Trump & Xi Will Hold AI Talks, Week in Review
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Week in Review
- Asian equities ended the week mixed as Mainland China's (Science & Technology) STAR Board and Taiwan outperformed, while Vietnam and Japan underperformed.
- China's "National Team", i.e. investment firms associated with sovereign wealth, were active in the markets this week, buying the dip in technology hardware stocks from last week.
- Tencent experienced an unfortunate downdraft after an analyst issued a forecast for a gaming revenue decline during the company's Q2 quiet period, meaning that it could not respond to the comment or buy back stock to support its share price.
- ChangXin Memory announced its official IPO date will be Monday on China's STAR Board. The company is expected to be China's largest chipmaker IPO since Semiconductor Manufacturing International (SMIC).
Friday's Key News
Asian equities were mostly lower overnight, though Thailand and Singapore managed gains. Meanwhile, Korea and Japan underperformed.
Mainland China's STAR (Science & Technology) Board held up the best overnight amid a broad market downdraft, thogh still ended the session slightly lower. Meanwhile the onshore Shenzhen Index and the offshore Hang Seng Index were the hardest hit by selling. Volumes were relatively low in Hong Kong, at 85% of the one-year average, as the lack of buyers may have explained the downturn. Although volumes were higher on the Mainland, they were still below the one-year average. Tencent and Alibaba were both sharply lower overnight as there was a clear value bias in both Mainland China and Hong Kong. Mainland investors sold a net -$194 million worth of Hong Kong-listed stocks and ETFs overnight via Southbound Stock Connect.
Investors shot first to ask questions later in selling Alibaba and Tencent overnight on a US Commerce Department investigation into whether China's model providers, including Moonshot, improperly accessed advanced US chips. This is only an initial investigation, which is important to note, and likely is part of the US government's response to pleas by Anthropic to restrict US customers' access to China's AI models. Ultimately, the accusations made by Anthropic likely stem from the steep competition they are seeing. We do not believe the Trump Administration will move to protect their lead in a highly competitve and nascent industry.
Trump announced yesterday that Xi will be visiting him in the US in September for high-level discussions on AI. This is a significant step in a positive direction, and the Department of Commerce's investigation is likely in preparation for these high-level meetings, where the leaders will try to begin to establish global standards for safety and competition in the space.
Health care was resilient overnight, and one of the top-performing sectors in both Hong Kong and Mainland China. China's health care sector has been underallocated to by global investors and has been seeing multiple positive catalysts in recent months, including a surge in the licensing of innovative, China-developed drugs and treatments for distribution abroad. Overnight, an investment bank raised its price targets and forecasts for China's contract research organizations, i.e,. outsourced drug development, such as WuXi Biologics and WuXi Apptec.
China approved nearly 200 new video games for distribution yesterday, which raises our skepticism of the lower growth forecast for Tencent Games, though the developer list in the latest batch of approvals was very diverse, so competition is high. NetEase, Bilibili, and XD were also key beneficiaries of this approvals round.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1% |
| Hang Seng Tech | HSTECH Index | -1.5% |
| Hong Kong Turnover | HKTurn Index | -10.1% |
| Hong Kong Short Sale Turnover | HKSST Index | -2.7% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 0.2 |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -193.89 |
| China (Shanghai) | SHCOMP Index | -1.6% |
| China (Shenzhen) | SZCOMP Index | -2.6% |
| China (STAR Board) | Star50 Index | -0.1% |
| Mainland Turnover | .chturn Index | -12.1% |
| Japan | NKY Index | -2.7% |
| India | SENSEX Index | -0.4% |
| Indonesia | JCI Index | -1.9% |
| Malaysia | FBMKLCI Index | -0.8% |
| Pakistan | KSE100 Index | -0.3% |
| Philippines | PCOMP Index | 0% |
| South Korea | KOSPI Index | -5.7% |
| Taiwan | TWSE Index | -2.7% |
| Thailand | SET Index | 0.2% |
| Singapore | STI Index | 0.1% |
| Australia | AS51 Index | -0.8% |
| Vietnam | VNINDEX Index | -0.0005 |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 85 | 90 |
| Advancing Stocks | 16 (Hang Seng) | 42 (CSI 300) |
| Declining Stocks | 74 (Hang Seng) | 255 (CSI 300) |
| Outperforming Factors | Value | Value |
| Underperforming Factors | Growth | Growth |
| Top Sectors | Financials, Health Care, Energy | Consumer Staples, Financials, Energy |
| Bottom Sectors | Materials, Real Estate, Consumer Discretionary | Real Estate, Health Care, Materials |
| Top Subsectors | Semiconductors, Banks, Telecom | Motorcycles, Telecom, Banking |
| Bottom Subsectors | Non-Ferrous Metals, Consumer Discretionary, Machinery | Internet, Precious Metals, Base Metals |
| Southbound Connect Buys | Hua Hong Grace Semiconductor, SMIC, Z.ai | N/A |
| Southbound Connect Sells | Tencent, Meituan, CNOOC | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -1.65 |
| Communication Services | 11 | -2.31 |
| Consumer Discretionary | 28 | -2.41 |
| Consumer Staples | 13 | -1.31 |
| Energy | 6 | -0.72 |
| Financials | 25 | -0.02 |
| Health Care | 16 | -0.16 |
| Industrials | 22 | -0.92 |
| Information Technology | 12 | -1.97 |
| Materials | 14 | -3.56 |
| Real Estate | 7 | -2.81 |
| Utilities | 11 | -1.65 |
| Mainland China Listed | 386 | -1.89 |
| Communication Services | 8 | -2.41 |
| Consumer Discretionary | 26 | -1.85 |
| Consumer Staples | 19 | -0.83 |
| Energy | 12 | -1.26 |
| Financials | 64 | -0.86 |
| Health Care | 31 | -3.59 |
| Industrials | 58 | -2.01 |
| Information Technology | 95 | -1.62 |
| Materials | 52 | -4.19 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -2.4 |
| Alibaba HK | 9988 HK Equity | -4.3 |
| JD.com HK | 9618 HK Equity | -1.3 |
| NetEase HK | 9999 HK Equity | -1.7 |
| Yum China HK | 9987 HK Equity | -1.9 |
| Baozun HK | 9991 HK Equity | 0 |
| Baidu HK | 9888 HK Equity | -2.3 |
| Autohome HK | 2518 HK Equity | 0 |
| Bilibili HK | 9626 HK Equity | -2.5 |
| Trip.com HK | 9961 HK Equity | -0.8 |
| EDU HK | 9901 HK Equity | -0.8 |
| Xpeng HK | 9868 HK Equity | -3.5 |
| Weibo HK | 9898 HK Equity | -0.9 |
| Li Auto HK | 2015 HK Equity | -2 |
| Nio Auto HK | 9866 HK Equity | -2.8 |
| Zhihu HK | 2390 HK Equity | -0.1 |
| KE HK | 2423 HK Equity | -2.5 |
| Tencent Music Entertainment HK | 1698 HK Equity | -2 |
| Meituan HK | 3690 HK Equity | -0.7 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | -4.3 |
| TENCENT HOLDINGS LTD | -2.4 |
| Z AI CO LTD | 5.6 |
| SEMICONDUCTOR MANUFACTURI-H | 0.8 |
| HUA HONG GRACE SEMICONDUCTOR | 0.3 |
| KINGBOARD LAMINATES HLDG LTD | -7.3 |
| MEITUAN-CLASS B | -0.7 |
| XIAOMI CORP-CLASS B | -1.5 |
| YANGTZE OPTICAL FIBRE AND-H | -3.7 |
| GIGADEVICE SEMICONDUCTOR I-H | 1.5 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -2.4 |
| GIGADEVICE SEMICONDUCTO-CL A | 1.1 |
| TONGFU MICROELECTRONIC CO-A | 9.8 |
| EOPTOLINK TECHNOLOGY INC L-A | -4.3 |
| UNISPLENDOUR CORP LTD-A | -2.4 |
| SUZHOU DONGSHAN PRECISION-A | -3.6 |
| JCET GROUP CO LTD-A | 2.6 |
| MONTAGE TECHNOLOGY CO LTD-A | 3.6 |
| ZIJIN MINING GROUP CO LTD-A | -4.7 |
| NAURA TECHNOLOGY GROUP CO-A | 2.3 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.77 versus 6.77 yesterday
- CNY per EUR 7.70 versus 7.71 yesterday
- Yield on 10-Year Government Bond 1.73% versus 1.73% yesterday
- Yield on 10-Year China Development Bank Bond 1.79% versus 1.79% yesterday
- Copper Price -1.19%
- Steel Price -0.45%
