Meituan’s Q1 Results Exceed Low Expectations

Meituan Q1 Earnings Overview

Meituan gained +6.54% in Hong Kong trading in advance of their financial results that beat low expectations. China’s vicious restaurant delivery war has left its mark, as the company posted its third consecutive quarterly loss. However, losses in the first quarter weren’t as large as analysts expected, as the government has stepped in to protect restaurants. On the earnings call, founder Wang Xing noted subsidies are becoming more “rational,” though top-line year-over-year (YoY) quarterly comparisons will be difficult, due to strong subsidy revenue growth. That is true, though an improvement in net income and EPS will be cheered by investors.

• Revenue +5.6% to RMB 91.04 billion from RMB 86.50 billion versus expectations of RMB 90.7 billio
• Adjusted Net Income -5.5% to RMB -4.97 billion from RMB -10.95 billion versus expectations of RMB -6.80 billion
• Adjusted Earnings per Share (EPS) RMB -0.94 from RMB 1.79 versus expectations of RMB -1.17

May Economic Data Overview

May's purchasing managers' indexes (PMIs) were released over the weekend. The “official” PMI survey is conducted by the National Bureau of Statistics (NBS) and focuses on large companies, including a relatively large number of them. On the other hand, the Rating Dog PMI survey is conducted by S&P, focuses on smaller companies, and surveys fewer companies. The official PMI tends to be less volatile than the private PMI.

Official PMIs:

• Manufacturing 50 versus April’s 50.3 and expectations of 50.0
• Non-Manufacturing 50.1 versus April’s 49.4 and expectations of 49.5

Rating Dog PMIs: Manufacturing PMI 51.8 versus April’s 52.2 and expectations of 51.3

China Emerging Industries PMI: 52.9 versus April’s 57.4. This survey is focused on 7 major industries in green technology, next-gen information technology, biotech, high-end equipment manufacturing, new energy, new materials, and new energy vehicles.

Key News

Asian equities were largely lower on continued Middle East tensions, as the AI "picks & shovels" trade was unwound somewhat. Taiwan and Korea outperformed, while Vietnam underperformed. Meanwhile, Indonesia was closed for Pancasila Day, which celebrates the country’s five founding principles, Malaysia was closed for the Harvest Festival, and Thailand closed for Vesak Day, which is also Buddha’s birthday. China's currency, the renminbi (CNY or RMB), continued to appreciate versus the US dollar overnight, despite broader regional currency weakness.

Internet-based AI large language model provider Minimax fell 15.71% in Hong Kong after announcing it will relist its shares on Shanghai's science and technology-focused STAR Board. The announcement triggered a vicious round of profit-taking in Hong Kong and China’s AI "picks & shovels" subsectors, including technology hardware, semiconductors, and communication equipment.

The move lower in technology hardware was despite President Xi’s article in the Qiushi Journal titled “Forge Ahead Planning and Development of Future Industries". The Ministry of Science and Technology’s Minister Yin Hejun also wrote on “core technologies”.

Hong Kong-listed internet and software stocks had a strong day, as US software companies' partnerships with AI large language models (LLMs) and strong financial results triggered a rotation from hardware stocks, led by Tencent, which gained +2.06% and was Hong Kong's most heavily traded stock by value, Alibaba, which gained +1.57%, Meituan, which gained +6.54%, Bilibili, which gained +4.99%, NetEase, which gained +0.57%, and Trip.com, which gained +2.39%. Baidu fell -0.69% and JD.com fell -0.97%.

Healthcare was weak overall, potentially triggered by US legislation on China’s pharmaceutical exports. However, Sinopharm +0.47%, reaching a 52-week high and bucking the trend after announcing positive Phase 3 results on a lung cancer drug at the ASCO Conference.

Mainland China was off due to the hardware technology selloff, as the STAR Board pulled back -5%.

May Auto Sales Overview:

• BYD 383,453, +0.26% YoY, +19.41% month-over-month (MoM)
• Geely Auto 237,637, +1.03% YoY, +1.05% MoM
• Chery 231,944
• Nio 37,705 +62.3% YoY, 28.44% MoM
• Zeeker 34,377
• Li Auto 33,350 +18.37% YoY, -2.16% MoM
• Xpeng 32,158 -4.08% YoY, +3.7% MoM
• Xiaomi 30,000

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	-28.4%
Hong Kong Short Sale Turnover	HKSST Index	-23.1%
Short Turnover as a % of Hong Kong Turnover	N/A	18.7%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	594.80
China (Shanghai)	SHCOMP Index	-0.3%
China (Shenzhen)	SZCOMP Index	-0.8%
China (STAR Board)	Star50 Index	-5%
Mainland Turnover	.chturn Index	-13.3%
Japan	NKY Index	0.9%
India	SENSEX Index	-0.7%
Indonesia	JCI Index	0%
Malaysia	FBMKLCI Index	-0.1%
Pakistan	KSE100 Index	-1.9%
Philippines	PCOMP Index	0.5%
South Korea	KOSPI Index	3.7%
Taiwan	TWSE Index	1.4%
Thailand	SET Index	0%
Singapore	STI Index	1%
Australia	AS51 Index	0%
Vietnam	VNINDEX Index	-1%

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	125	100
Advancing Stocks	369	3504
Declining Stocks	146	859
Outperforming Factors	Quality, Dividend Yield, EPS Revision	Dividend Yield, Low Volatility, Value
Underperforming Factors		Liquidity, Momentum, Large Caps
Top Sectors	Real Estate, Energy, Staples	Energy, Communication, Utilities
Bottom Sectors	Healthcare	Tech, Healthcare, Industrials
Top Subsectors	Paper/Packaging, Coal, Consumer Durables/Apparel	Coal, Energy Equipment, Petrochemical
Bottom Subsectors	Semiconductors, Pharmaceuticals, REITs	Semconductors, Communication Equipment, Computer Hardware
Southbound Connect Buys	Akeso (Very Large), Pop Mart, Tencent (Large), Alibaba, SMIC, YOFC  (Small)	N/A
Southbound Connect Sells	Lenovo (Moderate), Hua Hong Semi, KB Laminates(Small)	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	164	1.23
Communication Services	11	1.82
Consumer Discretionary	28	1.94
Consumer Staples	12	1.97
Energy	6	2.16
Financials	25	0.33
Health Care	16	-1.28
Industrials	19	0.63
Information Technology	15	0.65
Materials	14	0.52
Real Estate	1	2.38
Utilities	6	1.92
Mainland China Listed	11	-1.17
Communication Services	11	2.75
Consumer Discretionary	26	-0.51
Consumer Staples	18	-0.5
Energy	11	2.92
Financials	64	0.82
Health Care	29	-1.28
Industrials	60	-0.56
Information Technology	113	-3.84
Materials	58	-0.48

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	2.1
Alibaba HK	9988 HK Equity	1.6
JD.com HK	9618 HK Equity	-1
NetEase HK	9999 HK Equity	0.6
Yum China HK	9987 HK Equity	-1.1
Baozun HK	9991 HK Equity	0
Baidu HK	9888 HK Equity	-0.7
Autohome HK	2518 HK Equity	1.5
Bilibili HK	9626 HK Equity	5
Trip.com HK	9961 HK Equity	2.4
EDU HK	9901 HK Equity	1.4
Xpeng HK	9868 HK Equity	6.2
Weibo HK	9898 HK Equity	3.3
Li Auto HK	2015 HK Equity	1.2
Nio Auto HK	9866 HK Equity	6.7
Zhihu HK	2390 HK Equity	-0.3
KE HK	2423 HK Equity	1.3
Tencent Music Entertainment HK	1698 HK Equity	2.3
Meituan HK	3690 HK Equity	6.5

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
TENCENT HOLDINGS LTD	2.1
SEMICONDUCTOR MANUFACTURI-H	-2.6
LENOVO GROUP LTD	5.2
ALIBABA GROUP HOLDING LTD	1.6
POP MART INTERNATIONAL GROUP	3.6
AKESO INC	-1.9
HUA HONG SEMICONDUCTOR LTD-H	-5.6
MEITUAN-CLASS B	6.5
XIAOMI CORP-CLASS B	2.4
KINGBOARD LAMINATES HLDG LTD	-13.1

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
ZHONGJI INNOLIGHT CO LTD-A	-2.7
SUZHOU DONGSHAN PRECISION-A	-10
GIGADEVICE SEMICONDUCTO-CL A	0.2
JCET GROUP CO LTD-A	-7.8
FOXCONN INDUSTRIAL INTERNE-A	0.5
EOPTOLINK TECHNOLOGY INC L-A	-3.8
SUZHOU TFC OPTICAL COMMUNI-A	-5.8
BOE TECHNOLOGY GROUP CO LT-A	4.9
HENGTONG OPTIC-ELECTRIC CO-A	-2
VICTORY GIANT TECHNOLOGY -A	-7.1

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 6.77 versus 6.77 yesterday
• CNY per EUR 7.88 versus 7.89 yesterday
• Yield on 10-Year Government Bond 1.70% versus 1.71% yesterday
• Yield on 10-Year China Development Bank Bond 1.76% versus 1.77% yesterday
• Copper Price -0.16%
• Steel Price 0.51%