Alibaba Bounces Back As Baidu Reports Q2 Earnings
6 Min. Read Time
Key News
Asian equities were lower as continued Middle East tensions and higher sovereign bond yields led to a risk off day, as the AI supply chain, i.e. the "picks and shovels" were lower, though volumes were light.
Mainland China and Hong Kong were quite resilient, despite the regional weakness, as both markets rallied off intra-day lows in afternoon trading to mitigate the downdraft. The resilience was definitely not due to the efforts of China's "National Team", i.e. investment firms associated with sovereign wealth, as their favorite ETFs had outflows today, including one with a significant outflow.
The rally off of session lows was driven by policymakers' reaction to yesterday's poor economic results from July. Mainland media noted RMB 100 billion worth of consumption subsidies to be rolled out this year to “boost domestic demand” following yesterday’s comments from Premier Li and the State Council on getting the economy going again. There was also chatter that the National People’s Congress will take place from August 25th to 28th following the National People's Congress’ (NPC) Standing Committee, which met today. Premier Li and the State Council signed and released the "Decision of the State Council on Amending the Regulations on the Administration of Housing Provident Fund Management", a document focusing on housing affordability, as the announcement “removes the requirement that rent must exceed a specified proportion of household wage income for employees to withdraw housing provident fund to pay rent”. The government clearly recognizes the economic reality, though their reaction continues to be lackluster, in our opinion.
Hong Kong was helped by Alibaba, which gained +3.68% in advance of Thursday’s financial results that will be announced after the close in Asia. The company‘s cloud business opened its third data center in Korea. It also released an AI music generator.
Oil & gas and banks were strong in both markets, though insurance stocks were weak. This was despite Hong Kong-listed ETFs becoming available for onshore insurance companies for their asset allocations.
AI supply chain stocks in Hong Kong and Mainland China were off overnight, as semiconductors, technology hardware, and communications equipment were all lower. ChangXin Memory (CXMT) was hit with profit taking and fell -4.22%, following yesterday’s +12% gain, with lots of Mainland media attention on the company’s market cap exceeding RMB 4 trillion in market cap yesterday. Today’s drop left the company's market cap at RMB 3.96 billion, though the company floated an absurdly small number of shares, which makes their free float market cap a small fraction of the total market cap.
Unitree confirmed it will go public tomorrow on the Science & Technology (STAR) Board of the Shanghai Stock Exchange.
Some of the biggest news came after the close, as multiple large companies released their Q2 financial results. Gigadevice Semiconductor announced that its revenue increased +178% year-over-year (YoY) to RMB 11.57 billion from RMB 4.15 billion, while its net profits surged +1,091% to RMB 6.86 billion from RMB 575 million, and earnings per share (EPS) increased +1,029% to RMB 9.83. Meanwhile, Xiaomi's second quarter revenue fell -6.1% to RMB 108.90 billion from RMB 115.90 billion in the same period last year, and adjusted net profit declined -43% to RMB 6.22 billion. TFC Optical reported revenue growth of +15% YoY to RMB 2.83 billion from RMB 2.46 billion, and net profit growth of +33.90% to RMB 1.2 billion from RMB 899 million during the same period last year. Huayou Cobalt's first half net profit grew +29.30% to RMB 3.51 billion.
Baidu Q2 Earnings Overview
Baidu reported Q2 financial results after the Hong Kong close that missed analyst expectations. The company's AI efforts were on display, especially cloud computing, which increased revenue by 50% YoY to RMB 7.30 billion, though it was down -17% quarter-over-quarter (QoQ). They're working through legacy search-driven advertising, which is declining faster and from a higher base. The company announced it should become eligible for Southbound Stock Connect this year after shareholders vote on August 26th to make it eligible by converting the Hong Kong-listed shares to a dual share class, introducing the company to regulation by both the US’ SEC and Hong Kong’s SFC. The US listing is down significantly in US pre-market trading, indicating an open at -8.00%, though professional investors, by and large, own the Hong Kong share class, as that is MSCI’s primary share class.
- Revenue -4% to RMB 31.30 billion ($4.62 billion) from RMB 32.70 billion, versus expectations of RMB 31.59 billion.
- Adjusted Net Income RMB 2.60 billion ($379 million), down from RMB 4.80 billion, versus expectations of RMB 3.20 billion.
- Adjusted earnings per share (EPS) declined to RMB 7.22 ($1.06) from RMB 13.58 billion, versus expectations of RMB 9.75
- The company bought back $259 million worth of stock in Q2.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.1% |
| Hang Seng Tech | HSTECH Index | -0.9% |
| Hong Kong Turnover | HKTurn Index | 21.2% |
| Hong Kong Short Sale Turnover | HKSST Index | 43.5% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 0.2 |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 258.08 |
| China (Shanghai) | SHCOMP Index | 0.2% |
| China (Shenzhen) | SZCOMP Index | -0.5% |
| China (STAR Board) | Star50 Index | 0.1% |
| Mainland Turnover | .chturn Index | 0.6% |
| Japan | NKY Index | -2.5% |
| India | SENSEX Index | -0.6% |
| Indonesia | JCI Index | 0.7% |
| Malaysia | FBMKLCI Index | 0.4% |
| Pakistan | KSE100 Index | -1.4% |
| Philippines | PCOMP Index | 0% |
| South Korea | KOSPI Index | -1.5% |
| Taiwan | TWSE Index | -1.2% |
| Thailand | SET Index | -0.3% |
| Singapore | STI Index | -1.2% |
| Australia | AS51 Index | 0% |
| Vietnam | VNINDEX Index | -0.0005 |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 89 | 95 |
| Advancing Stocks | 190 | 1609 |
| Declining Stocks | 329 | 3438 |
| Outperforming Factors | Low Volatility, Dividend Yield, ESG Score | Low Volatility, Dividend Yield, Value |
| Underperforming Factors | Growth, Liquidity, EPS Revision | Liquidity, Momentum, EPS Revision |
| Top Sectors | Healthcare, Energy, Discretionary | Energy, Staples, Discretionary |
| Bottom Sectors | Tech, Communication, Staples | Communication, Tech, Real Estate |
| Top Subsectors | Petroleum/Petrochemical, Pharmaceuticals/Biotech, Coal | Agricultural, Motorcycle, Oil/Gas |
| Bottom Subsectors | Household/Personal Products, Semis, Tech Hardware | Internet, Cultural Media, Securities |
| Southbound Connect Buys | Alibaba, HK Tracker ETF (Very Large),KB Laminates, SMIC (Large), Z Hai (Moderate), Hua Hong Semi, YOFC (Small) | N/A |
| Southbound Connect Sells | None | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | 0.15 |
| Communication Services | 11 | -0.75 |
| Consumer Discretionary | 28 | 1.15 |
| Consumer Staples | 13 | -0.67 |
| Energy | 6 | 1.7 |
| Financials | 25 | -0.14 |
| Health Care | 16 | 2.26 |
| Industrials | 22 | 0.5 |
| Information Technology | 12 | -1.92 |
| Materials | 14 | -0.61 |
| Real Estate | 7 | 0.81 |
| Utilities | 11 | -0.25 |
| Mainland China Listed | 386 | -0.31 |
| Communication Services | 8 | -0.94 |
| Consumer Discretionary | 26 | 0.18 |
| Consumer Staples | 19 | 0.53 |
| Energy | 12 | 1.02 |
| Financials | 64 | -0.08 |
| Health Care | 31 | -0.3 |
| Industrials | 58 | -0.33 |
| Information Technology | 95 | -0.81 |
| Materials | 52 | -0.28 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -0.9 |
| Alibaba HK | 9988 HK Equity | 3.7 |
| JD.com HK | 9618 HK Equity | -1.8 |
| NetEase HK | 9999 HK Equity | -0.2 |
| Yum China HK | 9987 HK Equity | -0.7 |
| Baozun HK | 9991 HK Equity | 0 |
| Baidu HK | 9888 HK Equity | 0.8 |
| Autohome HK | 2518 HK Equity | -0.9 |
| Bilibili HK | 9626 HK Equity | -2.2 |
| Trip.com HK | 9961 HK Equity | -1.4 |
| EDU HK | 9901 HK Equity | -2.2 |
| Xpeng HK | 9868 HK Equity | 1.4 |
| Weibo HK | 9898 HK Equity | -0.5 |
| Li Auto HK | 2015 HK Equity | -1.2 |
| Nio Auto HK | 9866 HK Equity | -1.3 |
| Zhihu HK | 2390 HK Equity | -0.9 |
| KE HK | 2423 HK Equity | -0.5 |
| Tencent Music Entertainment HK | 1698 HK Equity | 0.6 |
| Meituan HK | 3690 HK Equity | -2.4 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | 3.7 |
| Z AI CO LTD | -13.3 |
| TENCENT HOLDINGS LTD | -0.9 |
| SEMICONDUCTOR MANUFACTURI-H | 0.9 |
| MINIMAX GROUP INC | -4.5 |
| HUA HONG GRACE SEMICONDUCTOR | -7.9 |
| XIAOMI CORP-CLASS B | 1.2 |
| YANGTZE OPTICAL FIBRE AND-H | -1.3 |
| MEITUAN-CLASS B | -2.4 |
| KINGBOARD LAMINATES HLDG LTD | -8.1 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| VISUAL CHINA GROUP CO LTD-A | -2.4 |
| SHANTUI CONSTRUCTION MACHI-A | -0.1 |
| GIGADEVICE SEMICONDUCTO-CL A | -1.6 |
| CXMT CORP-A | -4.2 |
| ZHONGJI INNOLIGHT CO LTD-A | -1.3 |
| BOE TECHNOLOGY GROUP CO LT-A | 6.4 |
| EOPTOLINK TECHNOLOGY INC L-A | -3.1 |
| HENGTONG OPTIC-ELECTRIC CO-A | 0.5 |
| SUZHOU TFC OPTICAL COMMUNI-A | 1.7 |
| TONGFU MICROELECTRONIC CO-A | 2 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.74 versus 6.74 yesterday
- CNY per EUR 7.80 versus 7.81 yesterday
- Yield on 10-Year Government Bond 1.69% versus 1.69% yesterday
- Yield on 10-Year China Development Bank Bond 1.74% versus 1.76% yesterday
- Copper Price -0.93%
- Steel Price -0.30%
