICONDUCTO-CL A	4.8
EOPTOLINK TECHNOLOGY INC L-A	2.6
MONTAGE TECHNOLOGY CO LTD-A	10.1
SHENGYI TECHNOLOGY CO LTD -A	8.4
SUNGROW POWER SUPPLY CO LT-A	-12.2
SUZHOU TFC OPTICAL COMMUNI-A	5.4
JIANGSU ZHONGTIAN TECHNOLO-A	8

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 6.72 versus 6.72 yesterday
• CNY per EUR 7.82 versus 7.83 yesterday
• Yield on 10-Year Government Bond 1.70% versus 1.69% yesterday
• Yield on 10-Year China Development Bank Bond 1.78% versus 1.76% yesterday
• Copper Price -0.38%
• Steel Price +0.33%