Trump Welcomes Xi, Though US Yields & Dollar Strength Spoil the Party
6 Min. Read Time
Key News
Asian equities were lower on light volumes amid rising US Treasury yields and a strengthening US dollar, except for Korea and Japan, which returned from holiday in a good mood. India and Mainland China underperformed.
DeepSeek's expected annual revenue doubled year-over-year to $1 billion for 2026, the company announced only "several" months ahead of an IPO in Shanghai's STAR Board. However, the exact timing of its rebut remains unknown. A Mainland media article noted that US and Asian chip makers face a high bar for year-over-year comparisons in revenue and EPS against the backdrop of more chip-making capacity coming online.
A potential factor today was Mainland media noting that the U.S. International Trade Commission (ITC) filed a Section 337 investigation against dynamic random access memory (DRAM) makers, which include several China-based companies, over a patent dispute with Netlist, which is a US-based firm. It is not a major issue, but you can understand how Mainland investors would be confused by Trump's reception of Xi, followed by another arm of the US government, i.e. Congress, filing this. Trump probably was not aware the ITC filing was coming.
The oil price, Treasury yields, and the Trump-Xi meeting were the main factors in last night's market action. Hong Kong and Mainland China were lower amid very light volumes, as investors await results from the Trump-Xi summit and state dinner following an unprecedented welcome for Xi by Trump at Andrews Air Force Base. In both markets, defensive plays including banks, oil & gas, and electricity all outperformed. Meanwhile, AI supply chain stocks, insurance, non-ferrous metals, and healthcare all lagged. Hong Kong held up better, as Alibaba gained +0.18% and Tencent was only off -0.59%. Mainland China was off more than Hong Kong, as the AI supply chain mostly underperformed, including the Science and Technology (STAR) Board, which fell -2.35%.
One factor in domestic AI weakness was Hengton Optic-Electric, which fell -3.66% after announcing it will sell RMB 6.6 billion ($98 million) worth of new shares via a private placement. Beijing's home purchase process for existing homes will be streamlined. The domestic equity ETFs favored by China's "National Team", i.e. investment firms associated with sovereign wealth, had slightly above average volumes as inflows picked up.
President Trump greeted President Xi at Andrews Air Force Base. The last President to greet a foreign leader at AAFB was back in 1962!
Treasury Secretary Bessent announced yesterday that the US-China trade truce, called the Busan Agreement, will be extended to January of 2027. Maybe we will get a bigger announcement from the Trump-Xi meeting later on today? Bessent wrote on Twitter (X): "Today in Washington, Vice Premier He Lifeng and I held substantive discussions on the U.S.-China economic relationship ahead of President Trump's meeting with President Xi. Our discussions continued to focus on securing meaningful commitments that protect American workers, farmers, and businesses while advancing U.S. economic and national security interests."
The Ministry of Commerce reported that the 8th round of "economic and trade consultations" took place yesterday and included their first discussion of AI.
The NDRC announced that gasoline and diesel prices per ton shoul be allowed to increase by CNY 395 and CNY 385, respectively. According to Perplexity, the city of Beijing's RMB 10,725 per ton equals $4.52 a gallon, which is just slightly higher than the US average.
Mainland China will be closed tomorrow for the Mid-autumn Festival, though Hong Kong will be open.
Hong Kong buybacks that took place today, but were announced after the close, included share purchases from Tencent, which bought 230,000 shares, Baidu, which bought 576,400 shares, Kuaishou, which bought 490,000 shares, and KE Holdings, which bought 544,065 shares.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -0.3% |
| Hang Seng Tech | HSTECH Index | -0.4% |
| Hong Kong Turnover | HKTurn Index | -13.4% |
| Hong Kong Short Sale Turnover | HKSST Index | -14.1% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 21% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 370.34 |
| China (Shanghai) | SHCOMP Index | -1.2% |
| China (Shenzhen) | SZCOMP Index | -2% |
| China (STAR Board) | Star50 Index | -2.3% |
| Mainland Turnover | .chturn Index | -6.1% |
| Japan | NKY Index | 0.8% |
| India | SENSEX Index | -1.7% |
| Indonesia | JCI Index | -1.2% |
| Malaysia | FBMKLCI Index | -0.2% |
| Pakistan | KSE100 Index | -1% |
| Philippines | PCOMP Index | -1.1% |
| South Korea | KOSPI Index | 0.9% |
| Taiwan | TWSE Index | -0.3% |
| Thailand | SET Index | -0.5% |
| Singapore | STI Index | -0.5% |
| Australia | AS51 Index | -0.7% |
| Vietnam | VNINDEX Index | -1.5% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 60 | 67 |
| Advancing Stocks | 196 | 1068 |
| Declining Stocks | 366 | 3946 |
| Outperforming Factors | Low Volatility | Low Volatility |
| Underperforming Factors | Liquidity, EPS Revision, Growth | Growth, EPS Revision, Liquidity |
| Top Sectors | Energy, Utilities, Financials | Energy, Utilities |
| Bottom Sectors | Materials, Healthcare, Materials | Materials, Technology, Healthcare |
| Top Subsectors | Petroleum/Petrochemical, Paper/Packaging, HK Utilities | Forest, Education, Oil/Gas |
| Bottom Subsectors | Electrical Equipment, Non-Ferrous Metal, Pharmaceuticals/Biotech | Precious Metals, Electronic Components, Biotech |
| Southbound Connect Buys | HS Tech ETF, HS China Enterprises ETF, Tencent, HK Tracker ETF (Moderate) KB Laminates, YOFC (Small) | |
| Southbound Connect Sells | SMIC (Small) |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -0.42 |
| Communication Services | 11 | -0.53 |
| Consumer Discretionary | 28 | -0.28 |
| Consumer Staples | 13 | 0.07 |
| Energy | 6 | 1.28 |
| Financials | 25 | 0.2 |
| Health Care | 16 | -2.55 |
| Industrials | 22 | -0.47 |
| Information Technology | 12 | -0.24 |
| Materials | 14 | -2.69 |
| Real Estate | 7 | -1.08 |
| Utilities | 11 | 0.97 |
| Mainland China Listed | 386 | -1.92 |
| Communication Services | 8 | -1 |
| Consumer Discretionary | 26 | -0.67 |
| Consumer Staples | 19 | -1.29 |
| Energy | 12 | 0.86 |
| Financials | 64 | -0.51 |
| Health Care | 31 | -2.7 |
| Industrials | 58 | -1.79 |
| Information Technology | 95 | -3.03 |
| Materials | 52 | -3.15 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -0.6 |
| Alibaba HK | 9988 HK Equity | 0.2 |
| JD.com HK | 9618 HK Equity | -0.5 |
| NetEase HK | 9999 HK Equity | 1.2 |
| Yum China HK | 9987 HK Equity | -0.8 |
| Baozun HK | 9991 HK Equity | 0 |
| Baidu HK | 9888 HK Equity | -2.5 |
| Autohome HK | 2518 HK Equity | 2.9 |
| Bilibili HK | 9626 HK Equity | -1.9 |
| Trip.com HK | 9961 HK Equity | -3.1 |
| EDU HK | 9901 HK Equity | 2.6 |
| Xpeng HK | 9868 HK Equity | -0.4 |
| Weibo HK | 9898 HK Equity | -0.9 |
| Li Auto HK | 2015 HK Equity | 1.1 |
| Nio Auto HK | 9866 HK Equity | -1.7 |
| Zhihu HK | 2390 HK Equity | 0.7 |
| KE HK | 2423 HK Equity | -0.3 |
| Tencent Music Entertainment HK | 1698 HK Equity | 0.1 |
| Meituan HK | 3690 HK Equity | -0.8 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| SENSETIME GROUP INC-CLASS B | 4.4 |
| SUNAC CHINA HOLDINGS LTD | -0.8 |
| COUNTRY GARDEN HOLDINGS CO | 1.6 |
| IND & COMM BK OF CHINA-H | 1.6 |
| GCL TECHNOLOGY HOLDINGS LTD | -2 |
| CHINA CONSTRUCTION BANK-H | 0.2 |
| CHINA PETROLEUM & CHEMICAL-H | 0.9 |
| BANK OF CHINA LTD-H | 0.7 |
| HORIZON ROBOTICS INC | 2.2 |
| AGRICULTURAL BANK OF CHINA-H | 1.8 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| BOE TECHNOLOGY GROUP CO LT-A | -2.8 |
| 5I5J HOLDING GROUP LTD-A | -5.2 |
| CHINA VANKE CO LTD -A | -4.1 |
| WINTIME ENERGY GROUP CO L-A | -2.6 |
| HARBIN PHARMACEUTICAL GRP-A | -10 |
| GREENLAND HOLDINGS CORP LT-A | -5.3 |
| SENSTEED HI-TECH GROUP-A | -2.5 |
| WORLD UNION GROUP INCORPOR-A | 2.8 |
| ZOTYE AUTOMOBILE CO LTD-A | -7.3 |
| SUZHOU VICTORY PRECISION-A | -5.4 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.71 versus 6.70 yesterday
- CNY per EUR 7.63 versus 7.65 yesterday
- Yield on 10-Year Government Bond 1.67% versus 1.68% yesterday
- Yield on 10-Year China Development Bank Bond 1.76% versus 1.75% yesterday
- Copper Price -0.51%
- Steel Price -0.19%
