Baidu Forces Investors to Revalue Its Stock, Week in Review
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Week in Review
- Asian equities were mixed for the week as Korea and Pakistan outperformed, while Indonesia and the Philippines underperformed.
- This week, we had earnings releases from Baidu, Kuaishou, Xiaomi, and PDD Holdings, as Kuaishou managed a strong beat on revenue and net income, while PDD came short of expectations due to high spending and extreme competition in China commerce.
- Memory chip supplier Changxin Technology began the review process for its pending STAR Market IPO this week. The company is expected to be valued between RMB 300 billion ($42 billion) and RMB 2 trillion ($290 billion), potentially the second‑largest semiconductor listing on the STAR Market.
- Shenzhen, China's high-tech manufacturing capital in the south, released its 15th Five-Year Plan on Monday. The Plan includes reforms to the ChiNext technology board of its stock exchange.
Key News
Asian equities had a strong day on very high volumes, powered by MSCI’s global index rebalance, which occurred at the markets’ close. Japan, Taiwan, and Korea outperformed, while India and the Philippines underperformed. China's currency, the renminbi (CNY) hit another 52-week high versus the US dollar, closing at 6.76 CNY per USD.
Hong Kong's volumes spiked to 150% of the 1-year average, as index and ETF managers globally rebalance at the market’s close.
Dell’s AI server-driven results sent peer Lenovo higher by +21.95%. Lenovo has been on a tear lately, going basically parabolic on optimism.
Semiconductors and technology hardware underperformed in both Hong Kong and Mainland China amid profit-taking, as the STAR Market fell 5.04% and the Mainland's technology sector broadly declined by 3.02%.
Healthcare was a top performer in both Hong Kong and Mainland China following Pfizer’s announcement that it would acquire and develop cancer drugs from the China-based Innovent, which gained 11.36%. The agreement includes an upfront payment of $650 million to Innovent and could yield up to $10.5 billion.
Baidu gained 3.5% after its AI chip unit, Kunlunxin, selected the investment banks that will lead its listing on both the STAR Market and the Hong Kong Stock Exchange. Baidu is forcing investors to provide it a sum of the parts (SOTP) valuation, which, if you include its chip unit, should be a strong positive for its shares.
Hong Kong had a broad rally with the heat map covered in green, except for Alibaba, which fell -0.74%. Tencent gained +0.52% on continued stock buybacks. CATL gained +3.84% in Hong Kong and +2.00% in Mainland China. Hong Kong-listed auto stocks were mixed after the European Union adopted a tariff playbook to protect local auto manufacturers. Mainland investors bought a net $240 million worth of Hong Kong-listed stocks and ETFs, despite a large net sell in the Hong Kong Tracker ETF. Mainland China had poor breadth, as banks and insurance kept Shanghai lower by -0.7%. Meanwhile, semiconductors, software, metals & mining, and technology hardware all underperformed, as the STAR Board fell -5.03% and Shenzhen fell -1.9%.
May's “official” purchasing managers' indexes (PMIs) will be released by the National Bureau of Statistics (NBS)
The power of passive flows was on full display overnight. MSCI’s at-the-close index rebalance drove significant volumes. I am not predicting the stock will go up or down, but I can guarantee that Full Truck Alliance (YMM) will see outsized volumes at the US close, due to its inclusion in MSCI’s indexes.
The Wall Street Journal had a good article earlier this week titled “It’s China’s Answer to a Rolls-Royce—and It’s Stuffed With Gadgets” that focuses on Huawei’s technology despite the high-end car being made by JAC. The article is interesting because it bucks Western media’s perpetually negative coverage of China and is complimentary of the car and Huawei’s technology. The technological upgrade in cars has been amazing to witness over the last several years. I personally don’t own any of them, though I’ve been impressed by my time riding in them.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.7% |
| Hang Seng Tech | HSTECH Index | -0.1% |
| Hong Kong Turnover | HKTurn Index | 29.7% |
| Hong Kong Short Sale Turnover | HKSST Index | 33.1% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 17.4% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 240.62 |
| China (Shanghai) | SHCOMP Index | -0.7% |
| China (Shenzhen) | SZCOMP Index | -1.9% |
| China (STAR Board) | Star50 Index | -5% |
| Mainland Turnover | .chturn Index | 11.9% |
| Japan | NKY Index | 2.5% |
| India | SENSEX Index | -1.4% |
| Indonesia | JCI Index | 0% |
| Malaysia | FBMKLCI Index | -0.1% |
| Pakistan | KSE100 Index | 1.2% |
| Philippines | PCOMP Index | -1.6% |
| South Korea | KOSPI Index | 3.6% |
| Taiwan | TWSE Index | 2.5% |
| Thailand | SET Index | 0% |
| Singapore | STI Index | 1% |
| Australia | AS51 Index | 1.6% |
| Vietnam | VNINDEX Index | 0% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 175 | 1.5 |
| Advancing Stocks | 343 | 1474 |
| Declining Stocks | 169 | 3506 |
| Outperforming Factors | Buyback, Liquidity, Dividend Yield | Low Volatility, Dividend Yield, Value |
| Underperforming Factors | Growth | Liquidity, Growth, Momentum |
| Top Sectors | Healthcare, Tech, Real Estate | Staples, Utilities, Healthcare |
| Bottom Sectors | Materials, Discretionary | Tech, Materials, Industrials |
| Top Subsectors | Consumer Durables/Apparel, National Defense, Household/Personal Products | Liquor, Power, Daily Chemical |
| Bottom Subsectors | Semis, Steel, Chemical Industry | Semis, Aerospace/Military, Industrials Machinery |
| Southbound Connect Buys | Pop Mart (Large), Lenovo, SMIC, Tencent (Moderate), Hua Hong, YOFC (Small) | N/A |
| Southbound Connect Sells | HK Tracker ETF (Very Large), Alibaba (Moderate) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 164 | 0.94 |
| Communication Services | 11 | 0.77 |
| Consumer Discretionary | 28 | -0.15 |
| Consumer Staples | 12 | 1.12 |
| Energy | 6 | 1.4 |
| Financials | 25 | 1.03 |
| Health Care | 16 | 4.29 |
| Industrials | 19 | 0.41 |
| Information Technology | 15 | 2.91 |
| Materials | 14 | -0.32 |
| Real Estate | 1 | 2.64 |
| Utilities | 6 | 2.5 |
| Mainland China Listed | 11 | -0.44 |
| Communication Services | 11 | 0.44 |
| Consumer Discretionary | 26 | 0.35 |
| Consumer Staples | 18 | 3.43 |
| Energy | 11 | 1.03 |
| Financials | 64 | 1.63 |
| Health Care | 29 | 2.35 |
| Industrials | 60 | -0.39 |
| Information Technology | 113 | -3.03 |
| Materials | 58 | -1.44 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 0.5 |
| Alibaba HK | 9988 HK Equity | -0.7 |
| JD.com HK | 9618 HK Equity | -0.6 |
| NetEase HK | 9999 HK Equity | 0.7 |
| Yum China HK | 9987 HK Equity | 1.4 |
| Baozun HK | 9991 HK Equity | 2.3 |
| Baidu HK | 9888 HK Equity | 3.5 |
| Autohome HK | 2518 HK Equity | 6.1 |
| Bilibili HK | 9626 HK Equity | 2.9 |
| Trip.com HK | 9961 HK Equity | 1.3 |
| EDU HK | 9901 HK Equity | -1.1 |
| Xpeng HK | 9868 HK Equity | -3.8 |
| Weibo HK | 9898 HK Equity | -2.9 |
| Li Auto HK | 2015 HK Equity | -4.3 |
| Nio Auto HK | 9866 HK Equity | -4.1 |
| Zhihu HK | 2390 HK Equity | 1.7 |
| KE HK | 2423 HK Equity | 1.8 |
| Tencent Music Entertainment HK | 1698 HK Equity | 1.2 |
| Meituan HK | 3690 HK Equity | 0.2 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | 0.5 |
| SEMICONDUCTOR MANUFACTURI-H | -7.5 |
| LENOVO GROUP LTD | 22 |
| ALIBABA GROUP HOLDING LTD | -0.7 |
| POP MART INTERNATIONAL GROUP | 7.4 |
| CHINA CONSTRUCTION BANK-H | 0.1 |
| HUA HONG SEMICONDUCTOR LTD-H | -5.1 |
| YANGTZE OPTICAL FIBRE AND-H | 8.3 |
| XIAOMI CORP-CLASS B | -1.8 |
| KINGBOARD LAMINATES HLDG LTD | -3.4 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -3.1 |
| SUZHOU TFC OPTICAL COMMUNI-A | 1.7 |
| FOXCONN INDUSTRIAL INTERNE-A | -2.1 |
| GIGADEVICE SEMICONDUCTO-CL A | -3.3 |
| JCET GROUP CO LTD-A | -3.2 |
| HENGTONG OPTIC-ELECTRIC CO-A | 9.4 |
| EOPTOLINK TECHNOLOGY INC L-A | -1.7 |
| SEMICONDUCTOR MANUFACTURIN-A | -9 |
| CONTEMPORARY AMPEREX TECHN-A | 2 |
| LUXSHARE PRECISION INDUSTR-A | 0.7 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.77 versus 6.78 yesterday
- CNY per EUR 7.88 versus 7.89 yesterday
- Yield on 10-Year Government Bond 1.71% versus 1.72% yesterday
- Yield on 10-Year China Development Bank Bond
- Copper Price 0.76%
- Steel Price 0.16%
