Trump-Xi Summit Highlights, Markets Hit With Profit Taking
6 Min. Read Time
Key News
Asian equities were mixed overnight, with Korea, Taiwan, and Vietnam outperforming, while Mainland China and Japan underperformed, and Indonesia was closed for Ascension Day. The renminbi (CNY) appreciated (again) to 6.78 versus the US dollar. The only Trump-Xi coverage from Western media appears to be on Xi's Taiwan comments. It really makes you wonder why the Western media is so negative. Let's highlight the positives: President Trump and President Xi appear to be having productive meetings thus far.
- According to Chinese media sources, the Trump-Xi meeting included a dozen US business executives, with Tesla's Elon Musk, Apple's Tim Cook, Nvidia's Jensen Huang, and Boeing's Kelly Ortberg named as attendees.
- China Daily reported President Xi stated: "China and the United States both stand to gain from cooperation and lose from confrontation. We should be partners, not rivals. We should help each other succeed and prosper together".
- Chinese media reported that Premier Li had a meeting with all of the US business executives on the trip.
- President Xi will visit the White House in September, potentially followed by another Trump-Xi meeting at the G20 in Shenzhen.
- The US will lift export controls on Nvidia H200 chips for ten companies, including Alibaba, JD.com, and Tencent.
Lots of positives! US-listed China stocks absolutely ripped on President Trump's arrival in China yesterday, with indications that there will be positive US-China news. Hong Kong and Mainland China opened higher but were hit by profit-taking in growth stocks and subsectors. Arguably, more Nvidia sales are a negative outcome for Chinese semiconductor stocks, which explains the weakness, though "the tall poppy was cut", i.e. outperformers were hit.
Yesterday, Alibaba gained +8.18%, though overnight in Hong Kong, its share class only went up +3.84% today. This played out across numerous stocks with listings in both as profit-taking really weighed on Hong Kong stocks, as Tencent's US listing gained +4.8% yesterday versus the Hong Kong-listed shares, which fell -0.52% today, JD.com gained +7.24% yesterday versus Hong Kong's +1.48%, Baidu +7.55% yesterday versus today's +2.47%.
It was a similar story for dual-listed electric vehicle stocks: Xpeng gained +3.22% yesterday, versus -0.24% in Hong Kong; NIO gained +7.57% yesterday, versus +3.36% in Hong Kong. Was yesterday's US price action a short squeeze? I'd assume that was a factor, though not the only factor. Is light China positioning among US investors, along with purchases of Mainland China and Hong Kong futures and ETFs during US trading hours, also a factor? I think so.
Alibaba and Tencent proved that very smart people run them, as their choice of reporting date was not accidental. The macroeconomic and geopolitical factors overshadowed the microeconomic factors and financial results. Tencent denied a rumor that its AI team might leave, which may have weighed on the stock overnight. It was interesting to see the large outflow from Hong Kong stocks by Mainland investors via Southbound Stock Connect, with a large outflow from Alibaba, despite several analyst price target increases.
Technology hardware and semiconductor stocks took the brunt of the selling in both Hong Kong and Mainland China, along with non-ferrous metals. Semiconductors' weakness overnight weighed on the STAR Board, which fell -2.55%. It is worth pointing out that China's defense stocks were amongst the worst performers overnight
A non-factor today was the economic data release. April New Loans year-to-date (YTD) were RMB 8.59 trillion versus May's RMB 8.60 trillion and estimates of RMB 8.9 trillion. Meanwhile, aggregate financing increased to RMB 15.45 trillion, up from May's RMB 14.83 trillion and estimates of RMB 16.08 trillion.
I anticipate that if the Trump trip continues to deliver good news, US investors will have to rectify their light China positioning. Intra-day, we utilize X to provide updates which can be accessed by following @ahern_brendan and @KraneShares.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0% |
| Hang Seng Tech | HSTECH Index | -0.3% |
| Hong Kong Turnover | HKTurn Index | 10.4% |
| Hong Kong Short Sale Turnover | HKSST Index | 6.4% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 14.3% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -1240.41 |
| China (Shanghai) | SHCOMP Index | -1.5% |
| China (Shenzhen) | SZCOMP Index | -2.1% |
| China (STAR Board) | Star50 Index | -2.5% |
| Mainland Turnover | .chturn Index | 3.9% |
| Japan | NKY Index | -1% |
| India | SENSEX Index | 1.1% |
| Indonesia | JCI Index | -2% |
| Malaysia | FBMKLCI Index | 0% |
| Pakistan | KSE100 Index | -0.7% |
| Philippines | PCOMP Index | 1.1% |
| South Korea | KOSPI Index | 1.8% |
| Taiwan | TWSE Index | 0.9% |
| Thailand | SET Index | 1.4% |
| Singapore | STI Index | -0.2% |
| Australia | AS51 Index | 0.1% |
| Vietnam | VNINDEX Index | 1.4% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 118 | 165 |
| Advancing Stocks | 163 | 1202 |
| Declining Stocks | 336 | 3880 |
| Outperforming Factors | ||
| Underperforming Factors | Growth, Momentum, Liquidity | Liquidity, Momentum, Growth |
| Top Sectors | Discretionary | Staples |
| Bottom Sectors | Materials, Healthcare, Staples | Communication, Real Estate, Materials |
| Top Subsectors | Consumer Discretionary Distribution, Household Appliances, REITs | Marine, Agricultural, Soft Drink |
| Bottom Subsectors | National Defense, Non Ferrous Metal, Tech Hardware | Power Generation Equipment, Aerospace Military, Forest |
| Southbound Connect Buys | Montage Tech, Tencent (Moderate) | |
| Southbound Connect Sells | Alibaba (Very Large), Xiaomi (Large), Hua Hong Semi, SMIC (Moderate), Pop Mart (Small) |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 164 | -0.1 |
| Communication Services | 11 | -0.4 |
| Consumer Discretionary | 28 | 1.61 |
| Consumer Staples | 12 | -0.88 |
| Energy | 6 | -0.86 |
| Financials | 25 | -0.13 |
| Health Care | 16 | -2.15 |
| Industrials | 19 | -0.75 |
| Information Technology | 15 | -0.75 |
| Materials | 14 | -3.81 |
| Real Estate | 1 | 0 |
| Utilities | 6 | -0.85 |
| Mainland China Listed | 11 | -1.84 |
| Communication Services | 11 | -3.72 |
| Consumer Discretionary | 26 | -0.71 |
| Consumer Staples | 18 | 0.23 |
| Energy | 11 | -0.46 |
| Financials | 64 | -0.72 |
| Health Care | 29 | -2.71 |
| Industrials | 60 | -2.38 |
| Information Technology | 113 | -2.46 |
| Materials | 58 | -2.77 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -0.5 |
| Alibaba HK | 9988 HK Equity | 3.8 |
| JD.com HK | 9618 HK Equity | 1.5 |
| NetEase HK | 9999 HK Equity | -1.3 |
| Yum China HK | 9987 HK Equity | -2.7 |
| Baozun HK | 9991 HK Equity | 1.7 |
| Baidu HK | 9888 HK Equity | 2.5 |
| Autohome HK | 2518 HK Equity | 0.1 |
| Bilibili HK | 9626 HK Equity | -1.2 |
| Trip.com HK | 9961 HK Equity | -1.9 |
| EDU HK | 9901 HK Equity | 0.6 |
| Xpeng HK | 9868 HK Equity | -0.2 |
| Weibo HK | 9898 HK Equity | 1.6 |
| Li Auto HK | 2015 HK Equity | 4.3 |
| Nio Auto HK | 9866 HK Equity | 3.4 |
| Zhihu HK | 2390 HK Equity | -0.6 |
| KE HK | 2423 HK Equity | 2.9 |
| Tencent Music Entertainment HK | 1698 HK Equity | -3.1 |
| Meituan HK | 3690 HK Equity | -2.2 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | 3.8 |
| TENCENT HOLDINGS LTD | -0.5 |
| SEMICONDUCTOR MANUFACTURI-H | -3.2 |
| XIAOMI CORP-CLASS B | -0.3 |
| MEITUAN-CLASS B | -2.2 |
| POP MART INTERNATIONAL GROUP | -1.2 |
| CONTEMPORARY AMPEREX TECHN-H | 1.9 |
| HUA HONG SEMICONDUCTOR LTD-H | 0.2 |
| YANGTZE OPTICAL FIBRE AND-H | -2.7 |
| MONTAGE TECHNOLOGY CO LTD-H | -3.7 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | 3.1 |
| MONTAGE TECHNOLOGY CO LTD-A | 7.5 |
| FOXCONN INDUSTRIAL INTERNE-A | 10 |
| VICTORY GIANT TECHNOLOGY -A | 3.2 |
| SUZHOU TFC OPTICAL COMMUNI-A | 10.4 |
| EOPTOLINK TECHNOLOGY INC L-A | 6.2 |
| CAMBRICON TECHNOLOGIES-A | 3.1 |
| ACCELINK TECHNOLOGIES CO -A | 2.9 |
| LUXSHARE PRECISION INDUSTR-A | 3.8 |
| JIANGSU ZHONGTIAN TECHNOLO-A | 1.1 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.78 versus 6.79 yesterday
- CNY per EUR 7.94 versus 7.94 yesterday
- Yield on 10-Year Government Bond 1.76% versus 1.76% yesterday
- Yield on 10-Year China Development Bank Bond 1.83% versus 1.82% yesterday
- Copper Price -0.45%
- Steel Price -0.12%
