AI Pick & Shovel Stocks Under Pressure
5 Min. Read Time
Key News
Asian equity markets were a sea of red as higher US yields following the strong jobs report lifted the US dollar, and AI picks-and-shovels winners saw a vicious unwind.
The sell-off was led lower by South Korea’s KOSPI, which fell by -8.29% (+67.85% YTD), with SK Hynix down -7.68% and Samsung down -10.18%.
Hong Kong and Mainland China’s AI pick-and-shovel stocks were hit hard, as Hong Kong semiconductor stocks fell by -3.30% (+72% YTD), Hong Kong electrical equipment stocks fell by -3.84% (+27% YTD), and tech hardware stocks fell by -2.42% (+20% YTD).
Similar situation in Mainland China as semiconductor stocks fell by -4.40% (+33% YTD), communication equipment stocks fell by -3.84% (+50% YTD), and electrical component stocks fell by -3.57% (+44% YTD).
Battery and energy storage giant CATL fell in Hong Kong by -3.94% and in Mainland China by -2.48%. Non-ferrous metal stocks in both markets fell, while energy was positive in both. Internet stocks weren’t immune to the selling pressure, as Alibaba fell by -2.94% and Tencent fell by -1.50%.
Mainland investors bought the Hong Kong dip with $1.44B of net buying of Hong Kong stocks and ETFs, with the HK Tracker seeing a strong net buy of US $714mm (HK $5.595B), followed by Tencent’s net buy of $148mm.
Today was the first day of Southbound Connect trading for six Hong Kong stocks, including AI software provider Biren Technology (up +2.51%) and AI LLM provider Knowledge Atlas (up +1.31%). AI LLM provider MiniMax fell by -8.14%, which cannot be added due to its Weighted Voting Right (WVR) structure.
Eighty-one Hong Kong-listed stocks bought back shares on Friday. Mainland China had only 606 advancing stocks versus 4,524 declining stocks in a broad decline.
President Xi met with North Korea’s Kim Jong Un in Pyongyang.
Yes, there has been some talk concerning financial regulators in China, though it did not seem to be a factor in today’s market action. It is worth noting that the National Team’s favored ETFs had below-average volumes, though they did see small inflows following massive outflows earlier this year.
Mainland-listed China equity ETFs had $678mm of net buying today, versus YTD outflows of $221B (not a typo). Institutions in China tend to buy low during market weakness, though they do take profits, as we saw in significant redemptions earlier this year. Are we seeing them tiptoe back into the market? Hard to ascertain at this juncture, though we’ll continue to monitor.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1.2% |
| Hang Seng Tech | HSTECH Index | -2.7% |
| Hong Kong Turnover | HKTurn Index | 6.2% |
| Hong Kong Short Sale Turnover | HKSST Index | -45.7% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 10.4% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 1445.45 |
| China (Shanghai) | SHCOMP Index | -1.7% |
| China (Shenzhen) | SZCOMP Index | -3.1% |
| China (STAR Board) | Star50 Index | -4.3% |
| Mainland Turnover | .chturn Index | -8.9% |
| Japan | NKY Index | -3.8% |
| India | SENSEX Index | -1% |
| Indonesia | JCI Index | -4.5% |
| Malaysia | FBMKLCI Index | -0.8% |
| Pakistan | KSE100 Index | -1% |
| Philippines | PCOMP Index | -1% |
| South Korea | KOSPI Index | -8.3% |
| Taiwan | TWSE Index | -3.5% |
| Thailand | SET Index | -1.3% |
| Singapore | STI Index | -1.7% |
| Australia | AS51 Index | -0.7% |
| Vietnam | VNINDEX Index | -2.6% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 147% | 124% |
| Advancing Stocks | 115 | 606 |
| Declining Stocks | 403 | 4524 |
| Outperforming Factors | None | None |
| Underperforming Factors | Growth, Liquidity, Momentum | Liquidity, Momentum, Growth |
| Top Sectors | Energy, Financials | Energy |
| Bottom Sectors | Materials, Healthcare, Discretionary | Materials, Tech, Real Estate |
| Top Subsectors | National Defense, Petroleum, Coal | Construction Machinery, Oil/Gas, Motorcycle |
| Bottom Subsectors | Non Ferrous Metal, Paper/Packaging, Electrical Equipment | Computer Hardware, Precious Metals, Power Generation Equipment |
| Southbound Connect Buys | HK Tracker ETF (Very Large), Tencent (Large), HS Tech ETF (Moderate), Alibaba, KB Laminates, YOFC (Small) | N/A |
| Southbound Connect Sells | SMIC (Large) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -1.59 |
| Communication Services | 11 | -1.98 |
| Consumer Discretionary | 28 | -2.34 |
| Consumer Staples | 13 | -0.31 |
| Energy | 6 | 0.58 |
| Financials | 25 | 0.37 |
| Health Care | 16 | -3.16 |
| Industrials | 22 | -1.11 |
| Information Technology | 12 | -2.11 |
| Materials | 14 | -4.49 |
| Real Estate | 7 | -1.18 |
| Utilities | 11 | -1.07 |
| Mainland China Listed | 386 | -2.6 |
| Communication Services | 8 | -2.7 |
| Consumer Discretionary | 26 | -1.11 |
| Consumer Staples | 19 | -1.31 |
| Energy | 12 | 0.63 |
| Financials | 64 | -0.12 |
| Health Care | 31 | -2 |
| Industrials | 58 | -2.61 |
| Information Technology | 95 | -4.22 |
| Materials | 52 | -4.48 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -1.5 |
| Alibaba HK | 9988 HK Equity | -2.9 |
| JD.com HK | 9618 HK Equity | -2 |
| NetEase HK | 9999 HK Equity | -0.4 |
| Yum China HK | 9987 HK Equity | 0.9 |
| Baozun HK | 9991 HK Equity | 3.9 |
| Baidu HK | 9888 HK Equity | -7.6 |
| Autohome HK | 2518 HK Equity | -5.5 |
| Bilibili HK | 9626 HK Equity | 0.7 |
| Trip.com HK | 9961 HK Equity | 0.7 |
| EDU HK | 9901 HK Equity | 1.3 |
| Xpeng HK | 9868 HK Equity | -4.6 |
| Weibo HK | 9898 HK Equity | -0.7 |
| Li Auto HK | 2015 HK Equity | 1.2 |
| Nio Auto HK | 9866 HK Equity | -1.6 |
| Zhihu HK | 2390 HK Equity | 1.3 |
| KE HK | 2423 HK Equity | -2 |
| Tencent Music Entertainment HK | 1698 HK Equity | -1.4 |
| Meituan HK | 3690 HK Equity | -4.6 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -1.5 |
| SEMICONDUCTOR MANUFACTURI-H | -4.1 |
| ALIBABA GROUP HOLDING LTD | -2.9 |
| YANGTZE OPTICAL FIBRE AND-H | -2.1 |
| AIA GROUP LTD | -1.8 |
| LENOVO GROUP LTD | -1.3 |
| KNOWLEDGE ATLAS TECHNOLOGY-H | 1.3 |
| MEITUAN-CLASS B | -4.6 |
| KINGBOARD LAMINATES HLDG LTD | 12.1 |
| HUA HONG GRACE SEMICONDUCTOR | -5.6 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -2.1 |
| BOE TECHNOLOGY GROUP CO LT-A | -2.2 |
| JIANGSU ZHONGTIAN TECHNOLO-A | 7.5 |
| HENGTONG OPTIC-ELECTRIC CO-A | -0.7 |
| EOPTOLINK TECHNOLOGY INC L-A | -3.1 |
| GIGADEVICE SEMICONDUCTO-CL A | -2.9 |
| SUZHOU TFC OPTICAL COMMUNI-A | -7 |
| VICTORY GIANT TECHNOLOGY -A | -7.1 |
| WUS PRINTED CIRCUIT KUNSHA-A | 2.8 |
| SUZHOU DONGSHAN PRECISION-A | -3.8 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.78 versus 6.77 Friday
- CNY per EUR 7.83 versus 7.87 Friday
- Yield on 10-Year Government Bond 1.73% versus 1.72% Friday
- Yield on 10-Year China Development Bank Bond 1.79% versus 1.76% Friday
- Copper Price -1.59%
- Steel Price +0.06%
