No Margin For Error In Highflyers’ Earnings, Week in Review
5 Min. Read Time
Week in Review
- Asian equities were mostly higher for the week, as Vietnam and Thailand outperformed while India and Indonesia underperformed as the only markets to end the week lower.
- The China Passenger Car Association (CPCA) announced July new energy vehicle (NEV) sales of 1.18 million, which includes EVs and hybrids, an increase of +25% from July 2024.
- Mainland investors were especially active this week, buying close to $3 billion worth of Hong Kong-listed stocks and ETFs this week via Southbound Stock Connect, net of sales.
- Stronger-than-expected trade data for July, released Thursday, indicated that current the US-China trade truce has induced exporters to ramp up shipments to the US compared to June.
Key News
Asian equities ended the week with a thud on US geopolitical concerns, though Japan managed to continue its run for roses.
Hong Kong and Mainland China ended the week higher, though they were off today due to several notable earnings misses. Growth stocks took the brunt of today’s downdraft, as Hong Kong underperformed the Mainland and investors took profits from recent outperformers. The Hang Seng Index closed just below the 25,000 level, as hopefully next week’s earnings from Tencent, JD.com, NetEase, and recent star Tencent Music Entertainment, and others, allow for the next leg higher.
Hong Kong’s most heavily traded stock by value was Semiconductor Manufacturing International (SMIC), which fell -8.19% in Hong Kong and -4.34% in Mainland China, after net income ever so slightly missed, despite beating on revenue and adjusted net income. Outperformers clearly have little margin for error, as the stock shaved 31 points off of the Hang Seng Index and 32 points off of the Hang Seng Tech Index. Global investors compliant with the US’ Executive Order, which includes ourselves, were spared SMIC’s downdraft, as they are not allowed to hold it, though the stock is still up +200% since September 2024.
Interestingly, Tencent fell -1.06% and Alibaba fell -2.48% on no news, indicating a risk-off day and little foreign investor participation, as Mainland investors accounted for 60% of Hong Kong turnover via Southbound Stock Connect. Mainland investors bought a net $780 million worth of Hong Kong-listed stocks today via Southbound Stock Connect.
Other notable earnings misses today were Macau casino stocks, such as MGM China, which fell-6.93% and Wynn Macau, which fell -7.37%. Meanwhile, Wharf Properties fell -8.09% as its first half profit was a touch light.
Mainland China also opened lower, but fought back to get into the green, though it faded in afternoon trading. The Shanghai government announced a new maternity policy support following the recent national government announcement on free preschool for parents.
The South China Morning Post had an interesting and worthwhile article on how electric vehicle (EV) auto makers are curtailing production, based on the government's anti-involution campaign targeting excess capacity, overproduction, and price wars. It is likely too early for the anti-inflation campaign's early July start to show in this weekend’s PPI and CPI, though I’ll make the bet this could be the deflationary bottom.
Last Night’s Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -0.9% |
| Hang Seng Tech | HSTECH Index | -1.6% |
| Hong Kong Turnover | HKTurn Index | -15.9% |
| Hong Kong Short Sale Turnover | HKSST Index | -12.3% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 14% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 780 |
| China (Shanghai) | SHCOMP Index | -0.1% |
| China (Shenzhen) | SZCOMP Index | -0.2% |
| China (STAR Board) | Star50 Index | -1.4% |
| Mainland Turnover | .chturn Index | -6.4% |
| Northbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 0.1% |
| Japan | NKY Index | 1.9% |
| India | SENSEX Index | -0.9% |
| Indonesia | JCI Index | 0.6% |
| Malaysia | FBMKLCI Index | 0.5% |
| Pakistan | KSE100 Index | -0.3% |
| Philippines | PCOMP Index | -0.4% |
| South Korea | KOSPI Index | -0.5% |
| Taiwan | TWSE Index | 0.1% |
| Thailand | SET Index | -0.5% |
| Singapore | STI Index | -0.4% |
| Australia | AS51 Index | -0.3% |
| Vietnam | VNINDEX Index | 0.2% |
| Indicator | Hong Kong | Mainland |
|---|---|---|
| Today's Volume as % of 1-Year Average | 97 | 121 |
| Advancing Stocks | 190 | 2337 |
| Declining Stocks | 275 | 2151 |
| Outperforming Factors | Low Volatility, EPS Revision, Quality | Value, Dividend Yield, Buybacks |
| Underperforming Factors | Liquidity, Large Caps, Growth | Momentum, Liquidity, Quality |
| Top Sectors | Materials, Industrials, Utilities | Industrials, Materials, Energy |
| Bottom Sectors | Discretionary, Tech, Communication | Real Estate, Tech, Discretionary |
| Top Subsectors | ||
| Bottom Subsectors | ||
| Southbound Connect Buys | ||
| Southbound Connect Sells |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 151 | -0.88 |
| Communication Services | 9 | -1.06 |
| Consumer Discretionary | 28 | -1.44 |
| Consumer Staples | 13 | 0.39 |
| Energy | 7 | -0.26 |
| Financials | 23 | -0.81 |
| Health Care | 13 | -0.74 |
| Industrials | 20 | 0.53 |
| Information Technology | 10 | -1.29 |
| Materials | 10 | 2.85 |
| Real Estate | 6 | -0.22 |
| Utilities | 12 | 0.41 |
| Mainland China Listed | 404 | -0.22 |
| Communication Services | 6 | -0.72 |
| Consumer Discretionary | 31 | -0.73 |
| Consumer Staples | 24 | -0.32 |
| Energy | 13 | 0.16 |
| Financials | 64 | -0.57 |
| Health Care | 31 | -0.14 |
| Industrials | 64 | 0.77 |
| Information Technology | 91 | -0.86 |
| Materials | 58 | 0.72 |
| Real Estate | 6 | -1.04 |
| Utilities | 16 | -0.05 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -1.1 |
| Alibaba HK | 9988 HK Equity | -2.4 |
| JD.com HK | 9618 HK Equity | -1.4 |
| NetEase HK | 9999 HK Equity | -1.1 |
| Yum China HK | 9987 HK Equity | -0.1 |
| Baozun HK | 9991 HK Equity | -0.3 |
| Baidu HK | 9888 HK Equity | -1.2 |
| Autohome HK | 2518 HK Equity | 1.1 |
| Bilibili HK | 9626 HK Equity | -2.7 |
| Trip.com HK | 9961 HK Equity | -2.3 |
| EDU HK | 9901 HK Equity | -0.9 |
| Xpeng HK | 9868 HK Equity | 3.1 |
| Weibo HK | 9898 HK Equity | -1.1 |
| Li Auto HK | 2015 HK Equity | 0.1 |
| Nio Auto HK | 9866 HK Equity | 3 |
| Zhihu HK | 2390 HK Equity | -3.3 |
| KE HK | 2423 HK Equity | -1 |
| Tencent Music Entertainment HK | 1698 HK Equity | 0.5 |
| Meituan HK | 3690 HK Equity | -1 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| SEMICONDUCTOR MANUFACTURI-H | -8.2 |
| TENCENT HOLDINGS LTD | -1.1 |
| ALIBABA GROUP HOLDING LTD | -2.4 |
| XIAOMI CORP-CLASS B | -1.2 |
| BYD CO LTD-H | -1.4 |
| MEITUAN-CLASS B | -1 |
| HUA HONG SEMICONDUCTOR LTD-H | -1.7 |
| CSPC PHARMACEUTICAL GROUP LT | 6 |
| CHINA MOBILE LTD-H | 1.1 |
| KUAISHOU TECHNOLOGY | -1.1 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| CHINA NORTHERN RARE EARTH -A | -0.3 |
| SUNGROW POWER SUPPLY CO LT-A | 9.1 |
| SHENGHE RESOURCES HOLDINGS-A | 4.7 |
| ANHUI GREAT WALL MILITARY -A | 0.4 |
| ZHONGJI INNOLIGHT CO LTD-A | 0.4 |
| FOXCONN INDUSTRIAL INTERNE-A | 2.6 |
| TIBET TIANLU CO LTD-A | 7.4 |
| GUANGDONG DONGFANG PRECISI-A | -1.7 |
| CHINA CSSC HOLDINGS LTD-A | 1 |
| EAST MONEY INFORMATION CO-A | -1.4 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.18 versus 7.18 yesterday
- CNY per EUR 8.37 versus 8.35 yesterday
- Yield on 10-Year Government Bond 1.69% versus 1.69% yesterday
- Yield on 10-Year China Development Bank Bond 1.78% versus 1.78% yesterday
- Copper Price 0.08%
- Steel Price -0.65%
