US-China Trade Deal Coming?

Key News

Asian equities cheered Alphabet's results, led higher by Korea on foreign buying, though volumes in the region were shockingly light.

While Mainland China and Hong Kong had very broad rallies, it was interesting that China's AI supply chain stocks, i.e. the "pick and shovels", were mixed to lower in both Hong Kong and Mainland China. Monday's IPO of ChangXin Memory (CXMT) on the Science & Technology (STAR) Board may have been a factor, as investors raise cash to fund their purchase.

A key catalyst today came from the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA), which jointly released the "15th Five-Year Plan for Renewable Energy Development". This policy document lifted clean technology sectors in both markets, including solar, wind, hybrid & fully electric vehicles, and batteries. The strong gains were led by battery giant CATL, which gained +3.69% in Mainland China and +2.79% in Hong Kong. The release stated that "total installed capacity of renewable energy power generation will reach around 3.5 billion kilowatts," and "wind and solar power will exceed 2.8 billion kilowatts, accounting for more than 50% of total installed capacity."

Tencent gained +1.04% and was Hong Kong's most heavily traded stock by value after an analyst defended the company's Q2 gaming projections following yesterday's unprecedented decline. Remember, the company is in its Q2 quiet period, so they can't defend themselves or buy back stock.

Alibaba gained +1.14%, though Mainland investors sold a net -$139 million (HKD 1.01 billion) via Southbound Stock Connect. Both Alibaba and Tencent had their positions reduced by active fund managers in China in favor of hardware plays. One could argue they are late to the AI trend, given the decline began at the conclusion of Q3. With that said, doesn't Alphabet's cloud growth provide a read on Alibaba, Tencent, and Baidu's cloud growth? We'll find out in August!

Baidu gained +2.3% after submitting paperwork to convert its Hong Kong share class to a dual primary listing, which would make it eligible for inclusion in Southbound Stock Connect and thereby available to Mainland investors.

Mainland China had a strong day. The strength was organic, too, as the ETFs favored by the "National Team", i.e. investment firms associated with sovereign wealth, saw light volumes.

After the close, the China Securities Regulatory Commission (CSRC), which is China's financial regulator, announced it held a symposium on "party building and regulatory work". The very long press release notes efforts to "promote the steady increase of long-term funds", "prevent external risk shocks", "deepen reform," and "strengthen corporate governance". Sounds good to me!

The Ministry of Commerce (MoC) held a press conference and Q&A with reporters on first-half economic data, which began with a focus on consumption. Year-over-year (YoY) growth in retail sales is +2.7%, led by services at +5.3% and digital & smart products, which increased 13.4% thanks to special trade-in subsidies. The latter should be good for the electronics-focused JD.com. Tourism is a key element of the 15th Five-Year Plan For Expanding Consumption. Exports and imports have both been strong, as "high-tech products" exports are up 39% YoY.

The MoC acknowledged that "everyone is very concerned about the consumer market data". The MoC believes growth in services has been overlooked, especially growth in tourism spending. Meanwhile, a high base from last year makes for a difficult YoY comparison. Another factor is that many families already own cars, computers, mobile phones, and household appliances, which garner significant attention.

During President Trump's visit to China, both a Trade Council and an Investment Council were formed. These councils are currently "exploring the implementation of a matching tax reduction framework of USD 30 billion". The reciprocal tax reduction arrangement will expand and promote bilateral trade. I highlighted the last line as this news has garnered ZERO attention in Western media.

Mainland media reported that DeepSeek's recent funding round valued the company at $42 billion to $46 billion. JD.com, NetEase, and CATL are counterd among the startups key investors.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	1.3%
Hang Seng Tech	HSTECH Index	0.6%
Hong Kong Turnover	HKTurn Index	-25.3%
Hong Kong Short Sale Turnover	HKSST Index	-34.9%
Short Turnover as a % of Hong Kong Turnover	N/A	0.2
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	-539.73
China (Shanghai)	SHCOMP Index	0.3%
China (Shenzhen)	SZCOMP Index	0.9%
China (STAR Board)	Star50 Index	-3.8%
Mainland Turnover	.chturn Index	-17.2%
Japan	NKY Index	0.5%
India	SENSEX Index	-0.5%
Indonesia	JCI Index	-0.3%
Malaysia	FBMKLCI Index	0.2%
Pakistan	KSE100 Index	-1.7%
Philippines	PCOMP Index	0.2%
South Korea	KOSPI Index	4.4%
Taiwan	TWSE Index	0.1%
Thailand	SET Index	0.1%
Singapore	STI Index	-0.2%
Australia	AS51 Index	0.2%
Vietnam	VNINDEX Index	-0.0005

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	84	89
Advancing Stocks	386	3766
Declining Stocks	146	1306
Outperforming Factors	Value, Momentum, EPS Revision	EPS Revision, Momentum, Value
Underperforming Factors	None	Liquidity, Large Caps
Top Sectors	Materials, Industrials, Financials	Materials, Industrials, Energy
Bottom Sectors	Staples	Communication, Tech, Real Estate
Top Subsectors	Construction Materials, National Defense, Chemical Industry	Energy Equipment, Power Generation Equipment, Electric Power Grid
Bottom Subsectors	Semis, Food, Consumer Staples Distribution	Semis, Computer Hardware, Software
Southbound Connect Buys	Z AI (Moderate)
Southbound Connect Sells	HK Tracker ETF (Very Large), Alibaba, SMIC, Tencent (Large), Hua Hong Semi, YOFC (Moderate)

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	165	1.27
Communication Services	11	0.89
Consumer Discretionary	28	1.55
Consumer Staples	13	-1.41
Energy	6	0.7
Financials	25	1.92
Health Care	16	0.06
Industrials	22	2.33
Information Technology	12	0.31
Materials	14	2.33
Real Estate	7	1.6
Utilities	11	1.86
Mainland China Listed	386	0.22
Communication Services	8	-1.98
Consumer Discretionary	26	0.55
Consumer Staples	19	-0.71
Energy	12	1.35
Financials	64	0.78
Health Care	31	-0.48
Industrials	58	2.74
Information Technology	95	-1.94
Materials	52	2.99

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	1
Alibaba HK	9988 HK Equity	1.1
JD.com HK	9618 HK Equity	0.8
NetEase HK	9999 HK Equity	-1
Yum China HK	9987 HK Equity	2.4
Baozun HK	9991 HK Equity	-2.2
Baidu HK	9888 HK Equity	2.3
Autohome HK	2518 HK Equity	1.1
Bilibili HK	9626 HK Equity	0.5
Trip.com HK	9961 HK Equity	1.5
EDU HK	9901 HK Equity	1.3
Xpeng HK	9868 HK Equity	2.1
Weibo HK	9898 HK Equity	-0.8
Li Auto HK	2015 HK Equity	2.8
Nio Auto HK	9866 HK Equity	1
Zhihu HK	2390 HK Equity	-0.6
KE HK	2423 HK Equity	1
Tencent Music Entertainment HK	1698 HK Equity	0.1
Meituan HK	3690 HK Equity	4.4

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
TENCENT HOLDINGS LTD	1
SEMICONDUCTOR MANUFACTURI-H	-3.4
HUA HONG GRACE SEMICONDUCTOR	-4.2
Z AI CO LTD	-3.6
ALIBABA GROUP HOLDING LTD	1.1
MEITUAN-CLASS B	4.4
YANGTZE OPTICAL FIBRE AND-H	-10.3
KINGBOARD LAMINATES HLDG LTD	-15.3
LENOVO GROUP LTD	3.7
ZIJIN MINING GROUP CO LTD-H	1.8

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
ZHONGJI INNOLIGHT CO LTD-A	-6.7
SUZHOU DONGSHAN PRECISION-A	-5.8
UNISPLENDOUR CORP LTD-A	8.3
EOPTOLINK TECHNOLOGY INC L-A	-7.8
GIGADEVICE SEMICONDUCTO-CL A	-1.2
TONGFU MICROELECTRONIC CO-A	8.1
IEIT SYSTEMS CO LTD-A	-2.8
ZIJIN MINING GROUP CO LTD-A	2.7
JCET GROUP CO LTD-A	1.3
CAMBRICON TECHNOLOGIES-A	-3

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 6.77 versus 6.77 yesterday
• CNY per EUR 7.71 versus 7.72 yesterday
• Yield on 10-Year Government Bond 1.73% versus 1.73% yesterday
• Yield on 10-Year China Development Bank Bond 1.79% versus 1.78% yesterday
• Copper Price -0.09%
• Steel Price +0.23%