Mainland Investors Buy Hong Kong in Size, Week in Review
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Week in Review
- Asian equities were mixed but mostly higher for the week as Mainland China returned from the Lunar New Year holiday and Korea and Taiwan outperformed, while Pakistan and Malaysia underperformed.
- After its use of the Emergency Economic Powers Act was struck down, the Trump Administration is now using a temporary, 150-day measure to keep tariffs in place, though at lower levels, while most negotiated trade deals remain in effect.
- The Ministry of Culture and Tourism announced that 596 million trips were recorded during the nine-day Lunar New Year holiday, an increase of 95 million from last year.
- Shanghai relaxed housing purchase restrictions for non-residents this week, a move that was cheered by real estate stocks in Hong Kong and Mainland China.
Friday's Key News
Asian equities ended the week mixed on high volumes, driven by MSCI’s index rebalance, as Japan outperformed, South Korea was hit with profit taking, and India and Malaysia were lower. Meanwhile, Taiwan, i.e. TSMC, could not go higher due to the Peace Memorial Day holiday honoring those killed during the “February 28th incident” in 1947. The US dollar was stronger overnight versus regional currencies, except for the Yen, which gained.
The month of February was a good one for the region, except for Hong Kong, Malaysia, and Indonesia. Meanwhile, Japan, Korea, Taiwan, Thailand, and the Philippines outperformed.
It was a fairly quiet night from a news perspective as the CPC Central Committee held a meeting to discuss the draft of the 15th Five Year Plan. The meeting release had all the verbal positives, including commitments to “implement more active fiscal policy and moderate loose monetary policy” and “expand domestic demand”. However, investors will want tangible figures.
Mainland media highlighted the Ministry of Commerce’s press conference on the upcoming 6th round of US-China trade talks. Consider this an exclusive as I’ve not seen this in any Western media. It makes sense, as President Trump and President Xi will want to make many announcements during Trump's China trip.
Hong Kong grinded higher on strong volumes, driven by MSCI’s index rebalance, as Tencent was the most heavily traded stock by value, gaining +1.17%. Meanwhile, Alibaba pulled an inverse James Bond, declining by only -0.07%.
Mainland investors bought a very healthy $1.92 billion worth of Hong Kong-listed stocks and ETFs, as the Hong Kong Tracker ETF saw massive inflow.
Internet was largely higher along with insurance and non-ferrous metals, which includes precious metals and mining. Mainland China posted small gains, despite technology hardware, i.e. electronic equipment, and semiconductors sold off on negative sentiment following Nvidia’s financial results. Non-Ferrous metals and coal also did well on the Mainland, along with utilities and telecom.
Following President Xi's meeting with German Chancellor Merz, BMW and CATL signed a memorandum of understanding (MOU). NIO did the same with Bosch and JD.com did so with DHL.
The State Council’s Tariff Policy Commission removed tariffs on Canadian lobsters, oil, cake, and peas, while the Ministry of Commerce removed “anti-discriminatory measures” against Canada.
Remember the "Dual Sessions" important policy meetings kick off next Wednesday.
JD announced it will report Q4 earnings next Thursday.
A Mainland media source noted that the Hang Seng Tech fell 10% in February, after having fallen 23% from the October high. The article noted that Baidu was down 19% in February. The strong momentum built in the first three quarters of 2025 has left the room. While I should be more emotionally resilient, having endured multiple bear markets over the last thirteen years, this downdraft has been especially painful as it really felt like the sentiment super tanker had finally turned around following the grinding bear markets of 2021, 2022, and 2023 and derivative-induced meltdown, potentially marking the bottom in January of 2024. While the circumstances are exceedingly different from the bear market in the summer of 2015 (Shanghai Composite fell from 6,451 on June 12th to 3,538 on August 26, 2015), this price action feels the same, which might be an indication of the bottom. Unsolicited, I received an exceedingly nice email yesterday from our investor Andrew from the land where “women glow and men thunder” along with one last night from my buddy Nick, who is a well-seasoned investing veteran, reiterating their confidence on the market turning. I’m appreciative as this too shall pass as I see numerous catalysts on the horizon.
An element of the downdraft has been shift of capital to Asia-based AI picks and shovels. While I understand the hyperscalers' cash flows are turning into orders for Taiwan Semiconductor (TSMC), SK Hynix, and Samsung, the market cap comparison game is one way to step back and take an impartial view. From an indexing lens, TSMC is now 60% of MSCI Taiwan, while Samsung and SK Hynix combined represent 55% of MSCI Korea. ASML is 50% of MSCI Netherlands. This kind of reminds me of Nortel Networks in MSCI Canada in early 2000. We shall see.
In Baidu's conference call yesterday, Founder & CEO Robin Li spoke on Apollo Go robotaxis, stating that “At under $30,000 per vehicle, RT6 offers the industry's best cost structure, and combined with our leading operational efficiency, this enables us to achieve the lowest cost per mile globally while maintaining superior safety.” Statistics around Apollo Go include 20 million cumulative rides, weekly fully driverless rides exceeding 300,000. Since launch, “Apollo Go fleets have accumulated more than 300 million autonomous kilometers, including over 190 million fully driverless autonomous kilometers with an outstanding safety record”. Remember Baidu’s market cap is half of Waymo’s valuation. HALF!
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.9% |
| Hang Seng Tech | HSTECH Index | 0.6% |
| Hong Kong Turnover | HKTurn Index | 11.2% |
| Hong Kong Short Sale Turnover | HKSST Index | 36.8% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 20.5% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 1,915.35 |
| China (Shanghai) | SHCOMP Index | 0.4% |
| China (Shenzhen) | SZCOMP Index | 0.3% |
| China (STAR Board) | Star50 Index | 0.1% |
| Mainland Turnover | .chturn Index | -1.9% |
| Japan | NKY Index | 0.2% |
| India | SENSEX Index | -1.2% |
| Indonesia | JCI Index | 0% |
| Malaysia | FBMKLCI Index | -1.4% |
| Pakistan | KSE100 Index | -0.5% |
| Philippines | PCOMP Index | -0.2% |
| South Korea | KOSPI Index | -1% |
| Taiwan | TWSE Index | Closed |
| Thailand | SET Index | -0.4% |
| Singapore | STI Index | 0.6% |
| Australia | AS51 Index | 0.3% |
| Vietnam | VNINDEX Index | 0% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 112 | 100 |
| Advancing Stocks | 277 | 3137 |
| Declining Stocks | 209 | 1880 |
| Outperforming Factors | Quality, Buyback, Liquidity | Value, Buyback, Low Volatility |
| Underperforming Factors | Growth | Growth, Momentum, Large Cap |
| Top Sectors | Energy, Healthcare, Utilities | Energy, Materials, Utilities |
| Bottom Sectors | Real Estate, Tech, Financials | Tech, Discretionary, Industrials |
| Top Subsectors | Coal, Steel, Chemical Industry | Steel, Base Metals, Forest |
| Bottom Subsectors | Paper/Packaging, Semis, Environmental Protection | Soft Drink, Building Materials, Electronic Components |
| Southbound Connect Buys | HK Tracker ETF (Massive), HS Tech ETF, HS China Enterprise ETF, Tencent (Large), Alibaba, Xiaomi (Small) | N/A |
| Southbound Connect Sells | YOFC (Moderate), Drinda, SMIC (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | 0.55 |
| Communication Services | 11 | 1.07 |
| Consumer Discretionary | 28 | 0.27 |
| Consumer Staples | 13 | 0.51 |
| Energy | 6 | 2.03 |
| Financials | 25 | -0.01 |
| Health Care | 16 | 1.96 |
| Industrials | 22 | 0.44 |
| Information Technology | 12 | -0.46 |
| Materials | 14 | 0.78 |
| Real Estate | 7 | -0.56 |
| Utilities | 11 | 1.22 |
| Mainland China Listed | 386 | -0.29 |
| Communication Services | 8 | 0.39 |
| Consumer Discretionary | 26 | -0.64 |
| Consumer Staples | 19 | -0.39 |
| Energy | 12 | 1.69 |
| Financials | 64 | -0.32 |
| Health Care | 31 | -0.32 |
| Industrials | 58 | -0.62 |
| Information Technology | 95 | -1.44 |
| Materials | 52 | 1.55 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 1.2 |
| Alibaba HK | 9988 HK Equity | -0.1 |
| JD.com HK | 9618 HK Equity | 0.4 |
| NetEase HK | 9999 HK Equity | 2.4 |
| Yum China HK | 9987 HK Equity | 0.5 |
| Baozun HK | 9991 HK Equity | -5.5 |
| Baidu HK | 9888 HK Equity | 0.2 |
| Autohome HK | 2518 HK Equity | -5.9 |
| Bilibili HK | 9626 HK Equity | 1.4 |
| Trip.com HK | 9961 HK Equity | 2.7 |
| EDU HK | 9901 HK Equity | 0.2 |
| Xpeng HK | 9868 HK Equity | 1.3 |
| Weibo HK | 9898 HK Equity | 1.7 |
| Li Auto HK | 2015 HK Equity | 0.1 |
| Nio Auto HK | 9866 HK Equity | -2.5 |
| Zhihu HK | 2390 HK Equity | -0.1 |
| KE HK | 2423 HK Equity | -0.2 |
| Tencent Music Entertainment HK | 1698 HK Equity | 2.2 |
| Meituan HK | 3690 HK Equity | 0.9 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | 1.2 |
| ALIBABA GROUP HOLDING LTD | -0.1 |
| YANGTZE OPTICAL FIBRE AND-H | 10.1 |
| SENSETIME GROUP INC-CLASS B | 4.9 |
| XIAOMI CORP-CLASS B | -0.8 |
| MEITUAN-CLASS B | 0.9 |
| PING AN INSURANCE GROUP CO-H | 0.2 |
| KUAISHOU TECHNOLOGY | -1.2 |
| MINIMAX GROUP INC | -3.2 |
| HSBC HOLDINGS PLC | 1.6 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -6.7 |
| EOPTOLINK TECHNOLOGY INC L-A | -6.7 |
| BEIJING TEAMSUN TECHNOLOGY-A | 6.1 |
| VICTORY GIANT TECHNOLOGY -A | -3.5 |
| SUZHOU TFC OPTICAL COMMUNI-A | 1.8 |
| CAMBRICON TECHNOLOGIES-A | 0.8 |
| CHINA NORTHERN RARE EARTH -A | 5.6 |
| INNER MONGOLIA BAOTOU STE-A | 8.7 |
| RANGE INTELLIGENT COMPUTI-A | 1.2 |
| WANGSU SCIENCE & TECHNOLOG-A | 2.3 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.87 versus 6.85 yesterday
- CNY per EUR 8.11 versus 8.07 yesterday
- Yield on 10-Year Government Bond 1.79% versus 1.83% yesterday
- Yield on 10-Year China Development Bank Bond 1.96% versus 1.96% yesterday
- Copper Price 0.12%
- Steel Price -0.23%
