FTSE Flows & AI Drive Asia Higher, Week in Review
7 Min. Read Time
Week in Review
- Asian equities were mixed but mostly lower for the week, as Mainland China's STAR (Science & Technology) Board and Taiwan outperformed, while the Philippines and Malaysia underperformed.
- Z.AI and other AI model providers outperformed this week in Hong Kong on rising revenue guidance.
- Trump-Xi Meeting Next Week: The Ministry of Commerce’s press conference included a question on both the US and China reducing the $30 billion worth of reciprocal tariffs currently in place. While stating talks were progressing, I assume this will be announced next week by President Trump and President Xi. The South China Morning Post is reporting executives from BYD, Xiaomi and Innolight will join President Xi on his US visit. Bloomberg also reported BYD’s CEO may attend with some speculation of a partnership with Ford. Against the backdrop of exceedingly light positioning, the market does not appear to be anticipating a better-than-expected Trump-Xi meeting, though the tea leaves point in that direction.
- Central Bank Indicates More Economic Support: China's central bank president Pan Gongsheng released an article in the influential Qiushi Journal titled “Deeply Understanding the Changes in China's Financial Structure and Improving the Adaptability of Financial Services to the Real Economy". The article reiterated the central bank’s role in aligning monetary policies to the real economy. There is acknowledgement of the slower loan growth, though economic growth remains relatively healthy. One element of the weakness in credit demand has been due to fewer real estate and local government loans. Real estate loans have contracted by RMB 2 trillion since 2025. New growth drivers need to take up the slack. The article also mentioned the need for anti-involution, i.e. reducing intense domestic competition that has led to oversupply in some industries.
Key News
Asian equities rebounded following US stocks' post-Fed rebound on heavier volumes driven by FTSE’s index rebalance. Renminbi (CNY) appreciation versus the US dollar broke through the 6.70 CNY per USD level, as CNY closed at 6.69 per USD. CNY was last at this level in July of 2022.
Indexes have a momentum bias, so it is not surprising to see Japan, Taiwan, and Korea outperform on higher volumes driven by rebalancing, while the Philippines’ decline has been exacerbated by index deletions. Not surprisingly, the index rebalance momentum is focused on the AI supply chain, which is exactly what outperformed in Hong Kong and Mainland China last night, as our "Four Horsemen" of AI, i.e. semiconductors, semiconductor equipment, technology hardware, electronic equipment, and communication equipment, outperformed. As a result, the semiconductor-heavy Science & Technology (STAR) Board gained +2.89% overnight. Nvidia CEO and Chief AI Cheerleader Jensen Huang said that chip sales could double next year, which was a factor. Meanwhile, Huawei executives commented on the growing strength of their own, domestically-produced chips.
The FTSE China 50 Index added the Hong Kong-listed Hua Hong Semiconductor, which gained +4.81%, and Montage Technology, which gained +5.75%. Meanwhile, the index removed Kuaishou, which gained +2.67%, and logistics firm SF Holdings, which fell -0.21%. Hong Kong's volumes jumped +43% from yesterday due to the rebalance. It also nudged Southbound’s percentage of trading to 17% of total Hong Kong turnover, despite Mainland investors only buying a net $152 million worth of Hong Kong-listed stocks and ETFs today.
Lenovo gained +9.5% overnight on an analyst upgrade, citing increased server demand. Alibaba gained +4.00% after launching its Qwen 3.8-Omni-Flash model, the latest upgrade to its Qwen large language model which greatly reduced video and audio costs. Alibaba's strong gain was despite net selling from Mainland investors via Southbound Stock Connect.
Z.AI continued to rally, gaining +5.41% overnight after releasing its GLM-5.3-FlashX. The stock also enjoyed strong inflow from Mainland investors via Southbound Stock Connect. Peer Minimax gained +18.92%, though I do not have a good explanation for the surge in its share price. Tencent fell -1.64% on seemingly no news.
Real estate was higher in advance of the press conference, which I discuss below. Health care gained on expected benefits of AI to biotech.
Battery giant CATL fell -0.77% in Hong Kong, but was flat in Mainland China. Chatter around competition heated up overnight, despite the company announcing a new factory. After the close, the battery giant reported it bought 1.51 million shares of its Shenzhen listing, at a cost of RMB 456 million. The Mainland-listed Foxconn gained +2.35% after announcing that it bought 15.83 million shares at a cost of RMB 1 billion.
Hong Kong Buybacks announced after the close came from Tencent, which repurchased 237,000 shares, Baidu, which repurchased 561,000 shares, and Kuaishou, which repurchased 815,000 shares.
After the close, the Ministry of Housing and Urban-Rural Development, along with the State Council, held a press conference on “the supply and demand relationship in the real estate market”. Acknowledging that real estate development’s high growth stage has passed, efforts will be on selling available inventory and supporting second-hand and used home sales. More than 50% of real estate transactions are now in used homes versus newly built versus only 27% in 2020.
Mainland media reported that US Secretary of State Marco Rubio and China Ministry of Foreign Affairs chief Wang Yi spoke yesterday in advance of the meeting between presidents Trump and Xi next week. There was chatter that President Trump will meet President Xi when he lands at Andrews Air Force Base next week. The Ministry of Foreign Affairs press conference included a statement that the US Department of Homeland Security returned 700 pieces of “cultural relics and artworks lost in the United States” to China. The spokesperson noted “This return is the latest achievement in implementing the consensus reached at the Beijing meeting between the two heads of state, and also demonstrates the broad prospects for building a constructive strategic and stable relationship between China and the United States.”
Premier Li and the State Council met to discuss services geared toward China’s aging population.
Is CNBC closing their Hong Kong studio the sign of the bottom? In their defense, they have a big studio in Singapore and folks scattered across several cities. Having recently been on air with CNBC’s Hong Kong team, I am sorry that they lost their jobs, as they were great hosts to me and we had a great discussion. With that being said, it is really hard not to see this as a sentiment signal, in my opinion.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.6% |
| Hang Seng Tech | HSTECH Index | 2.2% |
| Hong Kong Turnover | HKTurn Index | 43.6% |
| Hong Kong Short Sale Turnover | HKSST Index | 16.2% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 0.2 |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 152.40 |
| China (Shanghai) | SHCOMP Index | 0.9% |
| China (Shenzhen) | SZCOMP Index | 1.7% |
| China (STAR Board) | Star50 Index | 2.9% |
| Mainland Turnover | .chturn Index | 13.7% |
| Japan | NKY Index | 1.4% |
| India | SENSEX Index | 0% |
| Indonesia | JCI Index | -0.3% |
| Malaysia | FBMKLCI Index | -0.5% |
| Pakistan | KSE100 Index | 1.1% |
| Philippines | PCOMP Index | -1.7% |
| South Korea | KOSPI Index | 2.7% |
| Taiwan | TWSE Index | 1.9% |
| Thailand | SET Index | 0.1% |
| Singapore | STI Index | -0.1% |
| Australia | AS51 Index | 0% |
| Vietnam | VNINDEX Index | -0.4% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 99 | 84 |
| Advancing Stocks | 375 | 3797 |
| Declining Stocks | 181 | 1177 |
| Outperforming Factors | Liquidity, Growth, EPS Revision | Liquidity, Growth, Momentum |
| Underperforming Factors | Low Volatility | Low Volatility |
| Top Sectors | Tech, Discretionary, Real Estate | Real Estate, Tech, Materials |
| Bottom Sectors | Communication, Energy, Financials | Staples, Utilities |
| Top Subsectors | Semis, Tech Hardware, Consumer Staples Distribution | Semis, Real Estate, Forest |
| Bottom Subsectors | Household/Personal Products, Paper/Packaging, Construction Materials | Ports, Highways, Coal |
| Southbound Connect Buys | Z.AI (large), SMIC, YOFC (moderate) | N/A |
| Southbound Connect Sells | Alibaba, Hong Kong Tracker ETF (large), Minimax (small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | 0.63 |
| Communication Services | 11 | -1.27 |
| Consumer Discretionary | 28 | 2.11 |
| Consumer Staples | 13 | 0.04 |
| Energy | 6 | -0.68 |
| Financials | 25 | -0.02 |
| Health Care | 16 | 0.97 |
| Industrials | 22 | 0.41 |
| Information Technology | 12 | 3.28 |
| Materials | 14 | 1.1 |
| Real Estate | 7 | 1.59 |
| Utilities | 11 | 0.08 |
| Mainland China Listed | 386 | 1.37 |
| Communication Services | 8 | 0.93 |
| Consumer Discretionary | 26 | 0.57 |
| Consumer Staples | 19 | -0.07 |
| Energy | 12 | 0.2 |
| Financials | 64 | 0.37 |
| Health Care | 31 | 0.52 |
| Industrials | 58 | 0.77 |
| Information Technology | 95 | 3 |
| Materials | 52 | 1.13 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -1.6 |
| Alibaba HK | 9988 HK Equity | 4 |
| JD.com HK | 9618 HK Equity | 0 |
| NetEase HK | 9999 HK Equity | -0.8 |
| Yum China HK | 9987 HK Equity | -1 |
| Baozun HK | 9991 HK Equity | 2 |
| Baidu HK | 9888 HK Equity | -0.2 |
| Autohome HK | 2518 HK Equity | -1.8 |
| Bilibili HK | 9626 HK Equity | 1.9 |
| Trip.com HK | 9961 HK Equity | 0.8 |
| EDU HK | 9901 HK Equity | -1.1 |
| Xpeng HK | 9868 HK Equity | 2.1 |
| Weibo HK | 9898 HK Equity | 0.5 |
| Li Auto HK | 2015 HK Equity | 1.5 |
| Nio Auto HK | 9866 HK Equity | 3.9 |
| Zhihu HK | 2390 HK Equity | 4.8 |
| KE HK | 2423 HK Equity | 2.1 |
| Tencent Music Entertainment HK | 1698 HK Equity | 0.7 |
| Meituan HK | 3690 HK Equity | 0.4 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -1.6 |
| ALIBABA GROUP HOLDING LTD | 4 |
| BAIDU INC-CLASS A-HKD | -0.2 |
| Z AI CO LTD | 5.4 |
| MINIMAX GROUP INC | 18.9 |
| LENOVO GROUP LTD | 9.5 |
| SEMICONDUCTOR MANUFACTURI-H | 4.4 |
| AIA GROUP LTD | -0.8 |
| AGRICULTURAL BANK OF CHINA-H | -0.3 |
| HUA HONG GRACE SEMICONDUCTOR | 4.8 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | 3.4 |
| EOPTOLINK TECHNOLOGY INC L-A | 4.9 |
| CHINA JUSHI CO LTD -A | -4.5 |
| GIGADEVICE SEMICONDUCTO-CL A | 4.9 |
| HENGTONG OPTIC-ELECTRIC CO-A | 1.5 |
| CXMT CORP-A | 3.9 |
| SUZHOU DONGSHAN PRECISION-A | 1.4 |
| CAMBRICON TECHNOLOGIES-A | 0.6 |
| SUZHOU TFC OPTICAL COMMUNI-A | 2.5 |
| SHENGYI TECHNOLOGY CO LTD -A | -1.4 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.70 versus 6.71 yesterday
- CNY per EUR 7.68 versus 7.70 yesterday
- Yield on 10-Year Government Bond 1.68% versus 1.69% yesterday
- Yield on 10-Year China Development Bank Bond 1.76% versus 1.76% yesterday
- Copper Price 1.31%
- Steel Price -0.77%
