Mainland Investors Buy Dip On Earnings Unease
5 Min. Read Time
Key News
Asian equities were mixed overnight as Korea and Thailand outperformed, while Hong Kong's Hang Seng Tech Index and Pakistan underperformed.
Internet stocks were lower overnight after NetEase's earnings miss from yesterday. Meanwhile, as most of the top internet companies will report Q4 earnings in March, there was a lack of positive catalysts to support prices. Also, a Moody's outlook downgrade for Meituan on intense competition weighed on the large cap name overnight, though the report is backward-looking and we believe that the worst could be over for instant commerce competition squeezing margins, and that could be reflected in Q4 earnings.
Hong Kong trended lower throughout the session last night, while Mainland China's Shanghai and Shenzhen saw modest gains. There was a slight value tilt in both markets, as energy names outperformed. semiconductor stocks were mixed, though recent Hong Kong IPO Biren managed to gain +10%, following Korean chipmakers higher. Travel names were clipped despite China heading into the Lunar New Year holiday next week, as Trip.com fell -4%.
Tomorrow will be the last day for Stock Connect before the week-long Lunar (Chinese New Year) holiday. Mainland investors were net buyers of Hong Kong-listed stocks overnight before they go on vacation, taking advantage of weakness, to the tune of nearly $600 million. They snapped up shares of internet and technology stocks, in particular, as Tencent, Xiaomi, and Meituan were the top net buys overnight. This coincided with overall weakness in the Hang Seng Tech Index and internet stocks in general.
Real estate developers were higher overnight on news that Vanke will be raising RMB 20 billion through debt and equity offerings. The intended raise comes after the beleaguered developer secured state backing to fundraise once again.
The government's campaign to curb overcapacity and trigger inflation reached a key turning point and milestone overnight. Automakers will now be restricted by law from selling vehicles at below cost. BYD declined less than 1% overnight, while electric vehicle ecosystem and auto stocks were mostly flat to slightly lower, as the rule was mostly expected by investors.
Shoutout to Tony Peng’s Substack, "Recode China AI", for the original deep dive on China's AI race. We read his full report China’s Three Kingdoms in AI: ByteDance, Alibaba, and Tencent Battle for Their Destiny from yesteday and think our subscribers should read it, too! We provide a summary below.
China’s AI race is essentially coalescing into a three-way battle between ByteDance, Alibaba, and Tencent. ByteDance leads on consumer scale with Doubao, moving fast on product iteration and global expansion. Tencent, initially cautious, has reorganized aggressively, integrated DeepSeek, and is leveraging its vast ecosystem, which includes WeChat, QQ, Docs, Meeting, to accelerate its Yuanbao AI model. Alibaba is betting on a full-stack strategy, which includes Qwen models, Alibaba Cloud, and self-developed chips, using open source to drive developer adoption and cloud growth. The real competition is no longer just model quality, but compute scale, proprietary data, distribution, and internal coordination, which are advantages that favor incumbents and pressure startups. The market has yet to pick winners in this, and there will likely be multiple. Meanwhile, there are more specialized models, like Kuaishou's video creator K-Ling and NetEase's AI for gaming. This is why we believe in a basket approach to China AI!
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -0.9% |
| Hang Seng Tech | HSTECH Index | -1.7% |
| Hong Kong Turnover | HKTurn Index | 9.9% |
| Hong Kong Short Sale Turnover | HKSST Index | -1.2% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 14% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 583.30 |
| China (Shanghai) | SHCOMP Index | 0% |
| China (Shenzhen) | SZCOMP Index | 0.5% |
| China (STAR Board) | Star50 Index | 1.8% |
| Mainland Turnover | .chturn Index | 8.1% |
| Japan | NKY Index | 0% |
| India | SENSEX Index | -0.7% |
| Indonesia | JCI Index | -0.3% |
| Malaysia | FBMKLCI Index | -0.3% |
| Pakistan | KSE100 Index | -1.4% |
| Philippines | PCOMP Index | -0.4% |
| South Korea | KOSPI Index | 3.1% |
| Taiwan | TWSE Index | 1.6% |
| Thailand | SET Index | 2.1% |
| Singapore | STI Index | 0.6% |
| Australia | AS51 Index | 0.3% |
| Vietnam | VNINDEX Index | 1% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 91 | 115 |
| Advancing Stocks | 28 (Hang Seng) | 105 (CSI 300) |
| Declining Stocks | 56 (Hang Seng) | 191 (CSI 300) |
| Outperforming Factors | Value | Value |
| Underperforming Factors | Growth | Growth |
| Top Sectors | Materials, Energy, Industrials | Energy, Industrials, Information Technology |
| Bottom Sectors | Communication Services, Consumer Staples, Information Technology | Consumer Staples, Financials, Communication Services |
| Top Subsectors | Semiconductors, Electrical Equipment, Machinery | Computer Hardware, Heavy Machinery, Internet |
| Bottom Subsectors | Media & Entertainment, Food & Beverage, Conglomerates | Catering, Tourism, Chemicals |
| Southbound Connect Buys | Tencent, Xiaomi, Meituan | N/A |
| Southbound Connect Sells | WuXi Biologics, Zijin Mining, Pop Mart | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -1.19 |
| Communication Services | 11 | -2.47 |
| Consumer Discretionary | 28 | -1.37 |
| Consumer Staples | 13 | -1.75 |
| Energy | 6 | 0.96 |
| Financials | 25 | -0.53 |
| Health Care | 16 | -1.32 |
| Industrials | 22 | 0.92 |
| Information Technology | 12 | -1.43 |
| Materials | 14 | 1.32 |
| Real Estate | 7 | -0.79 |
| Utilities | 11 | -0.1 |
| Mainland China Listed | 386 | 0.35 |
| Communication Services | 8 | -0.69 |
| Consumer Discretionary | 26 | -0.49 |
| Consumer Staples | 19 | -1.13 |
| Energy | 12 | 2.45 |
| Financials | 64 | -1.06 |
| Health Care | 31 | -0.29 |
| Industrials | 58 | 1.63 |
| Information Technology | 95 | 1.45 |
| Materials | 52 | 0.5 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -2.3 |
| Alibaba HK | 9988 HK Equity | -0.9 |
| JD.com HK | 9618 HK Equity | -1.3 |
| NetEase HK | 9999 HK Equity | -4.1 |
| Yum China HK | 9987 HK Equity | -2.5 |
| Baozun HK | 9991 HK Equity | 1.1 |
| Baidu HK | 9888 HK Equity | -2.9 |
| Autohome HK | 2518 HK Equity | 1 |
| Bilibili HK | 9626 HK Equity | -2.7 |
| Trip.com HK | 9961 HK Equity | -3.9 |
| EDU HK | 9901 HK Equity | 0 |
| Xpeng HK | 9868 HK Equity | -0.4 |
| Weibo HK | 9898 HK Equity | -1.5 |
| Li Auto HK | 2015 HK Equity | -1.1 |
| Nio Auto HK | 9866 HK Equity | -0.6 |
| Zhihu HK | 2390 HK Equity | -4.4 |
| KE HK | 2423 HK Equity | -1.9 |
| Tencent Music Entertainment HK | 1698 HK Equity | -2.3 |
| Meituan HK | 3690 HK Equity | -4.5 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -2.3 |
| ALIBABA GROUP HOLDING LTD | -0.9 |
| MEITUAN-CLASS B | -4.5 |
| XIAOMI CORP-CLASS B | -1.6 |
| ZIJIN MINING GROUP CO LTD-H | 3.4 |
| SENSETIME GROUP INC-CLASS B | 6.8 |
| TRIP.COM GROUP LTD | -3.9 |
| WUXI BIOLOGICS CAYMAN INC | -0.1 |
| POP MART INTERNATIONAL GROUP | -1.1 |
| SEMICONDUCTOR MANUFACTURI-H | -0.3 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| EOPTOLINK TECHNOLOGY INC L-A | -1.6 |
| ZHONGJI INNOLIGHT CO LTD-A | -0.8 |
| SUZHOU TFC OPTICAL COMMUNI-A | 14.4 |
| BLUEFOCUS INTELLIGENT COMM-A | 6.6 |
| WANGSU SCIENCE & TECHNOLOG-A | 8.2 |
| LEO GROUP CO LTD-A | 10.1 |
| KUNLUN TECH CO LTD-A | 11.4 |
| CONTEMPORARY AMPEREX TECHN-A | 2.1 |
| CAMBRICON TECHNOLOGIES-A | 3.1 |
| ZIJIN MINING GROUP CO LTD-A | 0.7 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.90 versus 6.91 yesterday
- CNY per EUR 8.20 versus 8.21 yesterday
- Yield on 10-Year Government Bond 1.79% versus 1.80% yesterday
- Yield on 10-Year China Development Bank Bond 1.92% versus 1.93% yesterday
- Copper Price -0.48%
- Steel Price 0.26%
