The Invisible Hand Meets An Iron Hand
5 Min. Read Time
Key News
Asian equities were mixed, as Hong Kong outperformed, Korea underperformed, and Japan was closed for Marine Day.
There were two key catalysts overnight, so let's not bury the lead:
1. The World Artificial Intelligence Conference (WAIC) in Shanghai has lived up to expectations after Friday’s keynote speech by President Xi. Multiple key announcements in the AI space were made during the conference. Moonshot AI announced Kimi K3, with 2.8 trillion parameters, will launch on July 27th as an open-source model. Alibaba announced the rollout of open-source model Qwen 3.8-Max with 2.4 trillion parameters, placing it slightly behind Anthropic’s Fable 5.
2. Institutions said "no mas!” to the onshore market’s AI supply chain weakness, as two members of China's "National Team", i.e. institutional investors aligned with the government, announced they bought Friday’s market downdraft. Domestic equity ETFs listed in Mainland China had $11.47 billion worth of net inflow today, which raises the 1-week inflow to $30.20 billion. We noted early last week that Mainland-listed ETFs were seeing net inflow following the National Team’s massive redemption. Year-to-date, these ETFs have still seen a net outflow of $192.81 billion, which indicates that there could be a significant amount of dry powder still available. The onshore China momentum factor peaked on June 21st at +60% YTD, though it has fallen to +20% today.
The open-source nature of China's models is problematic to the closed model structure of US AI large language models (LLMs), which is why some are calling for the models to be banned in the US. Competitors appear to be hoping this will be done under the guise of “national defense”. Tencent, along with Alibaba, also made several announcements around their cloud efforts. The announcements weighed on the Hong Kong-listed LLM providers as Z.AI, formerly known as "Knowledge Atlas", fell -19.56% and Minimax fell -10.6%.
The European Union is fining Alibaba’s AliExpress for selling “unsafe or counterfeit products” while failing to take measures to stop vendors from doing so, according to Bloomberg News.
The State Administration for Market Regulation (SAMR) announced the "Action Plan for Promoting the Empowerment of Individual Businesses by Platform Enterprises" that lists five focus areas for e-commerce companies to support local merchants. My interpretation of the SAMR release is to stop the consumer subsidies and restaurant delivery price war, which have weighed on the bottom lines of JD.com, Meituan, and, to a lesser extent, Alibaba.
Hong Kong rebounded, as the Hang Seng Index gained +2.36%, closing above 25,0000 in a broad rally, as the Hang Seng Tech Index gained +2.79% and both growth and value stocks performed well. Alibaba gained +3.73% and was Hong Kong’s most heavily traded stock by value, as Mainland investors bought $237 million (HKD 1.86 billion) worth of the stock via Southbound Stock Connect. Tencent gained +3.51%, despite being a net sell within Southbound Stock Connect, as Mainland investors were net sellers of Hong Kong-listed ETFs. Energy had a good day as Middle East tensions appear to be escalating. Mainland China had more decliners than advancers, as mega and large caps outperformed along with banks and alcohol.
July's 1 and 5-Year Loan Prime Rates (LPRs) were left unchanged at 3.0% and 3.5%, respectively, for the fourteenth month in a row, which was expected.
Today, five state-owned enterprises (SOEs) announced they would buy back stock and pay dividends.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 2.4% |
| Hang Seng Tech | HSTECH Index | 2.8% |
| Hong Kong Turnover | HKTurn Index | -11.8% |
| Hong Kong Short Sale Turnover | HKSST Index | -8.2% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 0.2 |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -761.47 |
| China (Shanghai) | SHCOMP Index | 0.9% |
| China (Shenzhen) | SZCOMP Index | -1.3% |
| China (STAR Board) | Star50 Index | 0.2% |
| Mainland Turnover | .chturn Index | 1.8% |
| Japan | NKY Index | -4% |
| India | SENSEX Index | -0.6% |
| Indonesia | JCI Index | 0.9% |
| Malaysia | FBMKLCI Index | -0.5% |
| Pakistan | KSE100 Index | 0% |
| Philippines | PCOMP Index | 0.2% |
| South Korea | KOSPI Index | -4.5% |
| Taiwan | TWSE Index | -0.5% |
| Thailand | SET Index | 0.4% |
| Singapore | STI Index | -0.2% |
| Australia | AS51 Index | -0.1% |
| Vietnam | VNINDEX Index | -0.0005 |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 111 | 110 |
| Advancing Stocks | 417 | 1592 |
| Declining Stocks | 103 | 3459 |
| Outperforming Factors | Liquidity, EPS Revision, ESG Score | Dividend Yield, Low Volatility, Value |
| Underperforming Factors | None | Momentum, Liquidity |
| Top Sectors | Healthcare, Utilities, Energy | Staples, Energy, Healthcare |
| Bottom Sectors | None | Tech |
| Top Subsectors | Coal, Petroleum &Petrochemicals, Consumer Discretionary Distribution | Oil/Gas, Liquor, Coal |
| Bottom Subsectors | Chemical, Healthcare, Building | Electronic Components, Building Materials, Industrial Machinery |
| Southbound Connect Buys | Alibaba (Very Large), Z.AI (Small) | N/A |
| Southbound Connect Sells | HK Tracker ETF (Massive), HS Tech ETF (Very Large), Tencent, YOFC (Moderate), SMIC (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | 3.11 |
| Communication Services | 11 | 3.5 |
| Consumer Discretionary | 28 | 3 |
| Consumer Staples | 13 | 1.55 |
| Energy | 6 | 3.61 |
| Financials | 25 | 3.37 |
| Health Care | 16 | 3.95 |
| Industrials | 22 | 1.06 |
| Information Technology | 12 | 2.64 |
| Materials | 14 | 2.77 |
| Real Estate | 7 | 1.01 |
| Utilities | 11 | 3.68 |
| Mainland China Listed | 386 | 1.21 |
| Communication Services | 8 | 2.34 |
| Consumer Discretionary | 26 | 1.17 |
| Consumer Staples | 19 | 4.83 |
| Energy | 12 | 4.62 |
| Financials | 64 | 2.77 |
| Health Care | 31 | 3.91 |
| Industrials | 58 | 2.15 |
| Information Technology | 95 | -1.73 |
| Materials | 52 | 0.58 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 3.5 |
| Alibaba HK | 9988 HK Equity | 3.7 |
| JD.com HK | 9618 HK Equity | 3.2 |
| NetEase HK | 9999 HK Equity | 4 |
| Yum China HK | 9987 HK Equity | 0.9 |
| Baozun HK | 9991 HK Equity | 5.8 |
| Baidu HK | 9888 HK Equity | 2.5 |
| Autohome HK | 2518 HK Equity | -0.3 |
| Bilibili HK | 9626 HK Equity | 3.8 |
| Trip.com HK | 9961 HK Equity | 3.5 |
| EDU HK | 9901 HK Equity | 2.1 |
| Xpeng HK | 9868 HK Equity | 2.8 |
| Weibo HK | 9898 HK Equity | 2.6 |
| Li Auto HK | 2015 HK Equity | 0.4 |
| Nio Auto HK | 9866 HK Equity | 3.9 |
| Zhihu HK | 2390 HK Equity | -0.4 |
| KE HK | 2423 HK Equity | -1.2 |
| Tencent Music Entertainment HK | 1698 HK Equity | -1.3 |
| Meituan HK | 3690 HK Equity | 3.2 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | 3.7 |
| TENCENT HOLDINGS LTD | 3.5 |
| Z AI CO LTD | -19.6 |
| HUA HONG GRACE SEMICONDUCTOR | 3 |
| SEMICONDUCTOR MANUFACTURI-H | 3 |
| MEITUAN-CLASS B | 3.2 |
| YANGTZE OPTICAL FIBRE AND-H | 8.1 |
| XIAOMI CORP-CLASS B | 3.2 |
| KINGBOARD LAMINATES HLDG LTD | 0.8 |
| CNOOC LTD-H | 5.2 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | 2.5 |
| EOPTOLINK TECHNOLOGY INC L-A | 5.6 |
| GIGADEVICE SEMICONDUCTO-CL A | -6.7 |
| SUZHOU DONGSHAN PRECISION-A | -10 |
| CAMBRICON TECHNOLOGIES-A | 1.5 |
| UNISPLENDOUR CORP LTD-A | 7.3 |
| CONTEMPORARY AMPEREX TECHN-A | 4.6 |
| JCET GROUP CO LTD-A | -9.9 |
| BOE TECHNOLOGY GROUP CO LT-A | -4.6 |
| MONTAGE TECHNOLOGY CO LTD-A | 3.5 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.77 versus 6.78 yesterday
- CNY per EUR 7.73 versus 7.75 yesterday
- Yield on 10-Year Government Bond 1.75% versus 1.74% yesterday
- Yield on 10-Year China Development Bank Bond 1.79% versus 1.79% yesterday
- Copper Price 0.04%
- Steel Price -0.51%
