Feel The Rotation!
6 Min. Read Time
Key News
Asian equities were lower following Samsung's spectacular results, which reminded investors of the saying "buy the rumor, sell the news," as AI picks and shovels in South Korea, Japan, and Taiwan underperformed, while Singapore and Indonesia outperformed. Amazon's announcement of a $25 billion bond sale this morning confirms its capital expenditure commitment, though month-end Q2 financial results from hyperscalers will be closely scrutinized.
It is very important to note that Mainland investors were net sellers of Hong Kong-listed semiconductors, while they were net buyers of Hong Kong-listed internet stocks via Southbound Stock Connect. Looks like a continued rotation! However, Hong Kong was pulled lower on regional weakness, as local AI supply chain beneficiaries declined, such as semiconductors, which fell -5.93%, and technology hardware, which fell -3.07%. The broader market was also lower.
Tencent gained +2.04% and was Hong Kong's most heavily traded stock by value, seeing very high volumes. Tencent announced it sold down its stake in Kuaishou, which fell -12.04%, for $1.5 billion. Mainland investors were buyers of Tencent's stock, with a healthy $296 million (HKD 2.23 billion) worth of net buying via Southbound Stock Connect.
Kuaishou announced after yesterday's close that the spin-off of its Kling AI unit was moving forward, stating that "the annualized revenue run rate of Kling AI (可靈AI) would have been approximately USD 500 million". Mainland investors bought the Kuaishou dip on weakness, with a moderate $62 milliion (HKD 485 million) in net purchases via Southbound Stock Connect.
Alibaba fell -0.16% despite Mainland media reporting that Alibaba Cloud's market share is now above 40% in China. Today was the third of four net buying days in the stock by Mainland investors via Southbound Stock Connect, as last night saw $117 million (HKD 918 million of net inflow. The company also filed that it bought 4,108,720 American depositary receipts (ADRs) yesterday during US trading.
Meituan gained +4.54% after launching its Long Cat-2.0 large language model (LLM), utilizing domestic chips.
Knowledge Atlas, also known as Zhipu, gained +5.23% as its IPO lock-up expires tomorrow.
Banks held up in both Mainland China and Hong Kong, though otherwise it was a risk-off day. However, on the Mainland, chips were basically flat, at a +0.05% average gain, and technology hardware more broadly was mixed. It was a fairly deep sell-off on the Mainland, as insurance, pharmaceuticals, autos, and non-ferrous metals all fell. The Shanghai Composite closed below the 4,000 level. Semiconductors' strength kept the Mainland's Science & Technology (STAR) Board afloat, with a +0.27% gain, versus Shanghai's decline of -1.26% and Shenzhen's overall decline of -1.92%.
China's Cental Bank Governor Pan Gongsheng delivered a speech at the Hong Kong Fixed Income & Currency Summit and Bond Connect Forum. His remarks were focused on support for Hong Kong's role as an international financial center.
Following the Netherlands' exit from the World Cup, the Dutch Minister for Foreign Trade and Development Cooperation Liesje Schreinemacher announced an upcoming visit to China. Schreinemacher will meet with Minister of Commerce Weng Wentao. Meanwhile, Foreign Minister Wang Yi is heading home after visits to Denmark, Sweden, Finland, and Norway.
China's foreign reserves as of the end of June were $3.42 trillion, including 75.44 million ounces (2,346 tons) of gold. That indicates an increase in holdings of the precious metal for the 20th consecutive month.
There will be six new IPOs in Hong Kong tomorrow. SIX! Does anyone in Hong Kong remember from ECON 101 that increasing supply while keeping demand constant will lead to lower prices? Hong Kong's exchange seems indifferent to strategic and long-term investors, while catering to short-term results and headlines congratulating itself on being the "IPO capital of the world". Meanwhile, it appears to be ignoring the underperformance of its capital markets over the last several years. Capital flows to where it is treated best, which only partially explains Hong Kong's underperformance, though I would argue it is a factor. It is a good thing that companies are becoming more shareholder-friendly, and buybacks and dividends are increasing.
President Trump announced that he will meet with President Xi in the US around the UN General Assembly, which will take place September 24th in New York City. Meanwhile, Bloomberg News is reporting that China will release Pastor Ezra Jin Mingri following President Trump's request to President Xi. These are more signs of improving US-China relations.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -0.5% |
| Hang Seng Tech | HSTECH Index | -0.8% |
| Hong Kong Turnover | HKTurn Index | 1.6% |
| Hong Kong Short Sale Turnover | HKSST Index | -3% |
| 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 | -1.3% |
| China (Shenzhen) | SZCOMP Index | -1.9% |
| China (STAR Board) | Star50 Index | 0.3% |
| Mainland Turnover | .chturn Index | -16.6% |
| Japan | NKY Index | -2.1% |
| India | SENSEX Index | -0.1% |
| Indonesia | JCI Index | 1.2% |
| Malaysia | FBMKLCI Index | 0% |
| Pakistan | KSE100 Index | -0.6% |
| Philippines | PCOMP Index | 0.4% |
| South Korea | KOSPI Index | -4.9% |
| Taiwan | TWSE Index | -2.3% |
| Thailand | SET Index | -0.8% |
| Singapore | STI Index | 1.6% |
| Australia | AS51 Index | -0.3% |
| Vietnam | VNINDEX Index | -0.0005 |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 117 | 107 |
| Advancing Stocks | 99 | 616 |
| Declining Stocks | 417 | 4497 |
| Outperforming Factors | None | None |
| Underperforming Factors | Liquidity, EPS Revision, Momentum | EPS Revision, ESG Score, Quality |
| Top Sectors | Communication, Discretionary | Communication |
| Bottom Sectors | Utilities, Real Estate, Materials | Utilities, Real Estate, Materials |
| Top Subsectors | Software, Banks, Petroleum/Petrochemical | Construction Machinery, Leisure Products, Banking |
| Bottom Subsectors | Semis, Media/Entertainment, Non Ferrous Metals | Petrochemical, Power Generation Equipment, Chemical Fiber |
| Southbound Connect Buys | Tencent (Very Large), Alibaba (Large), Kuaishou (Moderate), Knowledge Atlas, HK Tracker ETF (Small) | |
| Southbound Connect Sells | KB Laminates (Very Large), SMIC, YOFC (Large), Hua Hong Semi (Small) |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -0.52 |
| Communication Services | 11 | 0.97 |
| Consumer Discretionary | 28 | 0.1 |
| Consumer Staples | 13 | -2.38 |
| Energy | 6 | -0.98 |
| Financials | 25 | -0.71 |
| Health Care | 16 | -3.66 |
| Industrials | 22 | -1.28 |
| Information Technology | 12 | -1.17 |
| Materials | 14 | -3.35 |
| Real Estate | 7 | -2.47 |
| Utilities | 11 | -1.44 |
| Mainland China Listed | 386 | -1.2 |
| Communication Services | 8 | 0.67 |
| Consumer Discretionary | 26 | -1.9 |
| Consumer Staples | 19 | -1.57 |
| Energy | 12 | -1.97 |
| Financials | 64 | -0.98 |
| Health Care | 31 | -3.63 |
| Industrials | 58 | -1.27 |
| Information Technology | 95 | -0.26 |
| Materials | 52 | -2.96 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 2 |
| Alibaba HK | 9988 HK Equity | -0.2 |
| JD.com HK | 9618 HK Equity | -1 |
| NetEase HK | 9999 HK Equity | -1.5 |
| Yum China HK | 9987 HK Equity | -0.7 |
| Baozun HK | 9991 HK Equity | -0.1 |
| Baidu HK | 9888 HK Equity | 0.1 |
| Autohome HK | 2518 HK Equity | 7.2 |
| Bilibili HK | 9626 HK Equity | -2.9 |
| Trip.com HK | 9961 HK Equity | -1.8 |
| EDU HK | 9901 HK Equity | 0.3 |
| Xpeng HK | 9868 HK Equity | -1.1 |
| Weibo HK | 9898 HK Equity | -0.1 |
| Li Auto HK | 2015 HK Equity | 0.7 |
| Nio Auto HK | 9866 HK Equity | 1.7 |
| Zhihu HK | 2390 HK Equity | 1.6 |
| KE HK | 2423 HK Equity | -3.2 |
| Tencent Music Entertainment HK | 1698 HK Equity | -2.1 |
| Meituan HK | 3690 HK Equity | 4.5 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | 2 |
| KUAISHOU TECHNOLOGY | 8 |
| ALIBABA GROUP HOLDING LTD | -0.2 |
| SEMICONDUCTOR MANUFACTURI-H | -2.4 |
| MEITUAN-CLASS B | 4.5 |
| HUA HONG GRACE SEMICONDUCTOR | 0 |
| KINGBOARD LAMINATES HLDG LTD | -12.6 |
| YANGTZE OPTICAL FIBRE AND-H | -14.8 |
| KNOWLEDGE ATLAS TECHNOLOGY-H | -14.7 |
| XIAOMI CORP-CLASS B | -0.8 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| VISUAL CHINA GROUP CO LTD-A | -0.1 |
| SHANTUI CONSTRUCTION MACHI-A | -2.1 |
| ZHONGJI INNOLIGHT CO LTD-A | -1.5 |
| GIGADEVICE SEMICONDUCTO-CL A | -3.5 |
| EOPTOLINK TECHNOLOGY INC L-A | -3.6 |
| JCET GROUP CO LTD-A | 4.6 |
| BOE TECHNOLOGY GROUP CO LT-A | -7.4 |
| SUZHOU DONGSHAN PRECISION-A | -3.6 |
| CAMBRICON TECHNOLOGIES-A | 1.3 |
| MONTAGE TECHNOLOGY CO LTD-A | -5.8 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.79 versus 6.79 yesterday
- CNY per EUR 7.76 versus 7.75 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 -0.12%
- Steel Price 0.00%
