Dam Project Benefits Construction-Related Stocks

Key News

Asian equities started the week off on a positive note, except for Australia and Japan, which was closed for Marine Day, a public holiday celebrating and giving thanks for the ocean’s bounty, according to Perplexity.

The biggest news today was that Linzhi City hosted the ceremony for a new hydropower dam project on the Yarlung Zangbo River in Tibet. The dam, which Bloomberg says will be three times the size of the Three Gorges Dam, will consist of five electrical plants. Its construction will cost RMB 1.2 trillion. It will also generate 200,000 jobs and add RMB 2 billion in revenue for Tibet annually, once the decade-long construction is completed. The official start of the project ignited a rally in the Hong Kong and Mainland China-listed shares of construction-related subsectors, including construction machinery, oil, metals, mining, steel, building material, and heavy machinery companies.

Mainland and Hong Kong markets saw massive rallies in individual stocks. Hong Kong’s moves were amplified by short sellers getting steamrolled, as the Hong Kong-listed Dongfang Electric gained +65%, Huaxin Cement gained +85%, and China Energy Engineering gained +23%, while the Mainland-listed Anhui Conch Cement gained +10%. The project’s demand for steel and cement caused futures to rally, as both industries faced the anti-involution campaign’s effort to curtail overproduction and price wars.

The 1 and 5-Year Loan Prime Rates (LPRs) were left unchanged, as expected, at 3.0% and 3.5%, respectively.

Alibaba gained +1.81%, Meituan gained +2.75%, and JD.com gained +2.11%, following Friday’s after-the-close announcement that the State Administration of Market Regulation (SAMR) had met the three companies concerning their instant commerce price war. SAMR’s concerns are likely driven by restaurants and convenience stores not getting in store business due to significant subsidies for delivery. The intervention is very much aligned with the recent anti-involution campaign, which initially mentioned E-Commerce as an industry culprit.

Healthcare was lower both offshore and onshore, as investors took profits, though the sector remains a strong outperformer this year.

Hong Kong and Mainland brokerage stocks had good sessions, as Hong Chief Executive Li Jiachao stated that there have been 52 IPOs so far this year, 30% more than last year by this time, which raised a total of HKD 124 billion. Mainland investors made their presence felt, as Southbound Stock Connect saw a healthy net $898 million worth of buying from Mainland investors, accounting for 61% of Hong Kong turnover. The very high turnover percentage indicates a lack of foreign involvement, in my opinion.

The Hang Seng and Hang Seng Tech indexes both closed at big round numbers: 25,000 and 5,600, respectively. Shanghai and Shenzhen both grinded higher across the trading day.

After the close, Premier Li and the State Council announced new regulations concerning housing rentals. Chengdu announced that easing housing purchase restrictions would be done incrementally.

Reuters is reporting that President Xi will meet with European Commission President Ursula von der Leyen and European Council President Antonio Costa this Thursday in Beijing. The meeting comes against the backdrop of the EU’s sanctions against Russia.

There was also continued chatter that a Xi-Trump summit could be in the works, as Reuters reported that Putin would travel to Beijing to meet with Trump. The September summit floated by Reuters is aligned with our belief that a summit could occur around September’s 80^th anniversary of World War Two ending.

Last Night's Performance

Country/Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	0.7%
Hang Seng Tech	HSTECH Index	0.8%
Hong Kong Turnover	HKTurn Index	10.2%
Hong Kong Short Sale Turnover	HKSST Index	-4.6%
Short Turnover as a % of Hong Kong Turnover	N/A	10.9%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	0
China (Shanghai)	SHCOMP Index	0.7%
China (Shenzhen)	SZCOMP Index	1%
China (STAR Board)	Star50 Index	0%
Mainland Turnover	.chturn Index	8.1%
Nouthbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	Not Available
Jing Daily China Global Luxury Index	CHINALUX Index	0.1%
Japan	NKY Index	-0.2%
India	SENSEX Index	0.5%
Indonesia	JCI Index	1.2%
Malaysia	FBMKLCI Index	-0.1%
Pakistan	KSE100 Index	-0.4%
Philippines	PCOMP Index	0.8%
South Korea	KOSPI Index	0.7%
Taiwan	TWSE Index	-0.2%
Thailand	SET Index	0.1%
Singapore	STI Index	0.4%
Australia	AS51 Index	-1%
Vietnam	VNINDEX Index	-0.8%

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	128	125
Advancing Stocks	307	3667
Declining Stocks	175	1335
Outperforming Factors	Dividend Yield, Low Volatility, Value	Value, Low Volatility, Buyback
Underperforming Factors
Top Sectors	Materials, Energy, Utilities	Materials, Industrials, Energy
Bottom Sectors	Healthcare, Financials	Healthcare, Financials
Top Subsectors	Construction, Steel, Electrical Equipment	Building Materials, Construction Machinery, Construction
Bottom Subsectors	Media/Entertainment, Pharmaceutical, Telecom	Education, Banking, Diversified Financials
Southbound Connect Buys	CH Energy, DEC (Large), Huaxin Cement, Tencent (Moderate) Alibaba (Small)	N/A
Southbound Connect Sells	Meituan, Xiaomi (Moderate) Guotai Junan (Small)	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	152	0.79
Communication Services	9	0.39
Consumer Discretionary	30	1.28
Consumer Staples	13	1.13
Energy	7	3.84
Financials	23	-0.1
Health Care	13	-1.61
Industrials	19	1.49
Information Technology	10	0.93
Materials	10	4.62
Real Estate	6	1.32
Utilities	12	1.9
Mainland China Listed	432	0.78
Communication Services	9	0.45
Consumer Discretionary	31	0.38
Consumer Staples	27	0.35
Energy	16	1.54
Financials	63	-0.04
Health Care	40	-0.52
Industrials	69	2.28
Information Technology	85	0.29
Materials	68	3
Real Estate	7	0.66
Utilities	17	0.97

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	0.5
Alibaba HK	9988 HK Equity	1.8
JD.com HK	9618 HK Equity	2.1
NetEase HK	9999 HK Equity	1.1
Yum China HK	9987 HK Equity	-1.8
Baozun HK	9991 HK Equity	0
Baidu HK	9888 HK Equity	0.9
Autohome HK	2518 HK Equity	1.2
Bilibili HK	9626 HK Equity	-1.7
Trip.com HK	9961 HK Equity	0
EDU HK	9901 HK Equity	-3.1
Xpeng HK	9868 HK Equity	0.3
Weibo HK	9898 HK Equity	0.3
Li Auto HK	2015 HK Equity	-1.3
Nio Auto HK	9866 HK Equity	2.1
Zhihu HK	2390 HK Equity	-0.8
KE HK	2423 HK Equity	0.3
Tencent Music Entertainment HK	1698 HK Equity	-4.4
Meituan HK	3690 HK Equity	2.7

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
ALIBABA GROUP HOLDING LTD	1.8
MEITUAN-CLASS B	2.7
DONGFANG ELECTRIC CORP LTD-H	65.2
XIAOMI CORP-CLASS B	1.3
HUAXIN CEMENT CO LTD-H	85.6
TENCENT HOLDINGS LTD	0.5
CHINA ENERGY ENGINEERING C-H	23.1
GUOTAI JUNAN INTERNATIONAL	-6.5
CHINA CONSTRUCTION BANK-H	-1.2
SEMICONDUCTOR MANUFACTURI-H	0.3

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
CHINA NORTHERN RARE EARTH -A	6.3
EAST MONEY INFORMATION CO-A	-0.7
ZHONGJI INNOLIGHT CO LTD-A	4.1
EOPTOLINK TECHNOLOGY INC L-A	-2.2
CONTEMPORARY AMPEREX TECHN-A	3.1
HUADIAN NEW ENERGY GROUP C-A	13.7
VICTORY GIANT TECHNOLOGY -A	-2.6
SUZHOU DONGSHAN PRECISION-A	1.4
BYD CO LTD -A	1.5
WOLONG ELECTRIC GROUP CO L-A	10

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 7.17 versus 7.18 yesterday
• CNY per EUR 8.35 versus 8.36 yesterday
• Yield on 10-Year Government Bond 1.68% versus 1.67% yesterday
• Yield on 10-Year China Development Bank Bond 1.74% versus 1.72% yesterday
• Copper Price 1.17%
• Steel Price 1.62%