Semiconductor Stocks Sold in Profit Taking
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Key News
Asian equities were largely higher as Nvidia's financial results fueled the AI trade in Japan , led by Softbank, Taiwan, led by TSMC, and especially in Korea, where the KOSPI rose 8.42% after Nvidia's results, combined with a Samsung labor union strike that was averted. Indonesia continues to underperform amid MSCI's reduction in the country's index weighting.
Mainland China and Hong Kong opened higher and were sitting on nice gains until a late-day collapse. There does not appear to be a consensus on what triggered the selling stampede, i.e., profit-taking, though I suspect that it was simply a rotation out of Mainland China technology and into the AI "picks and shovels" trade by foreign investors. That selling pressure prompted domestic investors to hastily take profits, as leading subsectors such as technology hardware, and chips underperformed. It was a dramatic intra-day U-turn across both Hong Kong and Mainland China as the Hang Seng ended lower by -1.03% from an intra-day high of +0.71%, Hang Seng Tech ended -2.15% from an intra-day high of +1.28%, Shanghai ended -2.04% from an intra-day high of +0.90%, Shenzhen ended -2.40% from an intra-day high of +1.62%, and the STAR Board ended -3.7% from an intra-day high of +3.31%. The move lower left the Hang Seng below 25,500 while the Shanghai is at 4,077 and the Shenzhen is at 2,800.
Evidence of foreign selling was present in MSCI China Index heavyweights, such as Tencent, which fell -3.56%, Hong Kong's most heavily traded stocks by value, and Alibaba, which fell -4.47% and was Hong Kong's second-most heavily traded stock by value. The foreign rotation likely triggered domestic investor selling, as Mainland investors were net sellers via Southbound Stock Connect and Mainland China's favored sub-sectors: computer hardware fell -5.48% (+31% YTD), communication equipment fell -5.51% (+37% YTD), and chips fell -4.63% (+43% YTD).
Autos were led higher by XPeng +4.57% on a new model release and CATL +1.66% in Hong Kong, though -075% in Mainland China. Bilibili fell 7.46% in a dramatic post-results decline, though Tencent appears to be trimming its stake.
Healthcare also bucked the Hong Kong and Mainland China downdraft. In Mainland China, the banks were a rare bright spot, though there was no evidence of intervention based on the volumes of the ETFs favored by the "National Team", i.e., investment firms associated with China's sovereign wealth. The Ministry of Commerce held a press conference on expanding US-China agricultural trade.
Following a decent start to the year highlighted by strong New Year's travel, April's underwhelming economic data continues to weigh on foreign investor sentiment as the Citi China Economic Surprise Index has taken an elevator down. Fundamentals, i.e., the financial results of Chinese companies relative to global tech peers, remain a factor, as earnings per share (EPS) growth has been muted. Domestic Chinese investors see the policies as favoring technology self-reliance, as evidenced by the strong year-to-date (YTD) performance of semiconductors, computer hardware, and communication equipment.
Mainland China has been somewhat out of sight and out of mind, as US technology dominance takes center stage, followed by the AI "picks and shovels" plays in Taiwan and Korea. China's technology companies get no "AI love", though they are going to force the issue, as Baidu will spin off its chip unit Kunlunxin and Alibaba will spin off its chip unit T-Head. We saw the real estate policy bazooka back in September 2024, though support for domestic consumption has been limited. It is possible that July's Politburo meeting could lead to greater support for domestic consumption policies. The 15th Five-Year Plan emphasized domestic consumption, though few earth-shattering policies have been announced. We continue to see buybacks as evidence that Chinese companies, especially internet companies, view depressed stock prices as a value. Hopefully, more investors do as well! I suppose Indian investors are likely feeling similarly with their benchmarks down double digits.
After the Hong Kong close, we had several Q1 financial results released, including:
- Online gaming company NetEase (NTES US, 9999 HK) beat analyst expectations, though the stock is down in the US pre-market.
- E-commerce company Vipshop (VIPS US) beat analyst expectations, though it is down in the US pre-market on light Q2 revenue guidance.
- Tongcheng Travel (780 HK) results were in line, a small beat.
- Full Truck Alliance (YMM US) beat analyst expectations, sending shares higher before the US market open.
- EV maker NIO (NIO US, 9866 HK) rose in the US pre-market after reporting stronger-than-expected revenues, narrowing its loss, and providing a strong Q2 revenue guidance.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1% |
| Hang Seng Tech | HSTECH Index | -2.2% |
| Hong Kong Turnover | HKTurn Index | 13.9% |
| Hong Kong Short Sale Turnover | HKSST Index | 4% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 18.1% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -779.69 |
| China (Shanghai) | SHCOMP Index | -2% |
| China (Shenzhen) | SZCOMP Index | -2.4% |
| China (STAR Board) | Star50 Index | -3.7% |
| Mainland Turnover | .chturn Index | 18.2% |
| Japan | NKY Index | 3.1% |
| India | SENSEX Index | -0.2% |
| Indonesia | JCI Index | -3.5% |
| Malaysia | FBMKLCI Index | -0.5% |
| Pakistan | KSE100 Index | 2.2% |
| Philippines | PCOMP Index | 0.5% |
| South Korea | KOSPI Index | 8.4% |
| Taiwan | TWSE Index | 3.4% |
| Thailand | SET Index | 0.3% |
| Singapore | STI Index | 0% |
| Australia | AS51 Index | 1.5% |
| Vietnam | VNINDEX Index | -0.9% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 114 | 161 |
| Advancing Stocks | 130 | 1,035 |
| Declining Stocks | 383 | 4,024 |
| Outperforming Factors | Value | Value |
| Underperforming Factors | Momentum, Growth, Liquidity | Liquidity, Momentum, EPS Revision |
| Top Sectors | Healthcare, Industrials | Healthcare, Discretionary, Financials |
| Bottom Sectors | Communication, Discretionary, Energy | Tech, Real Estate, Communication |
| Top Subsectors | Pharmaceuticals, Electrical Equipment, REITs | Marine, Auto Parts, Auto |
| Bottom Subsectors | Software, Media/Entertainment, Consumer Discretionary Distribution | Communication Equipment, Computer Hardware, Internet |
| Southbound Connect Buys | SMIC, Wellcell (Large), CNOOC (Moderate) | N/A |
| Southbound Connect Sells | Alibaba, HK Tracker ETF (Very Large), Tencent (Large), Hua Hong Semi, YOFC (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 164 | -2.1 |
| Communication Services | 11 | -3.91 |
| Consumer Discretionary | 28 | -2.75 |
| Consumer Staples | 12 | -0.4 |
| Energy | 6 | -2.52 |
| Financials | 25 | -0.79 |
| Health Care | 16 | 1.19 |
| Industrials | 19 | 0.25 |
| Information Technology | 15 | -2.18 |
| Materials | 14 | -1.82 |
| Real Estate | 1 | -0.72 |
| Utilities | 6 | -0.75 |
| Mainland China Listed | 11 | -1.62 |
| Communication Services | 11 | -2.5 |
| Consumer Discretionary | 26 | 0.58 |
| Consumer Staples | 18 | -0.45 |
| Energy | 11 | -2.12 |
| Financials | 64 | 0.22 |
| Health Care | 29 | 0.71 |
| Industrials | 60 | -1.44 |
| Information Technology | 113 | -3.42 |
| Materials | 58 | -1.9 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -3.6 |
| Alibaba HK | 9988 HK Equity | -4.5 |
| JD.com HK | 9618 HK Equity | -3.4 |
| NetEase HK | 9999 HK Equity | -4.8 |
| Yum China HK | 9987 HK Equity | -0.8 |
| Baozun HK | 9991 HK Equity | 0 |
| Baidu HK | 9888 HK Equity | -5.7 |
| Autohome HK | 2518 HK Equity | 0.2 |
| Bilibili HK | 9626 HK Equity | -7.5 |
| Trip.com HK | 9961 HK Equity | -1.5 |
| EDU HK | 9901 HK Equity | -5.7 |
| Xpeng HK | 9868 HK Equity | 4.6 |
| Weibo HK | 9898 HK Equity | -2.1 |
| Li Auto HK | 2015 HK Equity | 1.1 |
| Nio Auto HK | 9866 HK Equity | -2.5 |
| Zhihu HK | 2390 HK Equity | -3.2 |
| KE HK | 2423 HK Equity | -1.5 |
| Tencent Music Entertainment HK | 1698 HK Equity | -2.5 |
| Meituan HK | 3690 HK Equity | -0.9 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -3.6 |
| ALIBABA GROUP HOLDING LTD | -4.5 |
| SEMICONDUCTOR MANUFACTURI-H | 9.7 |
| HUA HONG SEMICONDUCTOR LTD-H | 13.9 |
| WELLCELL HOLDINGS CO LTD | -83.2 |
| MEITUAN-CLASS B | -0.9 |
| XIAOMI CORP-CLASS B | -1.6 |
| CNOOC LTD-H | 0.9 |
| YANGTZE OPTICAL FIBRE AND-H | -6.8 |
| KUAISHOU TECHNOLOGY | -5.7 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| MONTAGE TECHNOLOGY CO LTD-A | 4.1 |
| GIGADEVICE SEMICONDUCTO-CL A | 10 |
| ZHONGJI INNOLIGHT CO LTD-A | 0.7 |
| JCET GROUP CO LTD-A | 8.9 |
| SEMICONDUCTOR MANUFACTURIN-A | 12.6 |
| CAMBRICON TECHNOLOGIES-A | 3.3 |
| ACCELINK TECHNOLOGIES CO -A | 2.4 |
| SUZHOU DONGSHAN PRECISION-A | -7.2 |
| HGTECH CO LTD-A | 3.2 |
| EOPTOLINK TECHNOLOGY INC L-A | 2.7 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.80 versus 6.80 yesterday
- CNY per EUR 7.89 versus 7.88 yesterday
- Yield on 10-Year Government Bond 1.74% versus 1.74% yesterday
- Yield on 10-Year China Development Bank Bond 1.82% versus 1.82% yesterday
- Copper Price +1.14%
- Steel Price -0.16%
