Trump’s China Trip Kicks Off As Alibaba & Tencent Report Earnings
6 Min. Read Time
Alibaba Q1 Earnings Overview
Alibaba reported earnings for its March quarter (Fiscal Q4) results after the Hong Kong close, which missed analyst expectations. The results themselves are shocking, as the company plowed E-Commerce revenue into its AI efforts, which pushed it into an operating loss. The management team was very optimistic that the AI investment would pay off during the results call. The company has $59 billion of cash, so no concerns there, though the results are surprising. Yes, the accounting change, AI capex, and a diminishing restaurant delivery war are explainable, though the percentage declines are hard to digest.
- Revenue increased by +3% to RMB 243.38B ($35.28B) from RMB 236B, versus expectations of RMB 246B (excluding the sale of Sun Art and Intime, it would have been 11% YoY).
- Customer Management Revenue (CMR) was up +1% YoY due to an accounting expense change, which would have been 8% YoY previously.
- Adjusted Net Income declined -100% to RMB 86mm from RMB 29.9B versus expectations of RMB 14.4B
- Adjusted EPS declined -95% to RMB 0.08 from RMB 12.52 versus expectations of RMB 6.12
- A $1.05 dividend will be paid to shareholders as of June 11.
Tencent Q1 Earnings Overview
Tencent reported Q1 financial results after the Hong Kong close today that missed on revenue and EPS but beat on net income. Gaming revenue was up +4% YoY to RMB 96.1B, while Marketing Services revenue was up +20% YoY to RMB 38.2B. Business Services revenue jumped by +20%, driven by “increased cloud services…including demand for AI-related services”. The company is grinding along, which explains the initial positive reaction to results.
- Revenue increased by 9% to RMB 196.5B from RMB 180B, versus expectations of RMB 199B.
- Adjusted Net Income increased to 11% RMB 67.9B from RMB 61.3B, versus expectations of RMB 67.8B.
- Adjusted EPS increased to RMB 7.36 from RMB 6.58, versus expectations of RMB 7.43.
- The company repurchased approximately 12.7 million shares on the Hong Kong Stock Exchange, worth approximately HK $7.6 billion.
Key News
Asian equities had a mixed session as South Korea and Thailand rebounded. At the same time, Taiwan and Indonesia, from which MSCI removed several prominent stocks from their indices due to ownership concentration, underperformed.
Treasury Secretary Bessent met with Vice Premier He Lifeng in South Korea today. Maybe they are lining up more deals for Trump and Xi to announce? Summit expectations are so low that it will be interesting to see if we get a better-than-expected outcome as President Trump landed in China today.
Jensen Huang hopping on Air Force One in Alaska is a strong sign IMO. NVIDIA’s CEO appearance appeared to have weighed on Semiconductor Manufacturing (SMIC) stock as it dropped by -3.2% in Hong Kong and -0.1% in Mainland China, though potential clients such as AI LLMs Knowledge Atlas (+36.9%) and Minimax (+18.46%) ripped higher.
In both Mainland China and Hong Kong, tech hardware and semi stocks were higher as Hong Kong internet stocks were largely higher. Interesting to see local investors drive JD up +8.28% today after yesterday’s Q1 financial results versus the US ADR’s +3.14% gain yesterday. Given the same piece of information, local investors were more than 2X more impressed. JD’s results might have helped lift Meituan by 4.1% ahead of its financial results on Friday.
In advance of today’s results, Tencent gained +1.18% and was Hong Kong’s most heavily traded stock by value, and Alibaba fell -0.38% as the 2nd highest, though both were net outflows from Mainland investors via Southbound Stock Connect. Mainland investors sold a total of -$864 million in Hong Kong stocks today.
Auto/EV/hybrid stocks were mixed on an analyst note on weakening domestic demand, though CATL gained +3.3% in Hong Kong and +0.65% in Mainland China. Maybe a Trump-Xi announcement coming for the battery giant? Insurance stocks were weak in both Hong Kong and Mainland China. In Mainland China, semi, tech hardware, software, machinery, and non-ferrous metal stocks were higher. The STAR Board gained +2.69% on semi stock strength as tech leads onshore higher.
MSCI released its pro forma for the month-end index rebalance. Full Truck Alliance (YMM US) will be added to their indices, including EM and China, at the market’s close on May 29th.
One thing that jumped out is that the MSCI All Country World Index (ACWI) has a market cap of $109 trillion! Pro-forma EM weights were driven by the strong performance of Taiwan and South Korea at 23.8% and 17.8%, while China’s poor performance weighed on its allocation to 23.9% from 24%. 577/48.8% of EM’s 1,180 stocks are Chinese stocks.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -0.2% |
| Hang Seng Tech | HSTECH Index | -0.7% |
| Hong Kong Turnover | HKTurn Index | -9% |
| Hong Kong Short Sale Turnover | HKSST Index | -19.5% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 14.9% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 100.898722860792 |
| China (Shanghai) | SHCOMP Index | -0.2% |
| China (Shenzhen) | SZCOMP Index | -0.6% |
| China (STAR Board) | Star50 Index | 0.4% |
| Mainland Turnover | .chturn Index | -8.5% |
| Japan | NKY Index | 0.5% |
| India | SENSEX Index | -1.9% |
| Indonesia | JCI Index | -0.7% |
| Malaysia | FBMKLCI Index | 0.3% |
| Pakistan | KSE100 Index | -1% |
| Philippines | PCOMP Index | -0.2% |
| South Korea | KOSPI Index | -2.3% |
| Taiwan | TWSE Index | 0.3% |
| Thailand | SET Index | -0.4% |
| Singapore | STI Index | 0.1% |
| Australia | AS51 Index | -0.4% |
| Vietnam | VNINDEX Index | 0.3% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 101 | 160 |
| Advancing Stocks | 172 | 1177 |
| Declining Stocks | 333 | 3892 |
| Outperforming Factors | Large Caps, EPS Revision | |
| Underperforming Factors | Growth, Liquidity, Buyback | Liquidity, Quality, Growth |
| Top Sectors | Energy, Materials, Utilities | Utilities, Tech |
| Bottom Sectors | Tech, Communication, Industrials | Communication, Industrials, Discretionary |
| Top Subsectors | Paper/Packaging, Petroleum/Petrochemical, Household Appliances | Land Transport, Power, Electronic Components |
| Bottom Subsectors | Consumer Durables/Apparel, Machinery, Household/Personal Products | Construction Machinery, Internet, Leisure Products |
| Southbound Connect Buys | Alibaba, CIG, Deepexi Tech (Tiny) | N/A |
| Southbound Connect Sells | Hua Hong Semi, Kuaishou, Tencent (Moderate), SMIC, YOFC (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 164 | -0.3 |
| Communication Services | 11 | -1.1 |
| Consumer Discretionary | 28 | -0.45 |
| Consumer Staples | 12 | -0.17 |
| Energy | 6 | 1.72 |
| Financials | 25 | 0.36 |
| Health Care | 16 | 0.11 |
| Industrials | 19 | -0.81 |
| Information Technology | 15 | -1.12 |
| Materials | 14 | 1.07 |
| Real Estate | 1 | -0.44 |
| Utilities | 6 | 0.9 |
| Mainland China Listed | 11 | -0.25 |
| Communication Services | 11 | -1.99 |
| Consumer Discretionary | 26 | -1.31 |
| Consumer Staples | 18 | -1.11 |
| Energy | 11 | -0.48 |
| Financials | 64 | -0.2 |
| Health Care | 29 | -0.05 |
| Industrials | 60 | -1.36 |
| Information Technology | 113 | 0.65 |
| Materials | 58 | -0.23 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -1.6 |
| Alibaba HK | 9988 HK Equity | -0.4 |
| JD.com HK | 9618 HK Equity | -0.1 |
| NetEase HK | 9999 HK Equity | 1.8 |
| Yum China HK | 9987 HK Equity | -0.1 |
| Baozun HK | 9991 HK Equity | 1 |
| Baidu HK | 9888 HK Equity | -0.9 |
| Autohome HK | 2518 HK Equity | -0.3 |
| Bilibili HK | 9626 HK Equity | -1.2 |
| Trip.com HK | 9961 HK Equity | 0.5 |
| EDU HK | 9901 HK Equity | -0.6 |
| Xpeng HK | 9868 HK Equity | 0.2 |
| Weibo HK | 9898 HK Equity | -0.9 |
| Li Auto HK | 2015 HK Equity | -0.6 |
| Nio Auto HK | 9866 HK Equity | 1.4 |
| Zhihu HK | 2390 HK Equity | 0.6 |
| KE HK | 2423 HK Equity | 0.4 |
| Tencent Music Entertainment HK | 1698 HK Equity | -1.5 |
| Meituan HK | 3690 HK Equity | -0.2 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -1.6 |
| KUAISHOU TECHNOLOGY | 1.9 |
| ALIBABA GROUP HOLDING LTD | -0.4 |
| SEMICONDUCTOR MANUFACTURI-H | 0 |
| YANGTZE OPTICAL FIBRE AND-H | 4.5 |
| HUA HONG SEMICONDUCTOR LTD-H | -3.4 |
| POP MART INTERNATIONAL GROUP | -2.7 |
| XIAOMI CORP-CLASS B | -0.8 |
| ZIJIN MINING GROUP CO LTD-H | 1.7 |
| DEEPEXI TECHNOLOGY CO LTD-H | 12.3 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | 8.3 |
| EOPTOLINK TECHNOLOGY INC L-A | 5.1 |
| CAMBRICON TECHNOLOGIES-A | 6.5 |
| MONTAGE TECHNOLOGY CO LTD-A | -3.4 |
| SUZHOU DONGSHAN PRECISION-A | 0.5 |
| JIANGSU ZHONGTIAN TECHNOLO-A | 0.5 |
| VICTORY GIANT TECHNOLOGY -A | -0.7 |
| SUZHOU TFC OPTICAL COMMUNI-A | 3.2 |
| ACCELINK TECHNOLOGIES CO -A | 1.4 |
| CHINA GREATWALL TECHNOLOGY-A | 8.4 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.79 versus 6.79 yesterday
- CNY per EUR 7.94 versus 7.97 yesterday
- Yield on 10-Year Government Bond 1.76% versus 1.76% yesterday
- Yield on 10-Year China Development Bank Bond 1.82% versus 1.83% yesterday
- Copper Price +1.29%
- Steel Price -0.64%
