Internet Giants Gain As Asia’s AI Supply Chain Shows Weakness
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Key News
Asian equities were led lower by AI supply chain and picks-and-shovels stocks in Korea, Taiwan, Japan, and China’s STAR Board, while Thailand was closed for Asarnha Bucha Day, which celebrates Buddha’s first sermon.
Both Hong Kong and Mainland China were largely higher, except for AI supply chain sub-sectors, such as semiconductors, semiconductor equipment, electrical equipment, and electronic components. All of these subsectors were significantly lower overnight, which is eerily similar to their Korean and Taiwanese peers. Unlike their regional peers’ drawdown, the weakness in Mainland China and Hong Kong's AI supply chain was attributed to profit-taking, after yesterday’s monster IPO by CXMT. Chinese stocks are so underowned that it’s hard to imagine global investors are to blame for the weakness. Chinese investors likely have some exposure to Korea and Taiwan, though I wouldn’t think it is a significant figure.
Reuters has reported that Shanghai Aishengna Electronic Technology Group Co. has developed a deep ultraviolet lithography machine (DUV), which should be viewed as a positive for domestic producers, though one would assume such a DUV machine would be years from competing with ASML.
Hong Kong-listed internet stocks were largely higher, led by Alibaba, which was up by +0.90% and was Hong Kong’s most heavily traded stock by value, and Tencent, which was up +0.95%, despite both stocks being sold by Mainland investors via Southbound Stock Connect. Hong Kong’s resilience is an eye-opener, as last week’s webinar on China momentum (STAR Board, i.e Onshore Semiconductors) versus mean reversion (China internet) is leading to the latter's recent outperformance.
Z.ai fell by -18.66% following rival Moonshot’s Kimi 3 AI LLM launch. It is worth noting that Alibaba, which owns nearly 5% of CXMT, also owns 36% of Moonshot, which is looking at raising private capital at a $50 billion valuation in advance of a Hong Kong IPO later this year.
Autohome fell by -2.43% after it announced a $400 million share buyback that takes effect today. Banks were firm across both markets, as Mainland China had a decent day, except for the AI supply chain sub-sectors, which saw a strong downdraft. Mainland-listed domestic equity ETFs saw net inflows, though the National Team’s favored ETFs had mixed volumes.
In response to US and EU accusations, the Ministry of Commerce released a 10,000-word document on China’s “overcapacity” issue, followed by a press conference and Q&A with reporters. If I have trouble sleeping tonight, I’ll try to read a few pages of the document, though this is likely posturing and jockeying for position from both sides going into the Trump-Xi meeting in September.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.4% |
| Hang Seng Tech | HSTECH Index | 0.6% |
| Hong Kong Turnover | HKTurn Index | 19.1% |
| Hong Kong Short Sale Turnover | HKSST Index | -5.6% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 0.2 |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -318.59 |
| China (Shanghai) | SHCOMP Index | -1.2% |
| China (Shenzhen) | SZCOMP Index | -3.2% |
| China (STAR Board) | Star50 Index | -6.3% |
| Mainland Turnover | .chturn Index | 2.2% |
| Japan | NKY Index | -4% |
| India | SENSEX Index | -0.1% |
| Indonesia | JCI Index | -0.9% |
| Malaysia | FBMKLCI Index | 0% |
| Pakistan | KSE100 Index | -0.4% |
| Philippines | PCOMP Index | -0.2% |
| South Korea | KOSPI Index | -10.8% |
| Taiwan | TWSE Index | -4.7% |
| Thailand | SET Index | -1.2% |
| Singapore | STI Index | -0.1% |
| Australia | AS51 Index | 0.6% |
| Vietnam | VNINDEX Index | -0.0005 |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 91% | 83% |
| Advancing Stocks | 245 | 2372 |
| Declining Stocks | 254 | 2610 |
| Outperforming Factors | Low Volatility, Dividend Yield, Quality | Low Volatility, Dividend Yield, Value |
| Underperforming Factors | Growth, Liquidity, Momentum | Momentum, Liquidity, Growth |
| Top Sectors | Staples, Discretionary, Communication | Real Estate, Staples, Discretionary |
| Bottom Sectors | Industrials, Tech, Materials | Tech, Materials, Industrials |
| Top Subsectors | Food/Beverage, Commercial/Professional Services, Auto | Soft Drink, Liquor, Education |
| Bottom Subsectors | Semis, Tech Hardware, Electrical Equipment | Communication Equipment, Electronic Components, Semis |
| Southbound Connect Buys | Xiaomi, Z AI (Small) | N/A |
| Southbound Connect Sells | Hua Hong Semi, SMIC, Tencent, YOFC (Moderate), Alibaba, Gigadevice, KB Laminates (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | 0.55 |
| Communication Services | 11 | 1.02 |
| Consumer Discretionary | 28 | 1.09 |
| Consumer Staples | 13 | 2.28 |
| Energy | 6 | -0.14 |
| Financials | 25 | 0.99 |
| Health Care | 16 | -0.44 |
| Industrials | 22 | -1.91 |
| Information Technology | 12 | -1.44 |
| Materials | 14 | -1.42 |
| Real Estate | 7 | 1 |
| Utilities | 11 | 0.92 |
| Mainland China Listed | 386 | -2.7 |
| Communication Services | 8 | 0.33 |
| Consumer Discretionary | 26 | 1.37 |
| Consumer Staples | 19 | 2.07 |
| Energy | 12 | -0.6 |
| Financials | 64 | 0.61 |
| Health Care | 31 | -0.61 |
| Industrials | 58 | -1.64 |
| Information Technology | 95 | -8.12 |
| Materials | 52 | -1.82 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 0.9 |
| Alibaba HK | 9988 HK Equity | 0.9 |
| JD.com HK | 9618 HK Equity | 4.1 |
| NetEase HK | 9999 HK Equity | 4.5 |
| Yum China HK | 9987 HK Equity | 3.8 |
| Baozun HK | 9991 HK Equity | 3 |
| Baidu HK | 9888 HK Equity | -2.6 |
| Autohome HK | 2518 HK Equity | -2.4 |
| Bilibili HK | 9626 HK Equity | 1 |
| Trip.com HK | 9961 HK Equity | -1.8 |
| EDU HK | 9901 HK Equity | 0.6 |
| Xpeng HK | 9868 HK Equity | 1.2 |
| Weibo HK | 9898 HK Equity | 0.2 |
| Li Auto HK | 2015 HK Equity | 3.3 |
| Nio Auto HK | 9866 HK Equity | 2.1 |
| Zhihu HK | 2390 HK Equity | 2.1 |
| KE HK | 2423 HK Equity | 0.3 |
| Tencent Music Entertainment HK | 1698 HK Equity | 2.9 |
| Meituan HK | 3690 HK Equity | 1.1 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | 0.9 |
| SEMICONDUCTOR MANUFACTURI-H | -2.2 |
| TENCENT HOLDINGS LTD | 0.9 |
| Z AI CO LTD | -18.7 |
| XIAOMI CORP-CLASS B | 2 |
| HUA HONG GRACE SEMICONDUCTOR | -6.9 |
| MEITUAN-CLASS B | 1.1 |
| CHINA CONSTRUCTION BANK-H | 1.6 |
| KINGBOARD LAMINATES HLDG LTD | -16 |
| YANGTZE OPTICAL FIBRE AND-H | -13 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -15.7 |
| CXMT CORP | -4.1 |
| EOPTOLINK TECHNOLOGY INC L-A | -17.1 |
| UNISPLENDOUR CORP LTD-A | 0 |
| GIGADEVICE SEMICONDUCTO-CL A | -10 |
| CAMBRICON TECHNOLOGIES-A | -9.1 |
| CONTEMPORARY AMPEREX TECHN-A | -2.3 |
| SUZHOU DONGSHAN PRECISION-A | -10 |
| TONGFU MICROELECTRONIC CO-A | -10 |
| MONTAGE TECHNOLOGY CO LTD-A | -9.4 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.76 versus 6.77 yesterday
- CNY per EUR 7.69 versus 7.70 yesterday
- Yield on 10-Year Government Bond 1.73% versys 1.73% yesterday
- Yield on 10-Year China Development Bank Bond 1.79% versus 1.79% yesterday
- Copper Price +0.10%
- Steel Price -0.55%
