Hardware Weakness Despite Strong Earnings, Week in Review
6 Min. Read Time
Week in Review
- Asian equities were mixed for the week as Hong Kong and Mainland China's STAR (Science & Technology) Market outperformed, while Korea and Mainland China's Shenzhen Component Index underperformed.
- This week saw what could be the beginning of a rotation out of AI "picks & shovels" hardware technology and back into software companies, i.e. hyperscalers, that have been making significant capital investments in AI chips, potentially indicated by Alibaba's strong move higher.
- The “private” Rating Dog China Services purchasing managers' index (PMI) for June, released Monday, was 54.1 versus an expected 53.0.
- Key upcoming IPOs made significant progress this week: Kuaishou's spin off of video generator Kling was confirmed to be moving forward and ChangXin Memory's (CXMT) STAR Market IPO was announced to be targeting a raise of over $4 billion, potentially valuing the company at over $40 billion.
Friday's Key News
Asia ended a volatile week on a high note, except for Mainland China, which faced another round of AI "picks & shovels", i.e., hardware supply chain, profit-taking, while Taiwan had an impromptu closure due to Typhoon Bavi.
Mainland (onshore) China's momentum factor has fallen from a +65% year-to-date (YTD) return on June 20th to only +45% today. Hong Kong had a similar move overnight as technology hardware was mixed, while semiconductors were down dramatically, led lower by Giga Device, which fell -21.05%, despite yesterday’s very strong forecast. Hong Kong’s YTD momentum factor peaked on Jan 29th at a +30% return, but is now at only +5%.
Large language model (LLM) provider Minimax fell -9.68% after announcing that it will raise $2 billion by selling stock shares at a 9% discount and issuing a convertible bond. The only thing markets appear to hate more than Hong Kong’s endless stream of IPOs at the moment are private placements, due to their shareholder dilution. Meanwhile, shares in competitor Knowledge Atlas (Zhipu) declined -19.29% after a well-respected analyst wrote that its shares were “fairly valued”. They had also previously announced raising $4 billion via a stock sale.
Mainland investors were net buyers of Alibaba, which gained +2.04% overnight, for the fifth consecutive day, pouring $58 million (HKD 458 million) into the stock via Southbound Stock Connect. As we noted yesterday, Alibaba owns part of the soon-to-list chip maker Chang Xin Memory (CXMT). Alibaba filed in Hong Kong that they bought back 72,800 US-listed shares yesterday. Tencent, on the other hand, fell -2% overnight on the second day of net selling from Mainland investors. Bloomberg is reporting Tencent will buy agentic AI platform Manus, which Meta had tried to acquire
Mainland investors sold a net -$764 million worth of Hong Kong-listed stocks and ETFs overnioght. Selling was dominated by a large outflow in the Hong Kong Tracker ETF.
Healthcare outperformed in both Hong Kong and Mainland China overnight. The National Medical Security Administration announced that, in the second half of 2026, drug approvals will be accelerate. Meanwhile, drug reimbursement will be expanded further.
AI supply chain YTD winners were hit hard today, led lower by technology hardware, communications equipment, and electronic equipment. Battery maker and energy storage giant CATL fell -7.12%. Semiconductors, semconductor materials, and semiconductor equipment were all lower. This caused the semiconductor-heavy Science and Technology (STAR) Board to fall -5.53% today. Meanwhile, value factors and subsectors rebounded, including banks, consumer staples, telecommunications, and non-ferrous metals.
Metals benefited from Zijin Mining’s net profit forecast of +68% YoY.
Foxconn fell -4.69% despite delivering a net income forecast that was between +93% and 101% year-over-year (YoY) for the second quarter. The expected net profit surge will be led by AI server revenue, which increased +230% YoY.
Lithium battery maker Youngy (002192 CH) fell -10.01%. However, after the close, the company announced that its first half profit will be between CNY 900 million to CNY 1.1 billion, representing a year-on-year increase between 957% and 1,192%.
Electronic component maker Shannon Semiconductor (300745 CH) gained +1.13%. However, after the close, the company announced that its first half profit could grow to between CNY 3.5 billion to CNY 4.0 billion, representing an increase of 2,118% to 2,434%. AI momentum plays have faded over the last week, but the YoY earnings growth can’t be denied.
Fast-fashion retailer Shein has filed for a Hong Kong IPO.
The State Council issued the "15th Five-Year Carbon Peaking Action Plan” overnight. The Plan states a goal of reducing carbon dioxide emissions by 17% and raising non-fossil energy in energy consumption to 25%. This release was followed by the National Energy Administration's (NEA) release of a document called the "Energy Sector Energy Conservation and Carbon Reduction Action Plan (2026–2028)". Given these strong policy signals, I was surprised that clean tech names didn not have a better day.
Last Night's Exchange Rates, Prices, & Yields
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.6% |
| Hang Seng Tech | HSTECH Index | -0.2% |
| Hong Kong Turnover | HKTurn Index | -10% |
| Hong Kong Short Sale Turnover | HKSST Index | -28.7% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 0.2 |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -765.59 |
| China (Shanghai) | SHCOMP Index | -1% |
| China (Shenzhen) | SZCOMP Index | -1.2% |
| China (STAR Board) | Star50 Index | -5.5% |
| Mainland Turnover | .chturn Index | 16.4% |
| Japan | NKY Index | 1.2% |
| India | SENSEX Index | 1.1% |
| Indonesia | JCI Index | 0.2% |
| Malaysia | FBMKLCI Index | 0.8% |
| Pakistan | KSE100 Index | 0.5% |
| Philippines | PCOMP Index | 1% |
| South Korea | KOSPI Index | 2.5% |
| Taiwan | TWSE Index | -0.8% |
| Thailand | SET Index | 0.8% |
| Singapore | STI Index | 0.7% |
| Australia | AS51 Index | 0.5% |
| Vietnam | VNINDEX Index | -0.0005 |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 124 | 100 |
| Advancing Stocks | 335 | 3658 |
| Declining Stocks | 174 | 1408 |
| Outperforming Factors | ESG Score, Buyback, Low Volatility | Quality, Buyback, Dividend |
| Underperforming Factors | Momentum, Large Caps | Momentum, Large Caps, Growth |
| Top Sectors | Healthcare, Real Estate, Consumer Discretionary | Real Estate, Communication, Healthcare |
| Bottom Sectors | Industrials, Communication, Energy | Tech, Industrials, Energy |
| Top Subsectors | Industry Conglomerates, Pharmaceuticals, Commercial/Professional Services | Power Generation Equipment, Aerospace, Cultural Media |
| Bottom Subsectors | Semiconductors, Electrical Equipment, Software | Semicondictors, Energy Equipment, Electronic Components |
| Southbound Connect Buys | Knowledge Atlas (Large), Alibaba, Gigadevice (Moderate) | N/A |
| Southbound Connect Sells | HK Tracker ETF (Massive), Tencent (Very Large), Hua Hong Semi (Large), SMIC, YOFC (Moderate), KB Laminates, Xiaomi (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | 0.28 |
| Communication Services | 11 | -1.69 |
| Consumer Discretionary | 28 | 1.74 |
| Consumer Staples | 13 | 0.36 |
| Energy | 6 | -0.5 |
| Financials | 25 | 0.19 |
| Health Care | 16 | 2.97 |
| Industrials | 22 | -1.75 |
| Information Technology | 12 | 0.14 |
| Materials | 14 | 1.61 |
| Real Estate | 7 | 1.9 |
| Utilities | 11 | 0.79 |
| Mainland China Listed | 386 | -1.41 |
| Communication Services | 8 | 2.85 |
| Consumer Discretionary | 26 | 2.05 |
| Consumer Staples | 19 | 2.44 |
| Energy | 12 | -1.23 |
| Financials | 64 | 0.03 |
| Health Care | 31 | 2.59 |
| Industrials | 58 | -1.46 |
| Information Technology | 95 | -4.37 |
| Materials | 52 | -0.08 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -2 |
| Alibaba HK | 9988 HK Equity | 2 |
| JD.com HK | 9618 HK Equity | 2.3 |
| NetEase HK | 9999 HK Equity | -2.7 |
| Yum China HK | 9987 HK Equity | 0.9 |
| Baozun HK | 9991 HK Equity | -0.8 |
| Baidu HK | 9888 HK Equity | 0.9 |
| Autohome HK | 2518 HK Equity | 2.8 |
| Bilibili HK | 9626 HK Equity | 0.9 |
| Trip.com HK | 9961 HK Equity | 2 |
| EDU HK | 9901 HK Equity | -0.1 |
| Xpeng HK | 9868 HK Equity | 0.8 |
| Weibo HK | 9898 HK Equity | 0.3 |
| Li Auto HK | 2015 HK Equity | 1.4 |
| Nio Auto HK | 9866 HK Equity | 1.6 |
| Zhihu HK | 2390 HK Equity | -1.8 |
| KE HK | 2423 HK Equity | 2.1 |
| Tencent Music Entertainment HK | 1698 HK Equity | 0.8 |
| Meituan HK | 3690 HK Equity | 0.3 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -2 |
| SEMICONDUCTOR MANUFACTURI-H | -4.7 |
| KNOWLEDGE ATLAS TECHNOLOGY-H | -19.3 |
| HUA HONG GRACE SEMICONDUCTOR | -8.1 |
| ALIBABA GROUP HOLDING LTD | 2 |
| YANGTZE OPTICAL FIBRE AND-H | -0.2 |
| GIGADEVICE SEMICONDUCTOR I-H | -21.1 |
| KINGBOARD LAMINATES HLDG LTD | -7.2 |
| XIAOMI CORP-CLASS B | 3.4 |
| LENOVO GROUP LTD | 1.8 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| GIGADEVICE SEMICONDUCTO-CL A | -7.8 |
| ZHONGJI INNOLIGHT CO LTD-A | -8.4 |
| JCET GROUP CO LTD-A | -2.3 |
| SUZHOU DONGSHAN PRECISION-A | -7.3 |
| BOE TECHNOLOGY GROUP CO LT-A | -6.9 |
| EOPTOLINK TECHNOLOGY INC L-A | -4.1 |
| IEIT SYSTEMS CO LTD-A | 4.1 |
| MONTAGE TECHNOLOGY CO LTD-A | -6.2 |
| HENGTONG OPTIC-ELECTRIC CO-A | -2.8 |
| CAMBRICON TECHNOLOGIES-A | -8.8 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.78 versus 6.79 yesterday
- CNY per EUR 7.74 versus 7.77 yesterday
- Yield on 10-Year Government Bond 1.74% versus 1.74% yesterday
- Yield on 10-Year China Development Bank Bond 1.82% versus 1.79% yesterday
- Copper Price 1.48%
- Steel Price -0.10%
