Alibaba Busts A Move

Key News

While Hong Kong outperformed, Asian equities were largely lower, led by South Korea’s KOSPI, which fell -5.35% overnight, though remains up +64.99% year-to-date (YTD). That is compared to the KOSDAQ's -18.62% YTD decline, making for a truly incredible intra-market disparity. Japan, India, Thailand, and Indonesia all closed lower overnight.

Hong Kong’s rally was driven by Alibaba, which gained +12.21% on absolutely massive volume of 282 million shares traded, versus 100 million shares yesterday and the 1-year average of 99 million shares. Most folks will point to Alibaba’s multiple earnings guidance conversations with research and sell-side analysts as a key catalyst. Multiple analysts who cover Alibaba put out research with two key takeaways on their August financial results: cloud computing revenue will be greater than the +45% year-over-year (YoY) that was expected and the company will see an improving bottom line, as restaurant delivery subsidies are curtailed. 

What most folks will not mention is that the State Administration for Market Regulation (SAMR) held a lengthy press conference and Q&A with reporters overnight on the "in-depth rectification" of "involutionary" competition in the first half of 2026. The State Council and CPC Central Committee, i.e., the highest levels of the Chinese government, directed SAMR to implement these policies via the Government Work Report on “strengthening anti-monopoly and anti-unfair competition efforts" and "reinforcing the rigid constraints of fair competition review”. This led to 16 “special actions”. The first example reviewed was on restaurant “ghost delivery cases”, with fines and actions taken against PDD Holdings' Pinduoduo, Meituan, JD.com, ByteDance’s Douyin, Alibaba's Ele.me, Alibaba's Taobao, and Alibaba's T-mall. Three regulations were implemented, focused on involutionary competition in online trading platforms, live-streaming e-commerce, and restrictive competition. The press conference was very much focused on e-commerce and delivery, as the companies’ subsidies have wrecked their bottom lines. Will we see other companies follow Alibaba’s example to guide analysts’ expectations into Q2 results and Q3 guidance? If yes, we could garner more positive momentum in the space.

A rotation is occurring globally from the very narrow market leadership of AI momentum winners, i.e. the "picks and shovels" or technology hardware firms, to everyone else, i.e., the YTD laggards. We have witnessed this in both Mainland China and Hong Kong only recently, as, for the last two weeks, semiconductors and technology hardware have flatlined, while the broader market has rallied. Our China market webinar next week is aptly titled “AI Momentum & Mean Reversion”.

The value of Alibaba’s volume was $3.79 billion (HKD 29 billion), which is nearly 50% higher than the one-year average and is 5X pre-September of 2024 levels. Alibaba had significant net buying via Southbound Stock Connect as Mainland investors bought a net $507 million (HKD 3.98 billion) worth of shares. Additionally, the company bought 4,076,280 ADRs yesterday.

Large language model provider Knowledge Atlas (Zhipu) gained +13.35%, following an analyst price target upgrade, despite its coming private placement stock sale. It also had significant buying via Southbound Stock Connect, as Mainland investors poured $552 million (HKD 4.33 billion) into the stock.

Tencent gained +3.82%, as Mainland investors bought a healthy net $319 million (HKD 2.51 billion) worth of shares via Southbound Stock Connect overnight.

Xiaomi gained +9.52%, as founder Lei Jun announced a new line of cars called Sky Nomad.

AI supply chain companies and electronic equipment lagged, along with pharmaceuticals, following a recent rebound and CATL's -3.86% decline. Banks and insurance had a strong day in another sign of the rotation. Mainland China was mixed, as Shanghai and Shenzhen were off, though banks and semiconductors were up, while technology hardware was mixed. Laggards included CATL, which fell -3.08%, non-ferrous metals, pharmaceuticals, chemical industry, and machinery. There was an interesting value bias in both markets.

President Xi gave the keynote speech at the concisely named 11th National Congress of the China Science and Technology Association at the National Science and Technology Award Conference. A Mainland media source reported that his speech focused on “accelerating the development of high-level self-reliance in science and technology, firmly advance towards the goal of building a strong scientific and technological country by 2035, and solidly supporting and leading China's modernization with scientific and technological innovation”.

China's central bank's Monetary Policy Committee had its Q2 review meeting, where it noted that policies have been “proactive and effective this year, with monetary policy remaining moderately loose” while conceding “challenges such as strong supply and weak demand”.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	3%
Hang Seng Tech	HSTECH Index	5%
Hong Kong Turnover	HKTurn Index	17.6%
Hong Kong Short Sale Turnover	HKSST Index	9%
Short Turnover as a % of Hong Kong Turnover	N/A	0.2
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	-251
China (Shanghai)	SHCOMP Index	-0.5%
China (Shenzhen)	SZCOMP Index	-2%
China (STAR Board)	Star50 Index	0.7%
Mainland Turnover	.chturn Index	-0.6%
Japan	NKY Index	-2.1%
India	SENSEX Index	-2.1%
Indonesia	JCI Index	-1.9%
Malaysia	FBMKLCI Index	0%
Pakistan	KSE100 Index	-2.5%
Philippines	PCOMP Index	0.5%
South Korea	KOSPI Index	-5.3%
Taiwan	TWSE Index	0.6%
Thailand	SET Index	-1.7%
Singapore	STI Index	0.5%
Australia	AS51 Index	-0.2%
Vietnam	VNINDEX Index	-0.0005

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	137	106
Advancing Stocks	352	1525
Declining Stocks	161	3478
Outperforming Factors	Value, Dividend Yield, Large Caps	Low Volatility, Dividend Yield, Value
Underperforming Factors	None	Momentum, EPS Revision, Liquidity
Top Sectors	Consumer Discretionary, Information Technology, Communication Services	Utilities, Financials, Communication Services
Bottom Sectors	Healthcare, Industrials, Materials	Materials, Industrials, Healthcare
Top Subsectors	Consumer Discretionary Distribution, Media/Entertainment, Software	Internet, Highway, Soft Drinks
Bottom Subsectors	Machinery, Electrical Equipment, Chemical Industry	Fine Chemical, Base Metals, Auto Parts
Southbound Connect Buys	Alibaba, Knowledge Atlas (Very Large), Hua Hong Semi, Kingboard (Small)	N/A
Southbound Connect Sells	Xiaomi, YOFC (Moderate), KB Laminates (Small)	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	165	3.89
Communication Services	11	4.21
Consumer Discretionary	28	6.51
Consumer Staples	13	1.83
Energy	6	1.65
Financials	25	3.9
Health Care	16	-1.52
Industrials	22	-1.35
Information Technology	12	5.45
Materials	14	-0.9
Real Estate	7	3.03
Utilities	11	2.03
Mainland China Listed	386	-0.97
Communication Services	8	0
Consumer Discretionary	26	-0.82
Consumer Staples	19	-0.13
Energy	12	-0.45
Financials	64	0.07
Health Care	31	-1.48
Industrials	58	-2.5
Information Technology	95	-0.65
Materials	52	-2.77

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	3.8
Alibaba HK	9988 HK Equity	12.2
JD.com HK	9618 HK Equity	3.8
NetEase HK	9999 HK Equity	4.2
Yum China HK	9987 HK Equity	2.5
Baozun HK	9991 HK Equity	0.8
Baidu HK	9888 HK Equity	6.3
Autohome HK	2518 HK Equity	-0.7
Bilibili HK	9626 HK Equity	5
Trip.com HK	9961 HK Equity	2.9
EDU HK	9901 HK Equity	2.1
Xpeng HK	9868 HK Equity	-0.2
Weibo HK	9898 HK Equity	2.5
Li Auto HK	2015 HK Equity	4.1
Nio Auto HK	9866 HK Equity	0.8
Zhihu HK	2390 HK Equity	1.2
KE HK	2423 HK Equity	4.4
Tencent Music Entertainment HK	1698 HK Equity	3
Meituan HK	3690 HK Equity	3.3

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
ALIBABA GROUP HOLDING LTD	12.2
TENCENT HOLDINGS LTD	3.8
KNOWLEDGE ATLAS TECHNOLOGY-H	13.4
SEMICONDUCTOR MANUFACTURI-H	3.2
HUA HONG GRACE SEMICONDUCTOR	3.4
XIAOMI CORP-CLASS B	9.5
KINGBOARD LAMINATES HLDG LTD	-4.6
KUAISHOU TECHNOLOGY	8.7
MEITUAN-CLASS B	3.3
YANGTZE OPTICAL FIBRE AND-H	-4

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
ZHONGJI INNOLIGHT CO LTD-A	0.6
GIGADEVICE SEMICONDUCTO-CL A	-2.7
BOE TECHNOLOGY GROUP CO LT-A	0.7
EOPTOLINK TECHNOLOGY INC L-A	0.1
SUZHOU DONGSHAN PRECISION-A	0.3
JCET GROUP CO LTD-A	-6.8
CAMBRICON TECHNOLOGIES-A	1.8
UNISPLENDOUR CORP LTD-A	6.8
SEMICONDUCTOR MANUFACTURIN-A	4.6
TIANSHUI HUATIAN TECHNOLOG-A	-1.6

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 6.80 versus 6.79 yesterday
• CNY per EUR 7.76 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 1.82% yesterday
• Copper Price 0.04%
• Steel Price 0.46%