Alibaba Chip Unit Spin Off?
6 Min. Read Time
Key News
Asian equities had a strong day on easing Middle East tensions, and further AI and technology tailwinds led by South Korea’s gain of +6.45% (+40% in the last month! 75% YTD!).
Japan was closed for Constitution Day (Perplexity noted Japan has 15 to 20 stock market holidays versus the US, UK, and EU’s ~9 holidays. I should tell my kids to become Japanese equity traders!).
CNY hit a new 52-week high versus the US dollar, closing at 6.81, a level not seen since February of 2023.
Let’s not bury the headline and ChinaLastNight.com exclusive: A Mainland media report noted that an Alibaba subsidiary, Alibaba (China) Network Technology Co., increased its committed capital to a level that would allow operational spin-offs. Alibaba is in its quiet period before its earnings next Wednesday, so it can’t comment, though the company has previously stated it would spin off its T-Head Semiconductor unit.
A question in next Monday’s webinar with StoneX’s China Internet Analyst Fawne will be on Alibaba’s sum of the parts, though T-Head likely makes up just 1% of revenue today. You can register here.
AI, technology, growth, and internet stocks in Hong Kong and Mainland China had a strong day, except for Tencent, which fell by -1.95%. Semiconductor, technology hardware, software, and non-ferrous metal stocks also had notable performance, with CATL up +2.15% in Hong Kong and +5.5% in Mainland China.
Hong Kong’s rally was broader, with banks, insurance, brokers, and real estate stocks rising, though Mainland China was a bit more mixed.
The semiconductor-heavy STAR Board gained +5.47%, while growth-geared Shenzhen gained +2.24%, and the value-focused Shanghai gained +1.17%. Mainland investors sold $1.09 billion of Hong Kong stocks and ETFs, with selling concentrated in the HK Tracker ETF (-$485mm) and Tencent (-$305mm). I don’t see any news on Tencent’s decline other than Southbound selling. Kefu Medical and Jingwei Tiandi were added to Connect trading today.
Several stats highlighting the efficiency and size of China’s government bureaucracy from the Labor Day holiday include:
- Consumption-related VAT increased +14.3% YoY, driven by +21.1% YoY in sightseeing and entertainment services and catering/restaurants up +31.4%, according to the State Administration of Taxation.
- Cross-regional trips were up +3.49% YoY to 1.52 billion according to the Ministry of Transportation.
- Border crossings were up +3.5% to 11.28 million entry-exit trips according to the National Immigration Administration.
April’s “private” Services PMI, a survey conducted by S&P, was 52.6 versus May’s 52.1 and expectations of 52, driven by domestic demand as exports fell month over month. The composite PMI was 53.1 versus May’s 51.5. See any headlines on the economic beat? Me neither!
China’s Foreign Minister Wang Yi met with Iran’s Foreign Minister Abbas Aragchi to “de-escalate tensions”. I found this to be an interesting line: “China appreciates Iran's commitment not to develop nuclear weapons, while maintaining that Iran has the legitimate right to the peaceful use of nuclear energy," Wang said. Senator Daines (R-Montana) is in Beijing and Shanghai this week. Maybe an impromptu meeting?
Mainland media outlet China Daily had a headline yesterday that caught my attention, titled “Chinese courts rule AI-driven layoffs and pay cuts illegal”. Several courts have ruled in favor of Chinese workers laid off due to AI, as “Chinese courts have ruled that replacing human workers with AI and cutting their pay constitutes unlawful dismissal” and “businesses cannot transfer the risks of normal technological upgrades onto employees”. The incorporation and integration of AI will likely occur at the country, state/province, and/or city/municipal levels. Workers, i.e., voters, are apt to garner the ear of politicians.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 1.2% |
| Hang Seng Tech | HSTECH Index | 0.8% |
| Hong Kong Turnover | HKTurn Index | 149.3% |
| Hong Kong Short Sale Turnover | HKSST Index | 64.2% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 15.7% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -1093.82 |
| China (Shanghai) | SHCOMP Index | 1.2% |
| China (Shenzhen) | SZCOMP Index | 2.2% |
| China (STAR Board) | Star50 Index | 5.5% |
| Mainland Turnover | .chturn Index | 17.7% |
| Japan | NKY Index | 0.4% |
| India | SENSEX Index | 1.2% |
| Indonesia | JCI Index | 0.5% |
| Malaysia | FBMKLCI Index | 0.5% |
| Pakistan | KSE100 Index | 4.2% |
| Philippines | PCOMP Index | 1.2% |
| South Korea | KOSPI Index | 6.5% |
| Taiwan | TWSE Index | 0.9% |
| Thailand | SET Index | 1.8% |
| Singapore | STI Index | 0.1% |
| Australia | AS51 Index | 1.3% |
| Vietnam | VNINDEX Index | 0.9% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 118 | 156 |
| Advancing Stocks | 296 | 3447 |
| Declining Stocks | 216 | 1598 |
| Outperforming Factors | Large Caps, Value, Quality | Momentum, Growth, Liquidity |
| Underperforming Factors | Growth | Low Volatility, Dividend Yield, Value |
| Top Sectors | Real Estate, Materials, Industrials | Tech, Materials, Real Estate |
| Bottom Sectors | Communication, Energy | Staples, Discretionary |
| Top Subsectors | Semis, Non Ferrous Metal, Construction Materials | Computer Hardware, Internet, Semis |
| Bottom Subsectors | Consumer Durables/Apparel, Healthcare Equipment, Coal | Oil/Gas, Education, Catering/Tourism |
| Southbound Connect Buys | N/A | N/A |
| Southbound Connect Sells | HK Tracker ETF (Very Large), Tencent (Large), HS China Enterprise ETF (Moderate), Hua Hong Semi, Pop Mart, YOFC (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 164 | 0.62 |
| Communication Services | 11 | -1.07 |
| Consumer Discretionary | 28 | 0.61 |
| Consumer Staples | 12 | 0.19 |
| Energy | 6 | -0.11 |
| Financials | 25 | 1.3 |
| Health Care | 16 | 0.16 |
| Industrials | 19 | 1.38 |
| Information Technology | 15 | 1.36 |
| Materials | 14 | 4.36 |
| Real Estate | 1 | 5.2 |
| Utilities | 6 | 0.23 |
| Mainland China Listed | 11 | 2.12 |
| Communication Services | 11 | 1.56 |
| Consumer Discretionary | 26 | -0.12 |
| Consumer Staples | 18 | -0.79 |
| Energy | 11 | 1.38 |
| Financials | 64 | 0.28 |
| Health Care | 29 | 0.48 |
| Industrials | 60 | 2.95 |
| Information Technology | 113 | 4.11 |
| Materials | 58 | 3.21 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -1.9 |
| Alibaba HK | 9988 HK Equity | 2.3 |
| JD.com HK | 9618 HK Equity | 0.2 |
| NetEase HK | 9999 HK Equity | 0.2 |
| Yum China HK | 9987 HK Equity | -0.2 |
| Baozun HK | 9991 HK Equity | -0.8 |
| Baidu HK | 9888 HK Equity | 4.9 |
| Autohome HK | 2518 HK Equity | -0.6 |
| Bilibili HK | 9626 HK Equity | 0.3 |
| Trip.com HK | 9961 HK Equity | -0.7 |
| EDU HK | 9901 HK Equity | 3.4 |
| Xpeng HK | 9868 HK Equity | -4 |
| Weibo HK | 9898 HK Equity | -0.5 |
| Li Auto HK | 2015 HK Equity | -2.6 |
| Nio Auto HK | 9866 HK Equity | -3.5 |
| Zhihu HK | 2390 HK Equity | 4.2 |
| KE HK | 2423 HK Equity | 2.7 |
| Tencent Music Entertainment HK | 1698 HK Equity | 0.9 |
| Meituan HK | 3690 HK Equity | -1.3 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -1.9 |
| SEMICONDUCTOR MANUFACTURI-H | 5.7 |
| ALIBABA GROUP HOLDING LTD | 2.3 |
| CONTEMPORARY AMPEREX TECHN-H | 2.1 |
| XIAOMI CORP-CLASS B | 1.2 |
| HUA HONG SEMICONDUCTOR LTD-H | 9.3 |
| YANGTZE OPTICAL FIBRE AND-H | -4.1 |
| BYD CO LTD-H | -2.1 |
| CNOOC LTD-H | -1.8 |
| POP MART INTERNATIONAL GROUP | -1.8 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| CAMBRICON TECHNOLOGIES-A | 7.4 |
| ZHONGJI INNOLIGHT CO LTD-A | -0.2 |
| EOPTOLINK TECHNOLOGY INC L-A | -0.6 |
| MONTAGE TECHNOLOGY CO LTD-A | 14.8 |
| CONTEMPORARY AMPEREX TECHN-A | 5.5 |
| HYGON INFORMATION TECHNOLO-A | 16.3 |
| SUZHOU DONGSHAN PRECISION-A | 2.8 |
| BIWIN STORAGE TECHNOLOGY C-A | 17.4 |
| SUZHOU TFC OPTICAL COMMUNI-A | 2.8 |
| VICTORY GIANT TECHNOLOGY -A | -0.8 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.81 versus 6.82 on Thursday
- CNY per EUR 8.02 versus 7.99 on Thursday
- Yield on 10-Year Government Bond 1.77% versus 1.75% on Thursday
- Yield on 10-Year China Development Bank Bond 1.86% versus 1.85% on Thursday
- Copper Price +1.37%
- Steel Price +1.31%
