Hong Kong Internet Stocks Rebound As National Team Buys
8 Min. Read Time
Key News
Asia’s AI supply chain markets were hit again, with Korea, Taiwan, and Onshore China’s Science & Technology (STAR) Board down 3% to 4%, while the relatively AI-light markets of Hong Kong and India outperformed. Japan was closed.
Mainland China’s AI supply chain stocks (semiconductors, semiconductor equipment, electronic equipment, and communications equipment) were hit hard, with multiple names down nearly double digits, such as optical communications companies like Innolight (-12.69%), which was China’s most heavily traded stock by value, and Eoptolink (-9.46%). Semiconductor company CXMT fell by 7% and Cambricon fell by 10.81%.
In Hong Kong, the Hang Seng Tech gained +0.74% as it closed above 3,800. The most heavily traded stocks by value were Tencent (+1.27%), Xiaomi (+1.78%), and Alibaba (+0.1%). Looks like a rotation! A great podcast released every Friday is from the independent research firm Renaissance Macro, as last Friday Jeff De Graff noted how investors can be lulled into thinking in one dimension and believing trends will last indefinitely. He was speaking about rotation into US defensive sectors, though today’s price action in Asia reminded me of his comments. Coincidentally, ex-Lehman ETF trader and macro strategist Jared Dillian of The Daily Dirtnap research report mentioned he is looking at China for the first time in a long tim. He also co-hosts a great podcast released every Wednesday called "The Daily Macro".
Hong Kong's streak of 14 days of net selling, totaling $5.33 billion from Mainland investors via Southbound Connect, is over, as $2.99 billion in net buying occurred today! The Hong Kong Tracker ETF saw massive inflows, along with healthy inflows into the Hang Seng Tech ETF and Hang Seng China Enterprise ETF. The Hong Kong Tracker ETF had $2.1 billion (HKD 16.5 billion) in inflows, 4X the very strong inflows of about $500 million into both the Hang Seng Tech ETF and the Hang Seng China Enterprise ETF. A skeptic might point out that the CSRC Vice Chairman Li Chao spoke about China’s financial opening up and support for Hong Kong as a financial hub at the Global Financial Leaders' Investment Summit in Hong Kong today.
Hong Kong short turnover on the Main Board increased by 62% from yesterday, which is 1/3 higher than the 1-year average. Are shorts scrambling to cover?
All eleven Mainland-listed China equity ETFs that China's "National Team", i.e., investment firms associated with sovereign wealth, have utilized the most recently, had above-average activity, as 5 ETFs had a value traded above RMB 10 billion. The National Team slightly improved their arrival, showing up early in the afternoon trading, unlike in the past when they showed up in the last hour. While their buying mitigated losses in mega- and large-cap indices, it was too late for the STAR Board's mid- and small-cap stocks.
Interestingly, the ETF with the largest trading value was a STAR Board ETF, at RMB 22 billion. That same STAR Board ETF saw $1 billion in inflows yesterday, as it was one of three ETFs with +$1 billion in net buying. These ETFs have had $10.79 billion in net inflows (mega and large cap), $2.93 billion (small cap), and $7.78 billion (STAR) in the past month. Another 9 ETFs have seen $1 billion in inflows, while the top 11 ETFs have seen $51.369 billion in net inflows in the last month! The top 25 ETFs have seen $58.92 billion in net inflows over the last month. One piece of advice to the National Team on US election day: remember Chicago voting – early and often. Come out of the gate early and set the tone!
China's central bank is lending RMB100 billion to financial institutions via swaps to buy stocks. Meanwhile, the Financial Times is reporting that the China Securities Regulatory Commission (CSRC) is tapping the brakes on IPOs.
China's currrency, the renminbi (CNY), had a rough day versus the US dollar, losing 0.4% to close at 6.67 CNY per USD from yesterday’s 6.64 per USD after the PBOC raised the foreign exchange reserve requirement ratio to 6% from 4%. It appears the PBOC is tapping the brakes on CNY’s strong rebound against the US dollar.
Hong Kong-listed internet stocks had a good day, as JD.com gained 5.61% on the EU approval of its German electronics retailer Ceconomy. Meanwhile, Trip.com gained 6.34%, and NetEase gained 2.99%. A Mainland media source noted that Baidu, which fell -1.26%, might delay the IPO of its AI chip unit, which is called Kunlun. That could be an unintended consequence of the government’s intervention to slow IPOs, which have flooded the markets with supply, causing prices to fall.
Premier Li gave the keynote address at the 2026 World Internet Conference Wuzhen Summit. Alibaba’s Joe Tsai also spoke on open-source AI models.
The State Council submitted its financial work report for review by the Standing Committee of the National People's Congress (NPCSC), identifying five areas of focus, including “continuing the loose monetary policy modality,” “improving financial regulation,” “advancing AI in finance,” and “protecting consumer rights.”
China’s International Trade Negotiation Representative Li Chenggang and the Ministry of Commerce met with a US farm delegation. This could be another outcome of Trump-Xi Summit #3, which will be on the sidelines of APEC in Shenzhen. The Financial Times is also reporting that a Trump-Xi-Putin meeting could take place at APEC in Shenzhen.
Hong Kong-listed buybacks that took place today but were announced after the close included: NetEase, which bought back 5,180 shares, and KE Holdings, which bought back 415,363 shares
Last Night's Performance
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.67 versus 6.65 yesterday
- CNY per EUR 7.45 versus 7.45 yesterday
- Yield on 10-Year Government Bond 1.62% versus 1.63% yesterday
- Yield on 10-Year China Development Bank Bond 1.66% versus 1.68% yesterday
- Copper Price -0.33%
- Steel Price -0.56%
