Key News
Asian equities had a strong day led by Hong Kong after US-listed China ADRs rose, while Japan, India, and Malaysia saw gains, though Indonesia fell.
Hong Kong grinded higher on strong volume and strong breadth, as advancers handily outpaced decliners by nearly 4 to 1, while Mainland China bounced around the room. This morning’s BofA fund manager survey noted a big decline in US equity allocations while there were increases in Europe and emerging markets. US-listed China stocks and European ETFs have not seen significant flows year-to-date (YTD), possibly indicating that US-based investors haven’t adjusted their portfolios versus foreign investors repatriating capital. It’s hard to say, though, that the geopolitical narrative is likely a factor preventing more US investors from allocating.
It is interesting how little media coverage there was of President Trump’s comment overnight that President Xi will visit Washington DC “very soon”. That trip and a subsequent trade deal could dissipate the geopolitical headwinds.
Hong Kong-listed internet stocks had a strong day after yesterday’s State Council, the highest level of the Chinese government, release emphasizing domestic consumption. Alibaba led the way higher, up +5.83%, while Tencent gained +3.15% ahead of their financial results tomorrow. The highest level of the Chinese government telling you they are focused on domestic consumption is not subtle. Several big corporate announcements were a factor today, including:
- NIO gained +8.95% in Hong Kong, while CATL gained +0.39% in Mainland China after announcing a partnership to build out NIO’s battery swap network. CATL will invest RMB 2.5 billion in NIO’s battery swapping unit.
- BYD gained +4.10% and +1.14% in Hong Kong and Mainland China, respectively, after announcing its new electric vehicles (EVs) can be charged in 5 minutes.
- Li Auto gained +6.76% after announcing its Mind VLA, which, according to Bloomberg, allows for “vision-language-action autonomous driving.”
- Baidu gained +12.22% after its artificial intelligence (AI) release yesterday.
- Wuxi Biologics gained +5.08%, and Wuxi AppTec gained +10.54% after strong earnings results and 2025 guidance.
- Appliance maker Midea Group gained +10.01% in Hong Kong and +4.31% in Mainland China after it announced it is working on humanoid robots.
- Xiaomi gained +3.32% after it released Q4 and 2024 financial results that beat expectations after the Hong Kong close.
After the Hong Kong close, online real estate company KE Holdings (BEKE US) beat on revenue but missed on adjusted net income and adjusted EPS. Before the US market opened, Tencent Music Entertainment (TME US) beat analyst expectations on revenue, adjusted net income, and adjusted EPS. Southbound Stock Connect was a rare net sell, as Alibaba saw profit taking. Chinese Treasury bonds rallied after selling off yesterday. Reuters listed the US and global CEOs attending next week’s China Development Forum in Beijing, which includes a meeting with President Xi. I’ll put the article up on Twitter/X, though notable corporate attendees include FedEx, Qualcomm, Citadel, Blackstone, Pfizer, Mastercard, and Chubb.
The Hang Seng and Hang Seng Tech indexes gained +2.46% and +3.96%, respectively, on volume up +16.79% from yesterday, which is 177% of the 1-year average. 392 stocks advanced, while 85 declined. Main Board short turnover increased by +10.54% from yesterday, which is 151% of the 1-year average, as 13% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The growth factor and large capitalization stocks outperformed the value factor and small capitalization stocks. All sectors were positive, led by Consumer Discretionary, which was up +4.40%, Communication Services, which was up +3.41%, and Materials, which gained +3.35%. The top-performing subsectors were household appliances, consumer services, and automobiles. Meanwhile, household/personal products were the worst-performing subsector. Southbound Stock Connect volumes were 4x pre-stimulus levels as Mainland investors sold -$141 million of Hong Kong-listed stocks and ETFs, led by Xiaomi, which was a moderate net buy, SMIC, Kuaishou, and Dobot, which were small net buys. Meanwhile, Tencent and Li Auto were small net sells, Meituan was a moderate net sell, and Alibaba was a large net sell.
Shanghai, Shenzhen, and the STAR Board were up +0.11%, +0.49%, and +0.61%, respectively, on volume that decreased -3.39% from yesterday, which is 128% of the 1-year average. 2,460 stocks advanced, while 2,447 declined. The growth factor and small capitalization stocks outperformed the value factor and large capitalization stocks. The top-performing sectors were Consumer Discretionary, which gained +1.03%, Health Care, which gained +0.93%, and Information Technology, which gained +0.85%. Meanwhile, Consumer Staples fell -0.63%, Utilities fell -0.44%, and Energy fell -0.34%. The top-performing subsectors were precious metals, motorcycles, and ports. Meanwhile, forest industry, soft drinks, and construction were among the worst-performing subsectors. Northbound Stock Connect volumes were above average. CNY and the Asia Dollar Index barely fell versus the US dollar. Treasury bond prices gained. Copper rose, and steel fell.
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Read our latest article:
2025 China Outlook: A Recipe For Re-Rating
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.22 versus 7.23 yesterday
- CNY per EUR 7.90 versus 7.89 yesterday
- Yield on 10-Year Government Bond 1.89% versus 1.90% yesterday
- Yield on 10-Year China Development Bank Bond 1.93% versus 1.94% yesterday
- Copper Price +0.30%
- Steel Price -1.05%
Read the full article here
