Revenge of the Value Nerds
6 Min. Read Time
Key News
Asian equities were largely lower except for Taiwan, Indonesia, and the Philippines, which outperformed as the US dollar strengthened on higher US Treasury yields. Vietnam was closed for Independence Day (again). Hong Kong and Mainland China were lower on light volume following yesterday's high-volume day, fueled by MSCI's index rebalance. Value-focused bank and insurance stocks outperformed in both markets, while growth and AI supply chain stocks underperformed.
It was fairly quiet on the news front, as yesterday's domestic consumption policy announcement failed to motivate investors, and the consumer discretionary sector underperformed, though the announcement was arguably light on numbers. There was some chatter about China charging foreign investors a tax on dividends earned in China, which had previously been waived. This would close a tax loophole, as Chinese companies created foreign entities to avoid the onshore tax. Nothing to concern yourself with.
Hong Kong's large-cap stocks underperformed. Alibaba was down -3.33% and Hong Kong's most heavily traded stock by value after cutting the price of Qwen3-VL-Rerank by 72%. Mainland investors sold -$28 million (HK $222 million) via the Southbound Stock Connect. Tencent fell by -2.56% on no news but saw net buying from Mainland investors via the Southbound Stock Connect. Baidu fell by -2.8% despite its conversion to a dual-share class, which should allow for inclusion in the Southbound Stock Connect.
Z.AI fell by -1.34% following yesterday's after-the-close financial results. Kuaishou gained +3.16% bucked the trend after announcing two new investors in its Kling AI unit, including the Ministry of Finance's concisely named China Artificial Intelligence Industry Investment Fund Partnership. The Kling spinoff and IPO aren't expected until Q1 2027, unfortunately. Mainland semiconductor stocks were lower despite Yicai reporting that local mobile phone makers had to raise prices by 20% due to Qualcomm's semiconductor price hike. Mainland advancers versus decliners were much better than Hong Kong's.
Fast fashion company Shein's Hong Kong IPO (625 HK) went alright, with shares closing down -0.12% after raising HK $13.6 billion ($1.7 billion), which puts the market cap at US$26 billion. Yes, that's well below the Series D valuation of $100 billion. In the company's defense, its highly innovative business model has faced significant headwinds from US tariffs, the US's elimination of the de minimis rule, increased EU regulation, and data privacy issues. Ultimately, Shein is a consumer discretionary stock that is out of favor due to weak Chinese economic data. Investors are highly crowded into US, Korean, Taiwanese, and Japanese AI and AI supply chain stocks IMO, while ignoring China's Mainland-listed AI supply chain stocks.
The August "private" Manufacturing PMI, a survey conducted by S&P, was 51.5, up from July's 50.9 and above expectations of 51.
August auto sales were reported. BYD gained +1.2% after reporting sales were up +17.8% year-over-year (YoY) to 440,293 according to CnEVPost. Nio fell by -6.39% after reporting sales that were up +14.47% YoY to 35,836, though it's sales fell by -0.27% from July. Nio's post-close Q2 financial results were a slight miss on top-line revenue, though the company swung to a profit, with adjusted net income and adjusted EPS beating expectations. XPeng was lower despite August sales up +2.84% YoY to 39,107.
SAMR, the Ministry of Commerce, and MIIT released Guidelines on Overseas Competition Practices and Compliance Building for the Automotive Industry.
The National Energy Administration announced that solar power generation capacity eclipsed coal power generation with 1.286 billion kilowatts.
China's National Social Security Fund annual report showed that at year-end, assets under management totaled RMB 390 billion ($58 billion), which, divided by 1.4 billion, helps explain why Chinese citizens save so much.
The South China Morning Post noted Montana's Republican Senator Steve Daines concluded a China trip that included visits to local tech firms. It was interesting as Daines was in China back in April with several members of Congress. What is the probability that China agrees to buy more US beef during Trump's visit to Xi in September? High IMO.
Treasury Secretary Bessent had a "robust meeting" with PBOC's Governor Pan Gongsheng, though declined to elaborate on their conversation. Maybe he wants to swap the US's Treasury yield curve (green line) for China's (blue line)! Good luck finding either news item in Western media, as any positive US-China relations news isn't fit to print.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -0.9% |
| Hang Seng Tech | HSTECH Index | -1.5% |
| Hong Kong Turnover | HKTurn Index | -24.2% |
| Hong Kong Short Sale Turnover | HKSST Index | -14.8% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 0.2 |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -28 |
| China (Shanghai) | SHCOMP Index | -0.2% |
| China (Shenzhen) | SZCOMP Index | -0.7% |
| China (STAR Board) | Star50 Index | -2.2% |
| Mainland Turnover | .chturn Index | -4.3% |
| Japan | NKY Index | -0.1% |
| India | SENSEX Index | 0% |
| Indonesia | JCI Index | 1.1% |
| Malaysia | FBMKLCI Index | -1.5% |
| Pakistan | KSE100 Index | -0.3% |
| Philippines | PCOMP Index | 2.3% |
| South Korea | KOSPI Index | 0.2% |
| Taiwan | TWSE Index | 1.8% |
| Thailand | SET Index | -0.4% |
| Singapore | STI Index | -0.8% |
| Australia | AS51 Index | -0.1% |
| Vietnam | VNINDEX Index | -0.0005 |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 87 | 82 |
| Advancing Stocks | 189 | 3097 |
| Declining Stocks | 329 | 1933 |
| Outperforming Factors | None | Dividend Yield, Value, Low Volatility |
| Underperforming Factors | EPS Revision, Liquidity, Momentum | Momentum, Liquidity, EPS Revision |
| Top Sectors | Financials | Financials, Utilities, Staples |
| Bottom Sectors | Communication, Discretionary, Real Estate | Tech, Materials, Energy |
| Top Subsectors | Banks, Paper/Packaging, Household/Personal Products | Agriculture, Retail, Insurance |
| Bottom Subsectors | Consumer Discretionary Distribution, Software, Semis | Electronic Components, Semis, Coalf |
| Southbound Connect Buys | Tencent (Large) Kuiashou, Minimax (Moderate), KB Laminates (Small) | |
| Southbound Connect Sells | Z AI (Moderate), Alibaba (Small) |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -1.08 |
| Communication Services | 11 | -2.31 |
| Consumer Discretionary | 28 | -2.29 |
| Consumer Staples | 13 | -1.46 |
| Energy | 6 | -0.26 |
| Financials | 25 | 1.19 |
| Health Care | 16 | -0.51 |
| Industrials | 22 | -0.82 |
| Information Technology | 12 | -0.69 |
| Materials | 14 | -0.47 |
| Real Estate | 7 | -2.07 |
| Utilities | 11 | -1.18 |
| Mainland China Listed | 386 | -0.8 |
| Communication Services | 8 | -0.1 |
| Consumer Discretionary | 26 | 0.43 |
| Consumer Staples | 19 | 0.62 |
| Energy | 12 | -1.49 |
| Financials | 64 | 1.5 |
| Health Care | 31 | 0.24 |
| Industrials | 58 | -0.7 |
| Information Technology | 95 | -2.52 |
| Materials | 52 | -1.53 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -2.6 |
| Alibaba HK | 9988 HK Equity | -3.3 |
| JD.com HK | 9618 HK Equity | -3.2 |
| NetEase HK | 9999 HK Equity | -1.9 |
| Yum China HK | 9987 HK Equity | -0.7 |
| Baozun HK | 9991 HK Equity | -2.5 |
| Baidu HK | 9888 HK Equity | -2.6 |
| Autohome HK | 2518 HK Equity | -1.2 |
| Bilibili HK | 9626 HK Equity | -2.9 |
| Trip.com HK | 9961 HK Equity | -2.8 |
| EDU HK | 9901 HK Equity | 0.3 |
| Xpeng HK | 9868 HK Equity | -1 |
| Weibo HK | 9898 HK Equity | 0.2 |
| Li Auto HK | 2015 HK Equity | -1.6 |
| Nio Auto HK | 9866 HK Equity | -6.4 |
| Zhihu HK | 2390 HK Equity | -7.5 |
| KE HK | 2423 HK Equity | -0.5 |
| Tencent Music Entertainment HK | 1698 HK Equity | -1.7 |
| Meituan HK | 3690 HK Equity | -2.9 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | -3.3 |
| MINIMAX GROUP INC | 16.2 |
| TENCENT HOLDINGS LTD | -2.6 |
| Z AI CO LTD | 9.6 |
| MEITUAN-CLASS B | -2.9 |
| KUAISHOU TECHNOLOGY | 3.2 |
| BYD CO LTD-H | 1.2 |
| CHINA CONSTRUCTION BANK-H | 3.9 |
| KINGBOARD LAMINATES HLDG LTD | 2.7 |
| PING AN INSURANCE GROUP CO-H | -0.6 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -0.8 |
| EOPTOLINK TECHNOLOGY INC L-A | 0.7 |
| CXMT CORP-A | -1 |
| CHINA JUSHI CO LTD -A | -2.1 |
| SUZHOU DONGSHAN PRECISION-A | -4.7 |
| SHENGYI TECHNOLOGY CO LTD -A | 5.3 |
| HENGTONG OPTIC-ELECTRIC CO-A | -1.9 |
| CAMBRICON TECHNOLOGIES-A | 6.3 |
| GIGADEVICE SEMICONDUCTO-CL A | 2.3 |
| IEIT SYSTEMS CO LTD-A | 0.5 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.72 versus 6.72 yesterday
- CNY per EUR 7.79 versus 7.79 yesterday
- Yield on 10-Year Government Bond 1.68% versus 1.69% yesterday
- Yield on 10-Year China Development Bank Bond 1.76% versus 1.77% yesterday
- Copper Price +0.77%
- Steel Price -0.35%
