The Rotation Continues
5 Min. Read Time
Key News
Asian equities continued to rotate as Hong Kong, India, Vietnam, and Singapore outperformed while AI supply chain stocks led Korea, Taiwan, Japan, and onshore China’s Science and Technology (STAR) Board lower, while Thailand was closed for Asarnha Bucha Day.
We articulated our belief that a rotation could occur from the crowded AI trade in a webinar a week and a half ago titled "AI Momentum & Mean Reversion: Navigating Opportunities in China’s Market". Our belief that an AI pullback or pause was overdue has turned into a significant downturn. The severity of the move is well beyond what we had anticipated. It is difficult to ascertain what inning of the leverage unwind we are in, though SK Hynix's profit miss isn’t going to help sentiment.
Both Hong Kong and Mainland China had a strong day, with good breadth and more advancers than decliners, though volumes were a touch light. Hong Kong was led by internet stocks, including Tencent (+4.29%), which was Hong Kong’s most heavily traded stock by value, Alibaba (+1.43%), as Mainland investors bought $168 million (HK $1.325B) via Southbound Stock Connect, Meituan (+2.21%), and Trip.com (+5.51%).
Electric vehicle stocks had a strong day, led by Xiaomi, which gained +8.95% ahead of tomorrow’s SUV launch, BYD, which gained +4.23%, and Baidu gained +1.38% after announcing its Apollo Go is testing its robotaxi in London. Hong Kong was a very broad rally on light news as markets brushed off talk of the US banning Chinese humanoid robots.
Hong Kong semiconductor stocks were weak, along with Mainland semiconductor and semiconductor equipment stocks, except for CXMT, up +12.66%, while electrical equipment and communication equipment were mixed. Semiconductor weakness weighed on the STAR Board, which fell by -0.87%, a figure that looks tepid compared to peers in Korea, Japan, and Taiwan. Bank stocks were mixed, but otherwise it was a strong day in Mainland China. Quiet day!
Are banning Chinese humanoid robots in the US legitimate, or “The Art of the Deal” and negotiating 101 in advance of the Trump-Xi September summit? The US’ list of “can’t beat ’em, ban ‘em” industries is growing from Chinese EVs and hybrids (even if they are made in America, like Polestar) to open-source AI LLMs and, now, robots. We’ve called the US the “auto archipelago” because consumers worldwide enjoy low-cost, high-quality Chinese EVs and hybrids. Protecting the US auto industry is one thing, but forcing companies to use only US AI LLMs is harder to justify, even under the guise of the AI “race”. A robot ban ignores the reality that Chinese robots imported into the US are then loaded with US tech. One would suspect that Chinese robot companies, like EV and hybrid companies, will simply sell their products elsewhere, as US consumers are forced to buy a higher-cost domestic product. Not sure if that is a win.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 2% |
| Hang Seng Tech | HSTECH Index | 2.8% |
| Hong Kong Turnover | HKTurn Index | 24.6% |
| Hong Kong Short Sale Turnover | HKSST Index | 43.4% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 0.2 |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -713.821583652618 |
| China (Shanghai) | SHCOMP Index | 0.4% |
| China (Shenzhen) | SZCOMP Index | 0.9% |
| China (STAR Board) | Star50 Index | -0.9% |
| Mainland Turnover | .chturn Index | 13.9% |
| Japan | NKY Index | -1.5% |
| India | SENSEX Index | 1.2% |
| Indonesia | JCI Index | -0.6% |
| Malaysia | FBMKLCI Index | 0.2% |
| Pakistan | KSE100 Index | -1% |
| Philippines | PCOMP Index | 0.8% |
| South Korea | KOSPI Index | -6% |
| Taiwan | TWSE Index | -3.8% |
| Thailand | SET Index | -1.2% |
| Singapore | STI Index | 1.7% |
| Australia | AS51 Index | 1% |
| Vietnam | VNINDEX Index | -0.0005 |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 113 | 94 |
| Advancing Stocks | 444 | 3794 |
| Declining Stocks | 78 | 1283 |
| Outperforming Factors | Quality, Buybacks, ESG Score | Buybacks, EPS Revisions, Quality |
| Underperforming Factors | None | Large Caps, Momentum |
| Top Sectors | Staples, Tech, Communication | Communication, Real Estate, Discretionary |
| Bottom Sectors | None | Tech |
| Top Subsectors | Autos, Household & Personal Products, Consumer Staples Distribution | Education, Soft Drinks, Heavy Machinery |
| Bottom Subsectors | Semiconductors | Computer Hardware, Semiconductors, Electronic Components |
| Southbound Connect Buys | Alibaba, Tencent (Large), Z.ai, GigaDevice | N/A |
| Southbound Connect Sells | Xiaomi (Very Large), SMIC (Large), Meituan (Moderate), KB Laminates, YOFC (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | 2.51 |
| Communication Services | 11 | 3.7 |
| Consumer Discretionary | 28 | 2.48 |
| Consumer Staples | 13 | 4.3 |
| Energy | 6 | 1.41 |
| Financials | 25 | 1.31 |
| Health Care | 16 | 1.29 |
| Industrials | 22 | 2.14 |
| Information Technology | 12 | 3.99 |
| Materials | 14 | 1.55 |
| Real Estate | 7 | 2.4 |
| Utilities | 11 | 2.29 |
| Mainland China Listed | 386 | 0.7 |
| Communication Services | 8 | 3.2 |
| Consumer Discretionary | 26 | 2.63 |
| Consumer Staples | 19 | 0.72 |
| Energy | 12 | 0.51 |
| Financials | 64 | 0.63 |
| Health Care | 31 | 1.4 |
| Industrials | 58 | 1.23 |
| Information Technology | 95 | -0.4 |
| Materials | 52 | 1.61 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 4.3 |
| Alibaba HK | 9988 HK Equity | 1.4 |
| JD.com HK | 9618 HK Equity | 1.7 |
| NetEase HK | 9999 HK Equity | 1.8 |
| Yum China HK | 9987 HK Equity | 0.8 |
| Baozun HK | 9991 HK Equity | 3.9 |
| Baidu HK | 9888 HK Equity | 1.4 |
| Autohome HK | 2518 HK Equity | 10 |
| Bilibili HK | 9626 HK Equity | 4.4 |
| Trip.com HK | 9961 HK Equity | 5.1 |
| EDU HK | 9901 HK Equity | 2.5 |
| Xpeng HK | 9868 HK Equity | 4.4 |
| Weibo HK | 9898 HK Equity | 2.9 |
| Li Auto HK | 2015 HK Equity | 9.9 |
| Nio Auto HK | 9866 HK Equity | 3.6 |
| Zhihu HK | 2390 HK Equity | -2.3 |
| KE HK | 2423 HK Equity | 2.5 |
| Tencent Music Entertainment HK | 1698 HK Equity | 4.6 |
| Meituan HK | 3690 HK Equity | 2.2 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | 4.3 |
| XIAOMI CORP-CLASS B | 9 |
| ALIBABA GROUP HOLDING LTD | 1.4 |
| SEMICONDUCTOR MANUFACTURI-H | -2.7 |
| MEITUAN-CLASS B | 2.2 |
| Z AI CO LTD | -0.9 |
| HUA HONG GRACE SEMICONDUCTOR | -1.1 |
| GIGADEVICE SEMICONDUCTOR I-H | -3.2 |
| YANGTZE OPTICAL FIBRE AND-H | -5.9 |
| KINGBOARD LAMINATES HLDG LTD | -6.5 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| VISUAL CHINA GROUP CO LTD-A | 0.7 |
| SHANTUI CONSTRUCTION MACHI-A | 5.2 |
| CXMT CORP | 12.7 |
| ZHONGJI INNOLIGHT CO LTD-A | 4.7 |
| GIGADEVICE SEMICONDUCTO-CL A | -6.8 |
| EOPTOLINK TECHNOLOGY INC L-A | 3.5 |
| SUZHOU DONGSHAN PRECISION-A | -5.7 |
| CAMBRICON TECHNOLOGIES-A | 1.7 |
| CONTEMPORARY AMPEREX TECHN-A | 1.5 |
| ADVANCED MICRO-FABRICATION-A | -6 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.76 versus 6.76 yesterday
- CNY per EUR 7.70 versus 7.69 yesterday
- Yield on 10-Year Government Bond 1.73% versys 1.73% yesterday
- Yield on 10-Year China Development Bank Bond 1.79% versus 1.79% yesterday
- Copper Price -0.25%
- Steel Price +0.13%
