Investors Recognize Internet Stocks As AI Plays
6 Min. Read Time
Key News
Asian equities cheered easing Middle East tensions, as the US dollar weakened and Japan outperformed post-holiday. CNY rallied to another 52-week high versus the US dollar, reaching the psychologically important, big round number of 6.80 CNY per USD.
Hong Kong and Mainland China saw strong volumes and good breadth, led by growth stocks. Hong Kong-listed internet stocks joined the usual AI plays in technology hardware and semiconductors, broadening the AI trade from just "picks and shovels".
What catalyzed this broadening? Was it the Financial Times article on China Integrated Circuit Industry Investment Fund investing in DeepSeek at a $45 billion valuation? It is hard to say. We reported a week ago that both Tencent, which was mentioned in the article, and Alibaba, which was not mentioned in the article, are expected to invest in the company. Could it have been our mentioning of Alibaba's filing about a potential spin-off of its T-Head chip design unit yesterday?That is highly unlikely. Rather, overnight, a Mainland media source called out cloud providers as big AI beneficiaries, which is a more likely culprit.
Chinese companies in the internet space have not been given enough credit for their AI achievements, in our opinion. These achievements include the roll out of world-class large language models (LLMs), expanding cloud services, and investing in in-house chip design. It looks like investors are finally taking notice.
Tencent gained +3.11% and was Hong Kong's most heavily traded stock by value. It also had several large call option trades. Tencent's Hy3 AI model has seen a strong uptake in usage over the last two weeks. Kuaishou gained +7.56%, and was the 5th-most heavily-traded stock in Hong Kong. Finally, Kuaishou appears to be getting the AI "TLC" as investors woke up to its K-Ling AI video generation platform. Meanwhile, Baidu gained +4.33% as the company has previously stated it will spin off its Kunlun chip design unit.
It is worth noting that Tencent, Alibaba, and Hong Kong-listed stocks in general were a net sell by Mainland investors via the Southbound Stock Connect. Mainland investors may have been betting on this shift, and took some profits overnight.
Oil & gas were hit hard in both markets, along with battery storage giant CATL, which fell -0.60% in Hong Kong and -1.82% in Mainland China. Meanwhile, Midea fell -2.74% after announcing convertible bond issuance, i.e., dilution. The Shanghai, STAR Board, and Shenzhen Composite have broken out above resistance levels, though the Hang Seng Tech has a great deal of catching up to do.
April's foreign reserves grew faster than anticipated, reaching $3.41 trillion, versus May's $3.34 trillion, and expectations of $3.37 trillion. Out of the "Magnificent 7" stocks, China's government has enough cash to buy Meta ($1.5 trillion market cap), Tesla ($1.5 trillion), Amazon ($3.0 trillion), and Microsoft ($3.1trillion).
Premier Li met with Republican Senator Daines of Montana today, along with four other Senators. China Daily reported Premier Li as having quoted an ancient Chinese proverb: "All living things grow together without harming one another". Meanwhile, China's Foreign Minister Wang Yi said that China and the US should seek "harmony without uniformity" and become "partners rather than rivals". Wang Yi also said that "China will not follow the obsolete model of a country seeking hegemony when growing stronger, and will remain committed to peaceful development and the path of socialism with Chinese characteristics". That line stood out to me.
The Ministry of Foreign Affairs spokespeople kept their cards close to their chest when reporters asked them about the Wall Street Journal's report that the US and China will kick off a high-level dialogue on AI next week.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 1.6% |
| Hang Seng Tech | HSTECH Index | 3.1% |
| Hong Kong Turnover | HKTurn Index | 2.5% |
| Hong Kong Short Sale Turnover | HKSST Index | -6% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 14.4% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -612.62 |
| China (Shanghai) | SHCOMP Index | 0.5% |
| China (Shenzhen) | SZCOMP Index | 1.2% |
| China (STAR Board) | Star50 Index | 1.3% |
| Mainland Turnover | .chturn Index | -2.5% |
| Japan | NKY Index | 5.6% |
| India | SENSEX Index | -0.1% |
| Indonesia | JCI Index | 1.2% |
| Malaysia | FBMKLCI Index | 0.1% |
| Pakistan | KSE100 Index | 0.7% |
| Philippines | PCOMP Index | 1.1% |
| South Korea | KOSPI Index | 1.4% |
| Taiwan | TWSE Index | 1.9% |
| Thailand | SET Index | -0.6% |
| Singapore | STI Index | 0.3% |
| Australia | AS51 Index | 1% |
| Vietnam | VNINDEX Index | 0.9% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 121 | 151 |
| Advancing Stocks | 409 | 3176 |
| Declining Stocks | 101 | 1852 |
| Outperforming Factors | Growth, Liquidity, Value | Liquidity, Growth, Momentum |
| Underperforming Factors | Value | Low Volatility, EPS Revision, Dividend Yield |
| Top Sectors | Discretionary, Communication, Tech | Tech, Communication, Utilities |
| Bottom Sectors | Energy | Energy, Materials |
| Top Subsectors | Semis, Commercial/Professional Services, Media/Entertainment | Communication Equipment, Electronic Components, Cultural Media, |
| Bottom Subsectors | Petrochemical, Coal, Chemical | Coal, Oil/Gas, Petrochemical |
| Southbound Connect Buys | SMIC, CIG, Deepexi Technologies | N/A |
| Southbound Connect Sells | Tencent (Very Large), SMIC (Large), Alibaba, CNOOC, Hua Hong Semi (Moderate), Xiaomi (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 164 | 2.21 |
| Communication Services | 11 | 3.3 |
| Consumer Discretionary | 28 | 3.48 |
| Consumer Staples | 12 | 1.21 |
| Energy | 6 | -5.67 |
| Financials | 25 | 1.09 |
| Health Care | 16 | 2.01 |
| Industrials | 19 | 0.6 |
| Information Technology | 15 | 2.92 |
| Materials | 14 | 2.02 |
| Real Estate | 1 | 1.26 |
| Utilities | 6 | 0.91 |
| Mainland China Listed | 11 | 0.74 |
| Communication Services | 11 | 2.46 |
| Consumer Discretionary | 26 | 0.43 |
| Consumer Staples | 18 | 0.02 |
| Energy | 11 | -3.63 |
| Financials | 64 | 0.07 |
| Health Care | 29 | 0.39 |
| Industrials | 60 | 0.48 |
| Information Technology | 113 | 2.69 |
| Materials | 58 | -0.7 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 3.1 |
| Alibaba HK | 9988 HK Equity | 5 |
| JD.com HK | 9618 HK Equity | 2.2 |
| NetEase HK | 9999 HK Equity | 2.3 |
| Yum China HK | 9987 HK Equity | 0.6 |
| Baozun HK | 9991 HK Equity | 0.4 |
| Baidu HK | 9888 HK Equity | 4.3 |
| Autohome HK | 2518 HK Equity | 5.9 |
| Bilibili HK | 9626 HK Equity | 3.9 |
| Trip.com HK | 9961 HK Equity | 3.1 |
| EDU HK | 9901 HK Equity | 0.3 |
| Xpeng HK | 9868 HK Equity | 3.3 |
| Weibo HK | 9898 HK Equity | 1.4 |
| Li Auto HK | 2015 HK Equity | 3.1 |
| Nio Auto HK | 9866 HK Equity | 2.6 |
| Zhihu HK | 2390 HK Equity | 0.2 |
| KE HK | 2423 HK Equity | 0.5 |
| Tencent Music Entertainment HK | 1698 HK Equity | 4.8 |
| Meituan HK | 3690 HK Equity | 2.1 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | 3.1 |
| ALIBABA GROUP HOLDING LTD | 5 |
| SEMICONDUCTOR MANUFACTURI-H | 5.7 |
| HUA HONG SEMICONDUCTOR LTD-H | 9.3 |
| KUAISHOU TECHNOLOGY | 7.6 |
| CNOOC LTD-H | -1.8 |
| YANGTZE OPTICAL FIBRE AND-H | -4.1 |
| CONTEMPORARY AMPEREX TECHN-H | 2.1 |
| POP MART INTERNATIONAL GROUP | -1.8 |
| XIAOMI CORP-CLASS B | 1.2 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| EOPTOLINK TECHNOLOGY INC L-A | -0.6 |
| ZHONGJI INNOLIGHT CO LTD-A | -0.2 |
| CAMBRICON TECHNOLOGIES-A | 7.4 |
| VICTORY GIANT TECHNOLOGY -A | -0.8 |
| SUZHOU TFC OPTICAL COMMUNI-A | 2.8 |
| MONTAGE TECHNOLOGY CO LTD-A | 14.8 |
| GIGADEVICE SEMICONDUCTO-CL A | 1.7 |
| CONTEMPORARY AMPEREX TECHN-A | 5.5 |
| SUZHOU DONGSHAN PRECISION-A | 2.8 |
| HYGON INFORMATION TECHNOLO-A | 16.3 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.80 versus 6.81 yesterday
- CNY per EUR 8.00 versus 8.02 yesterday
- Yield on 10-Year Government Bond 1.76% versus 1.77% yesterday
- Yield on 10-Year China Development Bank Bond 1.85% versus 1.86% yesterday
- Copper Price +0.54%
- Steel Price +0.59%
