AI Model Providers Outperform As Z.AI Raises Revenue Guidance
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Key News
Asian equities were mixed but mostly higher overnight as Mainland China's STAR (Science & Technology) Board and Korea outperformed, while the Philippines and Malaysia underperformed.
Mainland China's semiconductor and AI-related stocks, mostly listed on the STAR Board, rebounded overnight in a growth-led rally across both offshore and onshore markets. In Hong Kong, the most heavily-traded stock by value was AI large language model (LLM) provider Z.AI, which gained 5.9% overnight. It was also the top net purchase by Mainland investors via Southbound Stock Connect, while competitor Minimax also made it into the top three top net purchases from Mainland investors. In aggregate, Mainland investors bought a net $268 million worth of Hong Kong-listed stocks and ETFs overnight.
Mainland flows into Hong Kong were an above-average 22% of total turnover as Southbound Connect flows have been positive for the last eight trading days and 15 of the last 16 trading days. Stock Connect flows have been positive for the past eight trading days and 15 out of the past 16 trading days. Meanwhile, several of the ETFs favored by China's "National Team", i.e. invstment firms associated with sovereign wealth, had slightly above-average volumes and inflows.
Aggregate Mainland turnover was strong, reaching RMB 1,839.1 billion across both the Shanghai and Shenzhen exchanges, at 86% of the one-year average. Computing hardware, optical communications, and semiconductor materials stocks led, bolstered by strong sentiment surrounding AI infrastructure deployment, i.e. the "picks and shovels" of AI. Hong Kong market turnover was also strong, at HKD 181.1 billion. The information technology and materials sectors outperformed in both Hong Kong and the Mainland, on structural tailwinds and policy announcements aimed at accelerating AI and digital economy initiatives.
Z.AI raised its revenue guidance significantly overnight. The company told analysts that revenue-sharing agreements with domestic and international cloud companies are benefiting its top line and expects to generate annual recurring revenue of around $3 billion, up from previous guidance of only $2.4 billion. Its open-source models are being used through APIs through multiple overseas hosts, according to the company.
Battery giant CATL fell -2.91% in Hong Kong and -3.44% in Mainland China after Mainland media noted that competitors have made headway on the company. The decline did not appear to be driven by Bloomberg’s article on a battery installation slowdown. The Hong Kong-listed competitor CALB gained +6.63%.
Hong Kong-listed internet stocks, except for the model providers, were off, as Alibaba did not make the top ten most-heavily traded stocks for the first time in a while. Tencent bought back 231,000 shares overnight for HKD 100 million. Baidu bought back 565,850 shares and Kuaishou bought back 504,000 shares. Trip.com reported a quarterly net loss of RMB 2.4 billion in the second quarter, owing to an anti-monopoly penalty charge, though its results were nonetheless above expectations and its stock gained +3.86% overnight.
The National Bureau of Statistics’ press conference on yesterday’s tepid economic release comes across as tone-deaf, as the NBS spokesperson stated that “The national economy continues to operate steadily and move towards a new direction and optimization.” Did they see the same numbers we did? Remember, the government agencies simply take the lead from leadership which means their statements tend to be more backward-looking. One positive from yesterday was that online retail sales +4.3%, vastly outpacing retail sales overall.
Hong Kong's Chief Executive John Lee announced the semi-autonomous region's first Five-Yeat Plan for the period 2026 to 2030. The structural initiatives focus on cementing Hong Kong's role as the primary offshore hub for the trading of RMB assets, establishing an AI city "brain" with related talent acquisition programs, expanding the low-altitude economy, and significantly increasingly the supply of public housing.
China's central bank governor Pan Gongsheng wrote in the Qiushi securities journal, in an article titled "Deeply Understanding The changes in China's Financial Structure & Improving The Adaptability of Financial Services to The Real Economy" that the central bank intends to expand and refine its tools for maintaining market stability and that credit growth should not be viewed as the only gauge of China's economy and the central bank's performance. This language is eerily similarly to that which surrounded market support measures taken in September of 2024.
Minister of Foreign Affairs Wang Yi spoke with Iran’s Foreign Minister today.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.2% |
| Hang Seng Tech | HSTECH Index | 0.8% |
| Hong Kong Turnover | HKTurn Index | -3.3% |
| Hong Kong Short Sale Turnover | HKSST Index | -22.5% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 20.0% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 268.13 |
| China (Shanghai) | SHCOMP Index | 0.7% |
| China (Shenzhen) | SZCOMP Index | 1.3% |
| China (STAR Board) | Star50 Index | 4.1% |
| Mainland Turnover | .chturn Index | 14% |
| Japan | NKY Index | 0.7% |
| India | SENSEX Index | 0.4% |
| Indonesia | JCI Index | -0.4% |
| Malaysia | FBMKLCI Index | -1.1% |
| Pakistan | KSE100 Index | -0.8% |
| Philippines | PCOMP Index | -1.5% |
| South Korea | KOSPI Index | 1.4% |
| Taiwan | TWSE Index | 0.7% |
| Thailand | SET Index | -1% |
| Singapore | STI Index | -0.1% |
| Australia | AS51 Index | 0.3% |
| Vietnam | VNINDEX Index | -0.1% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 92 | 86 |
| Advancing Stocks | 50 (Hang Seng) | 139 (CSI 300) |
| Declining Stocks | 44 (Hang Seng) | 147 (CSI 300) |
| Outperforming Factors | Growth | Growth |
| Underperforming Factors | Value | Value |
| Top Sectors | Information Technology, Materials, Real Estate | Materials, Information Technology, Real Estate |
| Bottom Sectors | Consumer Discretionary, Consumer Staples, Industrials | Industrials, Communication Services, Energy |
| Top Subsectors | Semiconductors, Non-Ferrous Metals, Technology Hardware | 3G Semiconductors, Communication Equipment, Forest Industry |
| Bottom Subsectors | Electrical Equipment, Machinery, Paper & Packaging | Construction Machinery, Motorcycles, Heavy Machinery |
| Southbound Connect Buys | Z.ai, SMIC, Minimax | N/A |
| Southbound Connect Sells | YOFC, Gencript Biotech, CIG | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -0.14 |
| Communication Services | 11 | -1.1 |
| Consumer Discretionary | 28 | -0.46 |
| Consumer Staples | 13 | -0.3 |
| Energy | 6 | -1.09 |
| Financials | 25 | 0.2 |
| Health Care | 16 | -0.59 |
| Industrials | 22 | -1.1 |
| Information Technology | 12 | 1.99 |
| Materials | 14 | 3.08 |
| Real Estate | 7 | 0.4 |
| Utilities | 11 | 0.32 |
| Mainland China Listed | 386 | 0.96 |
| Communication Services | 8 | -0.5 |
| Consumer Discretionary | 26 | -1.17 |
| Consumer Staples | 19 | -0.95 |
| Energy | 12 | -0.72 |
| Financials | 64 | -0.23 |
| Health Care | 31 | 0.18 |
| Industrials | 58 | -0.92 |
| Information Technology | 95 | 3.5 |
| Materials | 52 | 0.98 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -1.2 |
| Alibaba HK | 9988 HK Equity | -0.9 |
| JD.com HK | 9618 HK Equity | -0.4 |
| NetEase HK | 9999 HK Equity | -0.2 |
| Yum China HK | 9987 HK Equity | -0.8 |
| Baozun HK | 9991 HK Equity | -0.4 |
| Baidu HK | 9888 HK Equity | -1 |
| Autohome HK | 2518 HK Equity | -0.2 |
| Bilibili HK | 9626 HK Equity | -2.7 |
| Trip.com HK | 9961 HK Equity | 3.9 |
| EDU HK | 9901 HK Equity | 0.1 |
| Xpeng HK | 9868 HK Equity | 0.1 |
| Weibo HK | 9898 HK Equity | -1.4 |
| Li Auto HK | 2015 HK Equity | 0.8 |
| Nio Auto HK | 9866 HK Equity | -0.9 |
| Zhihu HK | 2390 HK Equity | 3.4 |
| KE HK | 2423 HK Equity | -1.6 |
| Tencent Music Entertainment HK | 1698 HK Equity | -1.8 |
| Meituan HK | 3690 HK Equity | -0.4 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| Z AI CO LTD | 5.9 |
| TENCENT HOLDINGS LTD | -1.2 |
| CONTEMPORARY AMPEREX TECHN-H | -2.9 |
| MINIMAX GROUP INC | 1.4 |
| SEMICONDUCTOR MANUFACTURI-H | 4.8 |
| LENOVO GROUP LTD | 8.3 |
| ALIBABA GROUP HOLDING LTD | -0.9 |
| YANGTZE OPTICAL FIBRE AND-H | 2.2 |
| KINGBOARD LAMINATES HLDG LTD | -0.2 |
| HUA HONG GRACE SEMICONDUCTOR | 5.9 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| CONTEMPORARY AMPEREX TECHN-A | -3.4 |
| ZHONGJI INNOLIGHT CO LTD-A | 5.1 |
| EOPTOLINK TECHNOLOGY INC L-A | 6.7 |
| CAMBRICON TECHNOLOGIES-A | 5.6 |
| CHINA JUSHI CO LTD -A | 0.6 |
| CXMT CORP-A | 1.6 |
| SUZHOU DONGSHAN PRECISION-A | 5 |
| SUZHOU TFC OPTICAL COMMUNI-A | 4.5 |
| HENGTONG OPTIC-ELECTRIC CO-A | 4.8 |
| GIGADEVICE SEMICONDUCTO-CL A | 2.8 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.71 versus 6.71 yesterday
- CNY per EUR 7.74 versus 7.75 yesterday
- Yield on 10-Year Government Bond 1.69% versus 1.69% yesterday
- Yield on 10-Year China Development Bank Bond 1.76% versus 1.77% yesterday
- Copper Price 0.47%
- Steel Price 0.74%
