Profit Taking Caps Strong Week For China Markets, Week in Review
5 Min. Read Time
Week in Review
- Asian equities had a stellar week of performance as Mainland China’s STAR Board and Japan’s Nikkei 225 outperformed while Australia, India, and Taiwan were the only markets lower for the week.
- Ground was broken on a new hydroelectric dam in Tibet, which will be three-times larger than the Three Gorges Dam, and powered industrials and construction-related stocks higher this week.
- There were several indications of progress on trade talks between the US and China this week, as Trump indicated that he may visit China’s Xi “in the not-so-distant-future” and US Treasury Scott Bessent met with his Chinese counterparts in Stockholm.
- The National Development and Reform Commission (NDRC) and the State Administration of Market Regulation (SAMR) released a “Price Law” setting the parameters for instant commerce deals being offered by internet platforms.
Last Night’s Key News
Asian equities were lower overnight after a significant rally for the week. Hong Kong and Mainland China both closed lower, though the latter outperformed. Analysts cited profit taking after a strong week, though the looming August 1st tariff deadline also likely weighed on sentiment.
China’s Premier Li met with European leaders at the EU-China Business Symposium. European leaders cited industrial overcapacity as a primary concern. It is good, then, that addressing overcapacity, especially in autos and solar panels, has become a top priority for China’s government. At the Summit, Premier is quoted by the South China Morning Post as having said, “Amid rising protectionism and unilateralism, if China and Europe join hands in upholding free trade and multilateralism while deepening economic and trade collaboration, they can serve as a stabilizing anchor for economic globalization and the stability of global industrial and supply chains”.
The deal with Japan is interesting as it involves a half-billion US dollar investment in the United States. We have advocated for some time that investment commitments are a superior alternative to tariffs as they do not punish US consumers and weigh on growth. Could this happen with China? We will see. Though, some security guardrails around the investments would have to be put in place. The America First Investment Plan memo provides for these guardrails, in theory, including a note that the US should consider employing what is basically a variable interest entity (VIE) structure for foreign investments. However, they did not call it that, of course.
Semiconductor Manufacturing International (SMIC) gained +4.98% overnight as UBS issued callable bull/bear contracts (CBBCs) on the semiconductor stock in Hong Kong. UBS also issued new CBBCs for Meituan, Ping An, BYD, Hong Kong Exchanges & Clearing, and Tencent.
Health care and industrials were the top-performing sectors in Hong Kong. Industrials continue to benefit from the perceived renewed infrastructure push in China, signified by the Tibet dam. However, not all were higher overnight as China Power Construction fell -3.10%, Inner Mongolia Baotou Steel fell -2.00%, and China Energy Engineering fell -9.60%. China will report industrial profits over the weekend.
Internet stocks were mostly lower overnight. Alibaba fell -1.91% and Meituan fell -3.20%. Markets have mostly taken the instant commerce promotion rules in stride, as these stocks had a positive performance week. Profit taking was likely the culprit behind last night's price action.
Last Night’s Performance
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1.1% |
| Hang Seng Tech | HSTECH Index | -1.1% |
| Hong Kong Turnover | HKTurn Index | -4.4% |
| Hong Kong Short Sale Turnover | HKSST Index | 21.5% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 15.2% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 0 |
| China (Shanghai) | SHCOMP Index | -0.3% |
| China (Shenzhen) | SZCOMP Index | -0.1% |
| China (STAR Board) | Star50 Index | 2.1% |
| Mainland Turnover | .chturn Index | -3% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | -0.6% |
| Japan | NKY Index | -0.9% |
| India | SENSEX Index | -0.9% |
| Indonesia | JCI Index | 0.2% |
| Malaysia | FBMKLCI Index | -0.4% |
| Pakistan | KSE100 Index | 0.5% |
| Philippines | PCOMP Index | -0.5% |
| South Korea | KOSPI Index | 0.2% |
| Taiwan | TWSE Index | 0% |
| Thailand | SET Index | 0.4% |
| Singapore | STI Index | -0.3% |
| Australia | AS51 Index | -0.5% |
| Vietnam | VNINDEX Index | 0.7% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 95 | 88 |
| Advancing Stocks | 20 (Hang Seng) | 95 (CSI 300) |
| Declining Stocks | 63 (Hang Seng) | 201 (CSI 300) |
| Outperforming Factors | Dividend, Value, Large Caps | Growth, Commodity-linked |
| Underperforming Factors | Growth | Value |
| Top Sectors | Health Care, Industrials, Consumer Staples | Real Estate, Information Technology, Financials |
| Bottom Sectors | Consumer Discretionary, Communication Services, Information Technology | Consumer Staples, Energy, Industrials |
| Top Subsectors | Semiconductors, Transportation, Healrh Care Equpment | Motorcycles, Internet, Soft Drinks |
| Bottom Subsectors | Media & Entertainment, Consumer Durables, Construction Materials | Construction Materials, Liquor, Construction |
| Southbound Connect Buys | China Life, SMIC, Xiaomi | N/A |
| Southbound Connect Sells | Kuaishou, WuXi Biologics, Guotai Junan | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 152 | -1.18 |
| Communication Services | 9 | -1.32 |
| Consumer Discretionary | 30 | -1.75 |
| Consumer Staples | 13 | 0.05 |
| Energy | 7 | -0.83 |
| Financials | 23 | -0.93 |
| Health Care | 13 | 0.42 |
| Industrials | 19 | 0.26 |
| Information Technology | 10 | -1.25 |
| Materials | 10 | -1.06 |
| Real Estate | 6 | -0.83 |
| Utilities | 12 | -1.05 |
| Mainland China Listed | 432 | -0.59 |
| Communication Services | 9 | -1.11 |
| Consumer Discretionary | 31 | -0.78 |
| Consumer Staples | 27 | -1.79 |
| Energy | 16 | -1.33 |
| Financials | 63 | -0.47 |
| Health Care | 40 | -0.76 |
| Industrials | 69 | -1.2 |
| Information Technology | 85 | 0.8 |
| Materials | 68 | -0.6 |
| Real Estate | 7 | 1.94 |
| Utilities | 17 | -0.97 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -1.2 |
| Alibaba HK | 9988 HK Equity | -1.9 |
| JD.com HK | 9618 HK Equity | -2.1 |
| NetEase HK | 9999 HK Equity | -0.7 |
| Yum China HK | 9987 HK Equity | -2.4 |
| Baozun HK | 9991 HK Equity | -2.5 |
| Baidu HK | 9888 HK Equity | -1.7 |
| Autohome HK | 2518 HK Equity | -0.1 |
| Bilibili HK | 9626 HK Equity | -4.2 |
| Trip.com HK | 9961 HK Equity | -0.6 |
| EDU HK | 9901 HK Equity | -3.4 |
| Xpeng HK | 9868 HK Equity | -0.8 |
| Weibo HK | 9898 HK Equity | -3.4 |
| Li Auto HK | 2015 HK Equity | -1.6 |
| Nio Auto HK | 9866 HK Equity | 0.3 |
| Zhihu HK | 2390 HK Equity | -0.9 |
| KE HK | 2423 HK Equity | -3 |
| Tencent Music Entertainment HK | 1698 HK Equity | -0.9 |
| Meituan HK | 3690 HK Equity | -3.2 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -1.2 |
| SEMICONDUCTOR MANUFACTURI-H | 5 |
| ALIBABA GROUP HOLDING LTD | -1.9 |
| MEITUAN-CLASS B | -3.2 |
| XIAOMI CORP-CLASS B | -1.8 |
| KUAISHOU TECHNOLOGY | -4.9 |
| HONG KONG EXCHANGES & CLEAR | -2.8 |
| CHINA LIFE INSURANCE CO-H | 1.8 |
| BYD CO LTD-H | -1.9 |
| 3SBIO INC | -6.4 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| CHINA NORTHERN RARE EARTH -A | 0.3 |
| POWER CONSTRUCTION CORP OF-A | -3.1 |
| EAST MONEY INFORMATION CO-A | -1.4 |
| TIBET TIANLU CO LTD-A | 10 |
| INNER MONGOLIA BAOTOU STE-A | -2 |
| CAMBRICON TECHNOLOGIES-A | 12.2 |
| KWEICHOW MOUTAI CO LTD-A | -2.4 |
| CHINA ENERGY ENGINEERING C-A | -9.6 |
| CHINA RARE EARTH RESOURCES-A | 7 |
| TIANQI LITHIUM CORP-A | 4 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.17 versus 7.15 yesterday
- CNY per EUR 8.40 versus 8.40 yesterday
- Yield on 10-Year Government Bond 1.73% versus 1.74% yesterday
- Yield on 10-Year China Development Bank Bond 1.82% versus 1.83% yesterday
- Copper Price -0.26%
- Steel Price -0.24%
