Growth Go-Go As Shanghai Loosens Real Estate Rules

Key News

Asian equities had a strong day, led by Taiwan and South Korea (again), as growth stocks performed well regionally.

The renminbi appreciated (again) versus the US dollar to a new 52-week high of 6.86. Where art thou Western media articles on the renminbi’s bull market? Good China news isn’t fit to print, I suppose. Anyone notice that President Trump didn’t mention China in the State of the Union? Another sign on the trajectory of US-China relations IMO.

Let’s not bury the lead, as Real estate stocks in both Hong Kong and Mainland China were top performers today, following the release today of the “Notice on Further Optimizing and Adjusting the Real Estate Policy of Shanghai,” which reduces housing purchase restrictions for both Shanghai resident permit holders and non-residents. We should expect other cities to follow Shanghai's lead. It should also be good news for the US-listed online real estate agent KE Holdings.

Also supporting today’s strong move in real estate is a consultation on the inclusion of Hong Kong-listed REITs in the Southbound Stock Connect. Hong Kong’s government announced that the real estate transaction stamp tax on luxury homes will increase to 6.5% from 4.25%. Remember, most real estate stocks have been kicked out of indices, with just 13 stocks included in MSCI China today, which is why we prefer their bonds as a rebound play.

Hong Kong had a decent day, though volumes were a touch light. Hong Kong’s most heavily traded by value were Tencent (+0.48%), with strong call option activity, followed by Alibaba (+0.20%). Remember, Tencent and Alibaba, both net buys from Mainland investors via Southbound Stock Connect, make up nearly 30% of the MSCI China Index, which is why they are so important to professional investors globally.

HSBC gained +5.47% following its mid-day better-than-expected financial results, though remember the stock isn’t part of MSCI China due to its Hong Kong domicile, as MSCI Hong Kong is part of developed markets.

Trip.com gained +1.72% in advance of today’s Q4 financial results post-US close. I am curious to hear management address Chinese New Year domestic travel and the regulatory oversight of its hotel-booking monopoly.

Baidu fell -0.62% in advance of tomorrow’s Q4 results, as core China search is expected to be weak, though investors will be focused on Ernie Bot large language model (LLM) adoption, progress in the robo-taxi business Apollo Go, and the spinoff of its AI Chip unit Kunlun.  

Southbound Stock Connect had a rare net sell day, with -$518 million driven by outflow in the Hong Kong Tracker ETF. Non-ferrous metal stocks, which include precious metals and mining stocks, had a strong day in both Hong Kong and Mainland China. Mainland China had another strong day on good volumes, driven by tech hardware, semiconductors, steel, and chemicals, which outperformed. Meanwhile, oil & gas and coal lagged.

Both Shanghai and Shenzhen are at resistance with a potential breakout looming. Mainland China is just 14% of MSCI China, which makes it non-existent for MSCI-benchmarked professional investors, though that doesn’t mean you shouldn’t care! In the 2026 Hong Kong budget speech, Financial Secretary Paul Chan Mo-po stated that GDP growth should be between 2.5% and 3.5%, following last year’s 3.5%.

President Xi met with German Chancellor Merz in Beijing today. Chatter from the US Trade Representative is that they will continue their Section 301 investigation to ensure China adheres to its trade commitments. Feasibly, this could be used as a trade-negotiating tactic, though I doubt they’ll screw up their boss’s end-of-March China trip.

The Wall Street Journal has an interesting article titled “The Tax Nerd Who Bet His Life Savings Against DOGE”. While it was not the article's intention, it shows the extent of US government spending and the inability to stop it.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	0.7%
Hang Seng Tech	HSTECH Index	-0.2%
Hong Kong Turnover	HKTurn Index	-5.7%
Hong Kong Short Sale Turnover	HKSST Index	-4.4%
Short Turnover as a % of Hong Kong Turnover	N/A	17.3%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	-518.10
China (Shanghai)	SHCOMP Index	0.7%
China (Shenzhen)	SZCOMP Index	1.2%
China (STAR Board)	Star50 Index	0.5%
Mainland Turnover	.chturn Index	11.7%
Japan	NKY Index	2.2%
India	SENSEX Index	0.1%
Indonesia	JCI Index	0.5%
Malaysia	FBMKLCI Index	-0.4%
Pakistan	KSE100 Index	-1.3%
Philippines	PCOMP Index	1.1%
South Korea	KOSPI Index	1.9%
Taiwan	TWSE Index	2.1%
Thailand	SET Index	1.7%
Singapore	STI Index	-0.3%
Australia	AS51 Index	1.2%
Vietnam	VNINDEX Index	-0.4%

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	91%	131%
Advancing Stocks	241	3492
Declining Stocks	238	1538
Outperforming Factors	Large Cap, Value, Momentum	Momentum, Liquidity, Growth
Underperforming Factors	Growth, Quality, Low Volatility	Dividend Yield, Value, Low Volatility
Top Sectors	Real Estate, Materials, Financials	Materials, Real Estate, Tech
Bottom Sectors	Utilities, Industrials, Tech	Communication
Top Subsectors	Construction Materials, Steel, Non Ferrous Metal	Base Metals, Steel, Marine
Bottom Subsectors	Paper/Packing, Semis, Household/Personal Products	Computer Hardware, Internet, Cultural Media
Southbound Connect Buys	Alibaba, Tencent, Xiaomi (Moderate), SMIC, YOFC (Small)
Southbound Connect Sells	HK Tracker ETF (Very Large), HS China Enterprise ETF (Large), COSCO Ship Energy (Light), CNOOC (Tiny)

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	165	0.4
Communication Services	11	0.27
Consumer Discretionary	28	0.31
Consumer Staples	13	0.31
Energy	6	0.11
Financials	25	0.42
Health Care	16	-0.08
Industrials	22	-0.24
Information Technology	12	-0.16
Materials	14	2.69
Real Estate	7	3.15
Utilities	11	-0.67
Mainland China Listed	386	0.98
Communication Services	8	-1.31
Consumer Discretionary	26	0.08
Consumer Staples	19	1.1
Energy	12	0.78
Financials	64	0.18
Health Care	31	0.52
Industrials	58	0.83
Information Technology	95	1.42
Materials	52	2.53

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	0.5
Alibaba HK	9988 HK Equity	0.2
JD.com HK	9618 HK Equity	0.5
NetEase HK	9999 HK Equity	-0.6
Yum China HK	9987 HK Equity	0.4
Baozun HK	9991 HK Equity	1.2
Baidu HK	9888 HK Equity	-0.6
Autohome HK	2518 HK Equity	-0.2
Bilibili HK	9626 HK Equity	-0.9
Trip.com HK	9961 HK Equity	1.7
EDU HK	9901 HK Equity	-2
Xpeng HK	9868 HK Equity	0.6
Weibo HK	9898 HK Equity	1.1
Li Auto HK	2015 HK Equity	0.1
Nio Auto HK	9866 HK Equity	-2.6
Zhihu HK	2390 HK Equity	2.1
KE HK	2423 HK Equity	5.6
Tencent Music Entertainment HK	1698 HK Equity	1.1
Meituan HK	3690 HK Equity	1.6

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
TENCENT HOLDINGS LTD	0.5
ALIBABA GROUP HOLDING LTD	0.2
HSBC HOLDINGS PLC	5.5
XIAOMI CORP-CLASS B	-0.4
MEITUAN-CLASS B	1.6
SEMICONDUCTOR MANUFACTURI-H	0.6
YANGTZE OPTICAL FIBRE AND-H	1.6
POP MART INTERNATIONAL GROUP	-0.4
MINIMAX GROUP INC	-14.4
PING AN INSURANCE GROUP CO-H	1.9

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
VISUAL CHINA GROUP CO LTD-A	-1.5
SHANTUI CONSTRUCTION MACHI-A	0.2
VICTORY GIANT TECHNOLOGY -A	9.3
CHINA NORTHERN RARE EARTH -A	10
EOPTOLINK TECHNOLOGY INC L-A	2.7
ZHONGJI INNOLIGHT CO LTD-A	2.2
ZIJIN MINING GROUP CO LTD-A	0.8
SUZHOU TFC OPTICAL COMMUNI-A	-2.7
HGTECH CO LTD-A	4.5
FOXCONN INDUSTRIAL INTERNE-A	3.6

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 6.86 versus 6.88 yesterday
• CNY per EUR 8.09 versus 8.10 yesterday
• Yield on 10-Year Government Bond 1.82% versus 1.80% yesterday
• Yield on 10-Year China Development 1.94% versus 1.92% yesterday
• Copper Price +0.50%
• Steel Price +1.09%