Southbound Connect Net Inflow Hits New Daily Record, Week in Review

Week in Review

• Asian equities were mostly higher this week as the US extended the tariff deadline for China again, as Mainland China and Japan outperformed, while Thailand and the Philippines underperformed.
• Internet earnings kicked off this week as Tencent, JD.com, Weibo, and Vipshop beat estimates, while NetEase announced a slight miss for the second quarter.
• Overcapacity curbs progressed this week, as CATL announced the closing of a key China lithium mine. However, China’s consumer price index (CPI) for July remained flat, indicating more work to be done to stimulate inflation,  which is a key goal of the curbs, along with adding goodwill in trade negotiations.
• Semiconductor stocks had a good week, despite Nvidia reentering China’s market, as  China urged companies to source chips from local sources because the US government is somehow now taking a cut of Nvidia and others’ China revenues.
• In our latest video, Xiabing takes us to the World Artificial Intelligence Conference in Shanghai.

Friday's Key News

Asian equities were mixed overnight as Mainland China and Japan outperformed, while Hong Kong and Vietnam underperformed.

Hong Kong’s market was flooded by an absolutely massive session of buying from Mainland investors via Southbound Stock Connect on broad weakness. Mainland investors purchased a staggering net $4.6 billion worth of Hong Kong-listed stocks and ETFs overnight, a new record since data became available in December of 2016 and six times the one-year average! Southbound flows have picked up significantly this year and are already above the total net inflow for 2024. This is owed to various factors, including structural adjustments leading to more stock ownership, the Mainland’s lag versus onshore this year, and positioning ahead of a potential increase in yields in China, which could happen if inflation is triggered.

Alibaba fell -3 %, and Meituan fell -2 %, as they were Hong Kong’s second and third most-traded stocks by value overnight. Alibaba will report earnings next week. Internet earnings have so far been better than expected, as major hits to net income from instant commerce price war have mostly been averted. Meanwhile, Tencent’s spending on AI also did not hit its bottom line too badly.

There was a slight value bias in Hong Kong overnight, as the Hang Seng Index ended a three-day winning streak. Technology and large caps were under pressure. Mainland did well, as the Shanghai, Shenzhen, and the STAR Market all managed healthy gains.

Consumer lending fintech platform Qifu Technology reported Q2 earnings last night. Borrowers on the platform increased +15% year-over-year in the second quarter, reaching 36.8 million. Total outstanding loan value also increased +13%. This is positive for the consumer. Consumers need to borrow more and the government’s recent encouragement of borrowing by offering to fund consumer loans could benefit Qifu and other fintech platforms. China’s consumers have always been wary of borrowing, unlike their American counterparts, preferring to save and spend with cash. That could be changing somewhat. Platforms like Qifu are important bellwethers because they act like credit cards do in the United States.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	-1%
Hang Seng Tech	HSTECH Index	-0.6%
Hong Kong Turnover	HKTurn Index	15.8%
Hong Kong Short Sale Turnover	HKSST Index	90.4%
Short Turnover as a % of Hong Kong Turnover	N/A	20.8%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	4,581.91
China (Shanghai)	SHCOMP Index	0.8%
China (Shenzhen)	SZCOMP Index	1.7%
China (STAR Board)	Star50 Index	1.4%
Mainland Turnover	.chturn Index	-1.5%
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	1.7%
India	SENSEX Index	0.1%
Indonesia	JCI Index	-0.4%
Malaysia	FBMKLCI Index	-0.3%
Pakistan	KSE100 Index	-0.2%
Philippines	PCOMP Index	0.4%
South Korea	KOSPI Index	0%
Taiwan	TWSE Index	0.4%
Thailand	SET Index	-0.6%
Singapore	STI Index	-0.6%
Australia	AS51 Index	0.7%
Vietnam	VNINDEX Index	-0.7%

Indicator	Hong Kong	Mainland
Today's Volume as % of 1-Year Average	96	151
Advancing Stocks	25 (Hang Seng)	211 (CSI 300)
Declining Stocks	60 (Hang Seng)	81 (CSI 300)
Outperforming Factors	Value	Large Caps
Underperforming Factors	Growth	Small Caps
Top Sectors	Materials, Health Care, Real Estate	Real Estate, Materials, Information Technology
Bottom Sectors	Consumer Discretionary, Industrials, Financials	Utilities, Consumer Staples, Energy
Top Subsectors	Consumer Services, Health Care Equipment, Aerospace	Securities Brokerage, Power Generation, Morotcycles
Bottom Subsectors	Commercial & Professional Services, Banks, Conglomerates	Banks, Soft Drinks, Telecom
Southbound Connect Buys	Alibaba, Tencent, Meituan	N/A
Southbound Connect Sells	N/A	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	151	-0.42
Communication Services	9	0.09
Consumer Discretionary	28	-1.66
Consumer Staples	13	0.66
Energy	7	-0.62
Financials	23	-0.79
Health Care	13	2.09
Industrials	20	-0.96
Information Technology	10	0.2
Materials	10	2.64
Real Estate	6	1.03
Utilities	12	0.03
Mainland China Listed	404	0.74
Communication Services	6	0.67
Consumer Discretionary	31	0.67
Consumer Staples	24	-0.19
Energy	13	0
Financials	64	0.67
Health Care	31	0.4
Industrials	64	0.86
Information Technology	91	1.28
Materials	58	1.53
Real Estate	6	1.89
Utilities	16	-0.22

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	0.3
Alibaba HK	9988 HK Equity	-3
JD.com HK	9618 HK Equity	-3.4
NetEase HK	9999 HK Equity	-3.7
Yum China HK	9987 HK Equity	-1.3
Baozun HK	9991 HK Equity	0.7
Baidu HK	9888 HK Equity	-1
Autohome HK	2518 HK Equity	-2.2
Bilibili HK	9626 HK Equity	2
Trip.com HK	9961 HK Equity	0.4
EDU HK	9901 HK Equity	3.2
Xpeng HK	9868 HK Equity	-0.3
Weibo HK	9898 HK Equity	9.9
Li Auto HK	2015 HK Equity	-0.9
Nio Auto HK	9866 HK Equity	0.4
Zhihu HK	2390 HK Equity	-0.5
KE HK	2423 HK Equity	-0.7
Tencent Music Entertainment HK	1698 HK Equity	-0.9
Meituan HK	3690 HK Equity	-2.2

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
TENCENT HOLDINGS LTD	0.3
ALIBABA GROUP HOLDING LTD	-3
MEITUAN-CLASS B	-2.2
XIAOMI CORP-CLASS B	-0.7
SEMICONDUCTOR MANUFACTURI-H	1.4
HUA HONG SEMICONDUCTOR LTD-H	5.2
JD.COM INC-CLASS A	-3.4
CHINA LIFE INSURANCE CO-H	3.1
PING AN INSURANCE GROUP CO-H	-0.5
CHINA CONSTRUCTION BANK-H	-2.3

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
VISUAL CHINA GROUP CO LTD-A	1.7
SHANTUI CONSTRUCTION MACHI-A	1.4
EAST MONEY INFORMATION CO-A	9.9
CITIC SECURITIES CO-A	4.9
HITHINK ROYALFLUSH INFORMA-A	16.3
BEIJING COMPASS TECHNOLOGY-A	20
FOXCONN INDUSTRIAL INTERNE-A	3.8
CAMBRICON TECHNOLOGIES-A	-2.7
WOLONG ELECTRIC GROUP CO L-A	10
EOPTOLINK TECHNOLOGY INC L-A	0.9

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.18 versus 7.18 yesterday
• CNY per EUR 8.39 versus 8.36 yesterday
• Yield on 10-Year Government Bond 1.75% versus 1.73% yesterday
• Yield on 10-Year China Development Bank Bond 1.86% versus 1.85% yesterday
• Copper Price -0.08%
• Steel Price -0.41%