Tencent Defenseless Due To Quiet Period Rules
6 Min. Read Time
Key News
Asian equities were mixed on light volumes, with the ongoing Middle East tensions weighing on risk sentiment, as Taiwan outperformed while Mainland China, Hong Kong, and Vietnam underperformed.
Yesterday’s AI Supply Chain Four Horsemen (Semiconductors, Electronic Equipment, Communications Equipment, and Electronic Components) were not sent to the glue factory, but were definitely hit with profit-taking after yesterday’s epic rally, as the Science and Technology (STAR) Board pulled back by -2.26% and the Hang Seng Tech fell by -3.04%.
Hong Kong and Mainland China’s heat map looks like a Jackson Pollock painting, as the AI hardware "Four Horsemen", CATL, and Hong Kong auto stocks lower, while bank, energy, precious metals, and mining stocks rebounded. Today’s biggest news by far was Tencent falling by -7.05%. Culprits include:
- An analyst's comment on Q2 gaming revenues likely declining was a factor that also whacked online video gaming company NetEase, which fell -7.39%.
- Onshore mutual fund data showed Tencent’s position was reduced as portfolio managers pivoted to AI supply chain beneficiaries.
- Evidence of this has been the outflow from Mainland investors via Southbound Stock Connect. Tencent had another healthy day of Mainland selling, with HK$ 2.765B of outflow today.
- Some chatter about the National Team’s preference to support onshore China versus offshore and Hong Kong equities.
Tencent is in its pre-earnings quiet period, so they can’t respond! Nor can they buy back stock during their quiet period on weakness. This likely explains the pick up in Hong Kong short turnover, which was 22% of Hong Kong volume today. There is also an element of a market structure issue in all of this, as quiet period rules disadvantage the company and strategic investors such as ourselves, in my opinion.
Hong Kong internet names were lower, with Alibaba down -2.91% and hit with $351 million (HK $2.759B) in net selling via the Southbound Stock Connect, Baidu down -2.61%, and JD.com down -2.06%. Mainland investors bought the Hong Kong dip with a very large inflow into the Hong Kong Tracker ETF. Value names ruled the day across both markets, despite poor breadth.
Healthcare stocks had a strong day in Hong Kong after President Trump’s feared generic drug tariff was delayed for 2 years. The two-year grace period provides companies time to build production here in the US and allows for Washington, DC’s attention deficit to kick in and forget about the issue.
Mainland-listed domestic equity ETFs were also hit with profit-taking and outflows after yesterday's strong move on the National Team’s announcements of market support. It is worth noting that a STAR Board ETF had inflow today. Beijing State-owned Capital Operation and Management Co. announced it has bought RMB 10 billion worth of Mainland stocks, with a focus on “innovation-driven enterprises”. There was a fair amount of chatter on Apple’s iPhone 18 production has ramped in advance of a fall release. It was a fairly quiet day overall.
Electronics and semiconductor testing company Link Instruments (688808 CH) reported that its first-half profits will increase between 801% and 925% YoY (RMB 510mm to RMB 580mm).
Optical chip maker Yuanjie Semiconductor (688498 CH) announced its 1st half profit will grow between 1,196.91% and 1,304.98% YoY (RMB 600 million to RMB 650 million).
The Ministry of Finance reported 1st-half tax revenue of RMB 12.1 trillion, up 4.7% year-over-year (YoY).
The CEO and President of the Canada Pension Plan Investment Board met with CSRC head Wu Qing in Beijing to discuss China’s opening up/access for foreign institutional investors.
Zhongji Innolight’s Hong Kong IPO is scheduled for July 30th, and is set to raise HKD 55 billion.
US Secretary of State Marc Rubio met with China’s Foreign Minister Wang Yi at the Association of Southeast Asian Nations (ASEAN) conference in Manila, in advance of President Xi’s September US trip.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1% |
| Hang Seng Tech | HSTECH Index | -3% |
| Hong Kong Turnover | HKTurn Index | 7.9% |
| Hong Kong Short Sale Turnover | HKSST Index | 53.3% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 0.2 |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 960.02 |
| China (Shanghai) | SHCOMP Index | 0.1% |
| China (Shenzhen) | SZCOMP Index | -1.1% |
| China (STAR Board) | Star50 Index | -2.3% |
| Mainland Turnover | .chturn Index | -10.3% |
| Japan | NKY Index | -0.2% |
| India | SENSEX Index | -0.9% |
| Indonesia | JCI Index | -0.1% |
| Malaysia | FBMKLCI Index | -0.5% |
| Pakistan | KSE100 Index | -0.8% |
| Philippines | PCOMP Index | -1% |
| South Korea | KOSPI Index | 0.7% |
| Taiwan | TWSE Index | 1.3% |
| Thailand | SET Index | -0.8% |
| Singapore | STI Index | 1.2% |
| Australia | AS51 Index | 0.3% |
| Vietnam | VNINDEX Index | -0.0005 |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 113% | 108% |
| Advancing Stocks | 231 | 1317 |
| Declining Stocks | 277 | 3727 |
| Outperforming Factors | EPS Revision, Momentum, Value | Low Volatility, Value, Dividend Yield |
| Underperforming Factors | Growth, Large Cap, Dividend Yield | Liquidity, Momentum, Large Caps |
| Top Sectors | Materials, Energy, Healthcare | Energy, Materials, Real Estate |
| Bottom Sectors | Communication, Discretionary, Tech | Communication, Tech, Discretionary |
| Top Subsectors | Non Ferrous Metal, Coal, Petroleum/Petrochemical | Precious Metals, Marine, Petrochemical |
| Bottom Subsectors | Software, Discretionary Distribution, Media | Communication Equipment, Building Materials, Fine Chemicals |
| Southbound Connect Buys | HK Tracker ETF (Massive), Hua Hong Semi (Large), Z AI (Small) | N/A |
| Southbound Connect Sells | Alibaba, Tencent (Very Large), KB Laminates (Large), SMIC (Moderate), YOFC (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -2.04 |
| Communication Services | 11 | -6.58 |
| Consumer Discretionary | 28 | -2.49 |
| Consumer Staples | 13 | -0.14 |
| Energy | 6 | 2.2 |
| Financials | 25 | 0.18 |
| Health Care | 16 | 1.07 |
| Industrials | 22 | -0.17 |
| Information Technology | 12 | -1.85 |
| Materials | 14 | 5.08 |
| Real Estate | 7 | -1.66 |
| Utilities | 11 | 0.47 |
| Mainland China Listed | 386 | -0.55 |
| Communication Services | 8 | -2.97 |
| Consumer Discretionary | 26 | -0.67 |
| Consumer Staples | 19 | 0.15 |
| Energy | 12 | 2.58 |
| Financials | 64 | 0.6 |
| Health Care | 31 | 0.02 |
| Industrials | 58 | -0.47 |
| Information Technology | 95 | -2.75 |
| Materials | 52 | 2.17 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -7 |
| Alibaba HK | 9988 HK Equity | -2.9 |
| JD.com HK | 9618 HK Equity | -2.1 |
| NetEase HK | 9999 HK Equity | -7.4 |
| Yum China HK | 9987 HK Equity | -3.8 |
| Baozun HK | 9991 HK Equity | -1.2 |
| Baidu HK | 9888 HK Equity | -2.6 |
| Autohome HK | 2518 HK Equity | -0.7 |
| Bilibili HK | 9626 HK Equity | -4.9 |
| Trip.com HK | 9961 HK Equity | -2.2 |
| EDU HK | 9901 HK Equity | -3.1 |
| Xpeng HK | 9868 HK Equity | -3.2 |
| Weibo HK | 9898 HK Equity | -1.3 |
| Li Auto HK | 2015 HK Equity | -2.1 |
| Nio Auto HK | 9866 HK Equity | -4 |
| Zhihu HK | 2390 HK Equity | -0.8 |
| KE HK | 2423 HK Equity | -3.8 |
| Tencent Music Entertainment HK | 1698 HK Equity | -3.6 |
| Meituan HK | 3690 HK Equity | -1.8 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -7 |
| ALIBABA GROUP HOLDING LTD | -2.9 |
| SEMICONDUCTOR MANUFACTURI-H | -3.4 |
| Z AI CO LTD | -3.6 |
| HUA HONG GRACE SEMICONDUCTOR | -4.2 |
| KINGBOARD LAMINATES HLDG LTD | -15.3 |
| YANGTZE OPTICAL FIBRE AND-H | -10.3 |
| GIGADEVICE SEMICONDUCTOR I-H | -4.9 |
| LENOVO GROUP LTD | 3.7 |
| XIAOMI CORP-CLASS B | -2.7 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -6.7 |
| GIGADEVICE SEMICONDUCTO-CL A | -1.2 |
| EOPTOLINK TECHNOLOGY INC L-A | -7.8 |
| SUZHOU DONGSHAN PRECISION-A | -5.8 |
| UNISPLENDOUR CORP LTD-A | 8.3 |
| JCET GROUP CO LTD-A | 1.3 |
| MONTAGE TECHNOLOGY CO LTD-A | 1.5 |
| TONGFU MICROELECTRONIC CO-A | 8.1 |
| ZTE CORP-A | 7.5 |
| CAMBRICON TECHNOLOGIES-A | -3 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.77 versus 6.76 yesterday
- CNY per EUR 7.72 versus 7.73 yesterday
- Yield on 10-Year Government Bond 1.73% versus 1.75% yesterday
- Yield on 10-Year China Development Bank Bond 1.78% versus 1.79% yesterday
- Copper Price +1.22%
- Steel Price -0.03%
