Trump-Xi Summit Base Case
6 Min. Read Time
Key News
Asian equities were mixed on light volume, with investors awaiting signals from the Middle East and the Trump-Xi summit. Indonesia outperformed, Hong Kong was clipped by profit-taking after yesterday’s strong move, while Japan remained on holiday.
Hong Kong turnover fell by -26% from yesterday as traders took quick profits on Tencent (-2.35%) and Alibaba’s (-4.36%) strong move yesterday. Unitree gained +0.36% after Elon Musk stated during a CCTV interview that there will be 1 billion robots in 10 years, 10 billion in 15 years, and 100 billion in 20 years. It was a very positive interview. Coincidentally, Chinese domestic media showed Johnny Depp in Shanghai talking to a robot.
For the Trump-Xi Summit, we don’t know for certain if Chinese CEOs are joining President Xi, though the lack of confirmation appeared to weigh on sentiment.
There was chatter that Chinese regulators are looking into Anthropic’s accusation that Deepseek and Kimi used their LLMs to build their LLMs, which hit Z AI (-12.4%) and Minimax (-3.98%). The Chinese regulator’s concern, if the news is true, is that Chinese data is on a US LLM, not to protect Anthropic’s business model. The rumored news likely weighed on Alibaba, though yesterday’s news of a massive 20 GW compute capacity build-out raises capex concerns.
Mainland investors sold -$30 million despite many positive announcements from their cloud conference, including Alibaba Cloud establishing cloud regions in Turkey, Finland, and the Netherlands, and expanding efforts in Malaysia, Germany, the United Arab Emirates, France, and Hong Kong. One highlight from the conference was Qwen Office showcasing dozens of companies using their tool across a wide variety of applications. Alibaba partnered with Honor to launch an AI-enabled phone.
Tencent was a very large net buy of $259 million from Mainland investors on today’s weakness. Baidu fell by -1.06% despite a Mainland media source noting a strengthening in its Kunlun AI chip unit, on reports that an IPO is coming, i.e., a big catalyst. Real estate rallied on rumors that the Ministry of Finance and local governments will subsidize mortgage interest rates for first-time homebuyers, reducing rates by 1% to 2%. An initial round of RMB 100 billion is anticipated, though a national government subsidy isn’t expected at this time. Similar to Hong Kong, there was little place to hide in Mainland Chinese stocks, though the downdraft wasn’t as deep. The National Team’s favored China equity ETFs in China had slightly above average volumes and small inflows (again).
President Xi went wheels up a few hours ago on his way to the United States, as he is expected to land at Andrews Air Force Base tonight. CCTV reported he is joined by “Madame Peng Liyuan, Xi Jinping's wife, Cai Qi, Member of the Standing Committee of the Political Bureau of the CPC Central Committee and Director of the General Office of the CPC Central Committee, Wang Yi, Member of the Political Bureau of the CPC Central Committee and Minister of Foreign Affairs”. When asked about Chinese CEOs joining President Xi during today’s press conference, the Ministry of Foreign Affairs responded, "I have no relevant information." Historically, Xi brings executives to announce business deals as we’ve seen his state visits in the last three years to Brazil, Vietnam, and Saudi Arabia.
In addition to the $30 billion in reciprocal tariffs being rolled back per USTR Greer’s US-China Board of Trade comments below and US-China AI red phone, I am fairly certain Trump & Xi will announce efforts to address fentanyl precursor (ingredients) based on the below developments that occurred today. An easy win that both sides should focus on. The following are not coincidental! There could be two more Trump-Xi meetings this year (APEC in Shenzhen in November and the G20 in Miami).
- US Trade Representative Greer announced the U.S.-China Board of Trade was now operational in order “to ensure stability while optimizing trade in non-sensitive goods between the two countries.” US TR Greer also released via X/Twitter that “President Trump is restoring effective communication channels with the Beijing side. These channels had once fallen into stagnation during the Biden administration.”
- China’s Supreme Court and the Ministry of Public Security issued “Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases Involving Fentanyl-related Substances,” which articulates “conviction and sentencing standards for fentanyl-related crimes." Not sure why it takes 18 articles to describe.
- The Ministry of Commerce announced changes to the “Catalog of Precursors and Chemicals Subject to Control for Export to Specified Countries (Regions)”. Regions that will require export permits include the US, Mexico, Canada, Myanmar, Laos, and Afghanistan.
Hong Kong buybacks announced after the close: Tencent 227,000 shares, Baidu 561,800 shares, Kuaishou 1.302 million shares, and KE Holdings (BEKE) 549,090 shares
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1% |
| Hang Seng Tech | HSTECH Index | -1.3% |
| Hong Kong Turnover | HKTurn Index | -26% |
| Hong Kong Short Sale Turnover | HKSST Index | -19.2% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 0.2 |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 440.48 |
| China (Shanghai) | SHCOMP Index | -0.4% |
| China (Shenzhen) | SZCOMP Index | -0.5% |
| China (STAR Board) | Star50 Index | -0.3% |
| Mainland Turnover | .chturn Index | -17.2% |
| Japan | NKY Index | 1.4% |
| India | SENSEX Index | 0.4% |
| Indonesia | JCI Index | 1.6% |
| Malaysia | FBMKLCI Index | -0.4% |
| Pakistan | KSE100 Index | 0.5% |
| Philippines | PCOMP Index | -0.3% |
| South Korea | KOSPI Index | 0.9% |
| Taiwan | TWSE Index | 0.7% |
| Thailand | SET Index | 0.4% |
| Singapore | STI Index | -0.2% |
| Australia | AS51 Index | 0.1% |
| Vietnam | VNINDEX Index | -0.8% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 69% | 72% |
| Advancing Stocks | 200 | 1749 |
| Declining Stocks | 351 | 3285 |
| Outperforming Factors | None | None |
| Underperforming Factors | Liquidity, Growth, Momentum | ESG Score, Quality, Momentum |
| Top Sectors | Real Estate, Staples, Healthcare | None |
| Bottom Sectors | Discretionary, Communication, Tech | Communication, Energy, Industrials |
| Top Subsectors | Real Estate Management/Development, Construction Materials, Electrical Equipment | Biotech, Fine Chemical, Fiber |
| Bottom Subsectors | Software, Consumer Discretionary Distribution, Paper/Packaging | Heavy Machinery, Cultural Media, Marine |
| Southbound Connect Buys | Tencent (Very Large), HK Tracker ETF (Moderate) | N/A |
| Southbound Connect Sells | KB Laminates (Very Large),Xiaomi (Moderate), Alibaba, Kingboard, Minimax, SMIC, Z AI (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -1.27 |
| Communication Services | 11 | -2.02 |
| Consumer Discretionary | 28 | -2.23 |
| Consumer Staples | 13 | 0.27 |
| Energy | 6 | -1.1 |
| Financials | 25 | -0.48 |
| Health Care | 16 | 0.06 |
| Industrials | 22 | -0.83 |
| Information Technology | 12 | -1.25 |
| Materials | 14 | -0.52 |
| Real Estate | 7 | 1.49 |
| Utilities | 11 | -0.24 |
| Mainland China Listed | 386 | -0.63 |
| Communication Services | 8 | -2.13 |
| Consumer Discretionary | 26 | -0.68 |
| Consumer Staples | 19 | -0.32 |
| Energy | 12 | -1.6 |
| Financials | 64 | -0.62 |
| Health Care | 31 | -0.16 |
| Industrials | 58 | -1.29 |
| Information Technology | 95 | -0.46 |
| Materials | 52 | -0.45 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -2.3 |
| Alibaba HK | 9988 HK Equity | -4.4 |
| JD.com HK | 9618 HK Equity | -0.4 |
| NetEase HK | 9999 HK Equity | -0.5 |
| Yum China HK | 9987 HK Equity | 0.3 |
| Baozun HK | 9991 HK Equity | -0.1 |
| Baidu HK | 9888 HK Equity | -1.1 |
| Autohome HK | 2518 HK Equity | -1 |
| Bilibili HK | 9626 HK Equity | 0.2 |
| Trip.com HK | 9961 HK Equity | 0.1 |
| EDU HK | 9901 HK Equity | 1.1 |
| Xpeng HK | 9868 HK Equity | -0.8 |
| Weibo HK | 9898 HK Equity | -0.1 |
| Li Auto HK | 2015 HK Equity | 2.6 |
| Nio Auto HK | 9866 HK Equity | 1.8 |
| Zhihu HK | 2390 HK Equity | 1.1 |
| KE HK | 2423 HK Equity | 1.4 |
| Tencent Music Entertainment HK | 1698 HK Equity | -0.9 |
| Meituan HK | 3690 HK Equity | -0.5 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -2.3 |
| ALIBABA GROUP HOLDING LTD | -4.4 |
| Z AI CO LTD | -12.4 |
| KINGBOARD LAMINATES HLDG LTD | 11.7 |
| YANGTZE OPTICAL FIBRE AND-H | 2.7 |
| XIAOMI CORP-CLASS B | -3.8 |
| MINIMAX GROUP INC | -4 |
| LENOVO GROUP LTD | 0.5 |
| KINGBOARD HOLDINGS LTD | 5.6 |
| HUA HONG GRACE SEMICONDUCTOR | 0.4 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| VISUAL CHINA GROUP CO LTD-A | -3.4 |
| SHANTUI CONSTRUCTION MACHI-A | 0.4 |
| ZHONGJI INNOLIGHT CO LTD-A | -0.6 |
| CXMT CORP-A | 1.3 |
| HENGTONG OPTIC-ELECTRIC CO-A | -4.2 |
| GIGADEVICE SEMICONDUCTO-CL A | -0.8 |
| EOPTOLINK TECHNOLOGY INC L-A | -0.8 |
| BOE TECHNOLOGY GROUP CO LT-A | 0.3 |
| SUZHOU DONGSHAN PRECISION-A | -2.6 |
| MONTAGE TECHNOLOGY CO LTD-A | 0.7 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.70 versus 6.69 yesterday
- CNY per EUR 7.65 versus 7.68 yesterday
- Yield on 10-Year Government Bond 1.68% versus 1.68% yesterday
- Yield on 10-Year China Development Bank Bond 1.75% versus 1.75% yesterday
- Copper Price +0.10%
- Steel Price -0.13%
