Icarus-Like Momentum Stocks Feel The Heat of Profit Taking

Key News

Asian equities were largely higher in advance of Samsung’s Q2 financial results tomorrow, whose profits are expected to increase 18X year-over-year (YoY), though the emphasis will be on their outlook, as memory chip prices rise. Overnight, there was chatter that Intel will raise prices on several products, while Nvidia has run into issues on the latest "Kyber rack" server cabinet rollout.

The rotation from momentum-driven AI picks and shovels that started last week continued, as Hong Kong-listed internet and pharmaceutical stocks outperformed. Meanwhile, technology hardware underperformed in both Hong Kong and Mainland China, which weighed on the Shenzhen Component Index, which fell -1.29%. Investors appear to think high chip prices will weigh on future demand for computers and mobile phones, though semiconductors managed to hold up, as the Science & Technology (STAR) Board gained +1.04%. Hong Kong was led higher by Tencent, which gained +4.82%. Hong Kong’s most heavily traded stocks by value on high volume, as AI integration fueled optimism as Mainland investors bought a healthy $317 million worth of shares via Southbound Stock Connect.

Mainland investors were very active in buying Hong Kong today, with $2.62 billion worth of net buying, as the Hong Kong Tracker ETF experienced a very large net buy. The strong buying might explain the 22% of volume being short volume, as short sellers scrambled to cover their positions.

Alibaba gained +1.97%, as the US courts are looking into the US Defense Department’s charge that the company has links to the Chinese military. Alibaba had $96 million worth of net buying from Mainland investors after several months of net selling. It was hard not to notice that several momentum high flyers fell like Icarus, including Kingboard Laminates, which fell -12.55%, Knowledge Atlas, which fell -14.67%, and GigaDevice Semiconductor, which fell -4.47%.

Biren Technology fell -5.38%, after announcing that it will raise $901 million by selling 153 million shares via a private placement, i.e. dilution. The lock-up expiration was a factor in the technology weakness.

Mainland China bounced around the room in a volatile session as technology hardware’s electronic equipment and communication equipment were hit with another round of profit-taking, though semiconductors held up. Banks and consumer staples gave today a value bias.It was a fairly quiet night overall!

The “private” Rating Dog China Services purchasing managers' index (PMI), a survey conducted by S&P, was 54.1 versus May’s 54.4 and expectations of 53.0, led by “export growth, sustained employment growth and the return of selling prices to expansion territory” according to the release.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	1.1%
Hang Seng Tech	HSTECH Index	0.9%
Hong Kong Turnover	HKTurn Index	3.2%
Hong Kong Short Sale Turnover	HKSST Index	15.6%
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	-0.1%
China (Shenzhen)	SZCOMP Index	-1.3%
China (STAR Board)	Star50 Index	1%
Mainland Turnover	.chturn Index	-2.9%
Japan	NKY Index	0%
India	SENSEX Index	0.7%
Indonesia	JCI Index	0.7%
Malaysia	FBMKLCI Index	0.3%
Pakistan	KSE100 Index	1%
Philippines	PCOMP Index	0.6%
South Korea	KOSPI Index	-0.5%
Taiwan	TWSE Index	-0.5%
Thailand	SET Index	0.3%
Singapore	STI Index	0.3%
Australia	AS51 Index	-0.2%
Vietnam	VNINDEX Index	-0.0005

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	115	129
Advancing Stocks	302	1845
Declining Stocks	204	3203
Outperforming Factors	ESG Score, Quality, Value	Low Volatility, Dividend Yield, Value
Underperforming Factors	None	Liquidity, Momentum, Growth
Top Sectors	Communication Services, Healthcare, Consumer Staples	Energy, Consumer Staples, Financials
Bottom Sectors	Information Technology, Utilities	Information Technology, Materials, Consumer Discretionary
Top Subsectors	Aerospace, Consumer Staples Distribution, Coal	Coal, Motorcycles, Computer Hardware
Bottom Subsectors	Technology Hardware, Semiconductors, Construction Materials	Building Materials, Internet, Communication Equipment
Southbound Connect Buys	Hong Kong Tracker ETF (Massive, Tencent (Very Large), Hang Seng China Enterprise ETF, Alibaba, Knowledge Atlas, Hua Hong Semiconductor (Small)	N/A
Southbound Connect Sells	KB Laminates, Kingboard, SMIC, YOFC (Large)	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	165	0.96
Communication Services	11	0.09
Consumer Discretionary	28	2.5
Consumer Staples	13	2.02
Energy	6	1.81
Financials	25	0.9
Health Care	16	4.76
Industrials	22	-0.18
Information Technology	12	-4.4
Materials	14	1.64
Real Estate	7	3.41
Utilities	11	0.55
Mainland China Listed	386	-2.96
Communication Services	8	1.3
Consumer Discretionary	26	0.76
Consumer Staples	19	0.2
Energy	12	0.43
Financials	64	-0.54
Health Care	31	0.4
Industrials	58	-1.27
Information Technology	95	-7.62
Materials	52	0.23

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	4.8
Alibaba HK	9988 HK Equity	2
JD.com HK	9618 HK Equity	1.2
NetEase HK	9999 HK Equity	1.5
Yum China HK	9987 HK Equity	-0.5
Baozun HK	9991 HK Equity	0
Baidu HK	9888 HK Equity	-0.4
Autohome HK	2518 HK Equity	-3.8
Bilibili HK	9626 HK Equity	2.5
Trip.com HK	9961 HK Equity	0.4
EDU HK	9901 HK Equity	1.2
Xpeng HK	9868 HK Equity	2.2
Weibo HK	9898 HK Equity	1.5
Li Auto HK	2015 HK Equity	-2.3
Nio Auto HK	9866 HK Equity	0.7
Zhihu HK	2390 HK Equity	0
KE HK	2423 HK Equity	1.1
Tencent Music Entertainment HK	1698 HK Equity	0.5
Meituan HK	3690 HK Equity	4.7

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
TENCENT HOLDINGS LTD	4.8
SEMICONDUCTOR MANUFACTURI-H	-2.4
KINGBOARD LAMINATES HLDG LTD	-12.6
HUA HONG GRACE SEMICONDUCTOR	0
YANGTZE OPTICAL FIBRE AND-H	-14.8
ALIBABA GROUP HOLDING LTD	2
KINGBOARD HOLDINGS LTD	-9.6
KNOWLEDGE ATLAS TECHNOLOGY-H	-14.7
KUAISHOU TECHNOLOGY	8
MEITUAN-CLASS B	4.7

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
GIGADEVICE SEMICONDUCTO-CL A	-3.5
ZHONGJI INNOLIGHT CO LTD-A	-1.5
BOE TECHNOLOGY GROUP CO LT-A	-7.4
EOPTOLINK TECHNOLOGY INC L-A	-3.6
SHENZHEN LONGSYS ELECTRONI-A	10.3
JCET GROUP CO LTD-A	4.6
BIWIN STORAGE TECHNOLOGY C-A	6.3
SHENZHEN TECHWINSEMI TECHN-A	6
SUZHOU DONGSHAN PRECISION-A	-3.6
HENGTONG OPTIC-ELECTRIC CO-A	-5.4

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 6.80 versus 6.78 Friday
• CNY per EUR 7.76 versus 7.76 Friday
• Yield on 10-Year Government Bond 1.74% versus 1.75% Friday
• Yield on 10-Year China Development Bank Bond 1.82% versus 1.79% Friday
• Copper Price 0.24%
• Steel Price 0.29%