Record Net Southbound Buy, “Big Year” In US-China Relations Looms
5 Min. Read Time
Key News
Asian equities fell on Middle East tensions as the feasibility of oil prices staying higher for longer combined with a stronger US dollar led multiple markets to experience significant declines of -2% or more, including Japan, Taiwan, Korea, Australia, Malaysia, Indonesia, the Philippines, and Vietnam.
While Hong Kong and Mainland China were by no means immune to today’s downdraft, they did not fall nearly as much as their regional peers. Meanwhile, Hong Kong's relative resilience was driven by the largest net buy ever from Mainland investors via Southbound Stock Connect, with a net purchase of $4.8 billion. The Hong Kong Tracker ETF was the largest beneficiary, Hang Seng Tech ETFs and Hang Seng China Enterprise ETFs also had large inflows. The inflow also helped the Hang Seng and Hang Seng Tech indexes stay afloat, as they had morning intra-day lows of -3.31% and -3.79%, respectively, before grinding higher to close lower by only -1.35% and -0.12%, respectively.
Energy was the top-performing sector in both Hong Kong and Mainland China, as coal outperformed, though Hong Kong-listed electric vehicle stocks had a good day, led by BYD, which gained +3.54%, and Mainland-listed solar stocks, led by Sungrow, which gained +4.01%. Mainland technology hardware diverged, as electronic equipment makers were lower, led by Foxconn, which fell -2.83%, though technology hardware held up.
Battery giant CATL fell -1.95% in Hong Kong and gained +0.77% in Mainland China before releasing earnings after the close. CATL reported revenue of RMB 423 billion, versus estimates of RMB 421 billion, net income of RMB 72.2 billion, versus an estimate of RMB 68.9 billion, and a higher-than-expected dividend. The Mainland-listed China equity ETFs favored by the National Team had below-average volumes, though an ETF focused on the top 50 reported strong inflows of $1.2 billion after losing $6.42 billion over the last month.
February's consumer price index (CPI) was +1.3% versus January’s +0.2% and expectations of +0.9%, while the producer price index (PPI) was -0.90%, versus February's -1.4% and expectations of -1.1%. CPI was driven by food prices, which increased +1.7% overall, as fresh vegetables surged +10.9% despite pork prices falling by -8.6%.
Yesterday Foreign Minister Wang Yi held a press conference and Q&A on the upcoming visit from US President Trump. He stated that “This year is a big year for US-China relations, as the agenda of high-level exchanges is already on the table". This line was telling, in my opinion, and it is heartening to see that the presidents of the two countries have led by example. He also said that "By maintaining good interactions at the top level, they have provided important strategic safeguards for the US-China relationship to improve and move forward, and they have brought the relationship back on an even keel after the ups and downs." The lack of coverage of his statements in Western media can be explained by the positive responses!
A Mainland article noted how "expanding domestic demand” was mentioned numerous times in the Government Work Report from last week. It will be interesting to see whether we have further clarification on efforts to raise consumption in 2026 and beyond. Today at the Dual Sessions, Chairman Zhao Leji delivered the work report to the National People's Congress (NPC) Standing Committee on 2025 efforts covering a wide range of topics, but nothing to specific on the economy.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1.4% |
| Hang Seng Tech | HSTECH Index | -0.1% |
| Hong Kong Turnover | HKTurn Index | 34% |
| Hong Kong Short Sale Turnover | HKSST Index | 97.6% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 22.8% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 4,752.62 |
| China (Shanghai) | SHCOMP Index | -0.7% |
| China (Shenzhen) | SZCOMP Index | -0.7% |
| China (STAR Board) | Star50 Index | -1.7% |
| Mainland Turnover | .chturn Index | 20.4% |
| Japan | NKY Index | -5.2% |
| India | SENSEX Index | -1.7% |
| Indonesia | JCI Index | -3.3% |
| Malaysia | FBMKLCI Index | -2.6% |
| Pakistan | KSE100 Index | -6.8% |
| Philippines | PCOMP Index | -5% |
| South Korea | KOSPI Index | -6% |
| Taiwan | TWSE Index | -4.4% |
| Thailand | SET Index | -1.9% |
| Singapore | STI Index | -1.9% |
| Australia | AS51 Index | -2.8% |
| Vietnam | VNINDEX Index | -6.5% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 152 | 100 |
| Advancing Stocks | 126 | 1420 |
| Declining Stocks | 384 | 3638 |
| Outperforming Factors | Value, Buybacks, Momentum | Value |
| Underperforming Factors | Energy, Information Technology | Buyback, EPS Revision, Momentum |
| Top Sectors | Industrials, Healthcare, Utilities | Energy, Utilities |
| Bottom Sectors | Industrials, Healthcare, Utilities | Real Estate, Tech, Healthcare |
| Top Subsectors | Coal, Petroleum, Consumer Staples Distribution | Internet, Oil/Gas, Coal |
| Bottom Subsectors | Machinery, Industry Conglomerates, Semis | Marine, Petrochemical, Construction Machinery |
| Southbound Connect Buys | HK Tracker ETF (Massive), HS Tech ETF, HS China Enterprise ETF (Very Large), CNOOC, Tencent (Large), Alibaba (Flat) | N/A |
| Southbound Connect Sells | None | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -0.78 |
| Communication Services | 11 | -0.79 |
| Consumer Discretionary | 28 | -0.55 |
| Consumer Staples | 13 | -0.4 |
| Energy | 6 | 1.23 |
| Financials | 25 | -1.02 |
| Health Care | 16 | -1.84 |
| Industrials | 22 | -2.43 |
| Information Technology | 12 | 0.38 |
| Materials | 14 | -1.5 |
| Real Estate | 7 | -1.22 |
| Utilities | 11 | -1.72 |
| Mainland China Listed | 386 | -1.16 |
| Communication Services | 8 | -0.97 |
| Consumer Discretionary | 26 | -0.8 |
| Consumer Staples | 19 | -0.63 |
| Energy | 12 | 0.86 |
| Financials | 64 | -1.41 |
| Health Care | 31 | -1.53 |
| Industrials | 58 | -0.72 |
| Information Technology | 95 | -1.83 |
| Materials | 52 | -1.27 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -0.6 |
| Alibaba HK | 9988 HK Equity | -1.5 |
| JD.com HK | 9618 HK Equity | -1 |
| NetEase HK | 9999 HK Equity | -2.8 |
| Yum China HK | 9987 HK Equity | -2.9 |
| Baozun HK | 9991 HK Equity | -3.3 |
| Baidu HK | 9888 HK Equity | -1.8 |
| Autohome HK | 2518 HK Equity | 2 |
| Bilibili HK | 9626 HK Equity | -1.8 |
| Trip.com HK | 9961 HK Equity | -0.8 |
| EDU HK | 9901 HK Equity | -1.8 |
| Xpeng HK | 9868 HK Equity | 5.7 |
| Weibo HK | 9898 HK Equity | -0.9 |
| Li Auto HK | 2015 HK Equity | 2.1 |
| Nio Auto HK | 9866 HK Equity | 1.2 |
| Zhihu HK | 2390 HK Equity | -1.9 |
| KE HK | 2423 HK Equity | -1.7 |
| Tencent Music Entertainment HK | 1698 HK Equity | -2.7 |
| Meituan HK | 3690 HK Equity | 2.4 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -0.6 |
| CNOOC LTD-H | 3.3 |
| ALIBABA GROUP HOLDING LTD | -1.5 |
| SHANDONG MOLONG PETROLEUM-H | 25.1 |
| XIAOMI CORP-CLASS B | 0.8 |
| MEITUAN-CLASS B | 2.4 |
| PING AN INSURANCE GROUP CO-H | -3.1 |
| HSBC HOLDINGS PLC | -3.9 |
| PETROCHINA CO LTD-H | 2.3 |
| BYD CO LTD-H | 3.5 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| EOPTOLINK TECHNOLOGY INC L-A | -4.5 |
| ZHONGJI INNOLIGHT CO LTD-A | -3.6 |
| HGTECH CO LTD-A | 3.3 |
| ZIJIN MINING GROUP CO LTD-A | -1.9 |
| TALKWEB INFORMATION SYSTEM-A | 10 |
| TBEA CO LTD-A | 1.6 |
| SUNGROW POWER SUPPLY CO LT-A | 4 |
| WANGSU SCIENCE & TECHNOLOG-A | 12.2 |
| BEIJING TEAMSUN TECHNOLOGY-A | 2.6 |
| SUZHOU TFC OPTICAL COMMUNI-A | -4.9 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.92 versus 6.91 Friday
- CNY per EUR 7.99 versus 7.98 Friday
- Yield on 10-Year Government Bond 1.81% versus 178% Friday
- Yield on 10-Year China Development Bank Bond 1.95% versus 1.92% Friday
- Copper Price -0.89%
- Steel Price 1.23%
