Trip.com Earnings Review
Trip.com (TCOM US, 9961 HK) reported financial results after the US closed yesterday/before Hong Kong’s opening. Trip.com shares fell by -11.92% in Hong Kong after earnings guidance was a touch light along with margins. After a strong performance run, investors were quick to shoot first. Big picture, it is fascinating that Trip.com had revenue of RMB 35.6 billion in 2019, revenue then fell to RMB 18.3 billion in 2020 but subsequently rebounded in 2024 to RMB 53.3 billion ($7.3 billion). So, the company is making more revenue today than before Covid. Impressive, in my opinion, though clearly, my views are not universally held.
- Revenue increased by +23% year-over-year (YoY) to RMB 12.7 billion ($1.7 billion) versus an estimate of RMB 12.3 billion and Q4 2023’s RMB 10.3 billion.
- Adjusted Net Income was RMB 3 billion ($416 million) versus an estimate of RMB 2.9 billion and Q4 2023’s RMB 2.7 billion.
- Adjusted EPS was RMB 4.35 ($3.59) versus an estimate of RMB 4.19 and Q4 2023’s RMB 4.
- The company announced a new $400 million stock buyback and a $0.30 per share dividend.
Key News
Asian equities were a sea of red as President Donald Trump “appears” to be pushing forward with tariffs on Canada and Mexico, while the Philippines was closed for Revolution Day.
U.S. stocks’ indifference to tariff talk is fascinating to me. U.S.-listed China stocks dramatically fell yesterday after Trump suggested replicating and/or strengthening Biden’s technology export controls. We do not yet know whether this is simply the “Art of The Deal,” which would allow the Hawks to establish the worst-case scenario or actual policy that will be implemented. I believe the former, as, despite all the headlines, the Hong Kong growth and technology stock rally was overdue for a correction and pullback. However, the question remains as to whether investors stay on the sidelines or step in. It is easier to say buy low than to actually do it, though I suspect professional investors, who, based on the below analysis, have no choice but to get involved due to their significant underweight to the space.
One sign that this is simply a negotiation tactic is that Tesla has been allowed to push out its autonomous driving function in China today. Considering Trump’s relationship with Tesla, harming and not helping Tesla would seem logical if we are headed to replicating “The Grapes of Wrath,” i.e. the economic policies that prolonged the Great Depression in the United States.
After the close, Chinese media noted that DeepSeek was launching its R2 AI model, which only highlights the prior administration’s effort to hobble Chinese technology growth, which failed.
Hong Kong stocks were not off remotely as much, as Hong Kong’s most heavily traded stocks by value included Alibaba, down -3.76% versus the U.S. ADR Monday down -10.23%, Tencent, down -2.49% versus its unsponsored ADR down -7.6%, Xiaomi, up +3.1% as electric vehicle (EV) stocks rallied, Semiconductor Manufacturing International (SMIC), down -1.45%, Meituan, down -4.74%, and Li Auto, up +12.52% versus its ADR down -4.01%. Another example would be JD.com, which was down -3.79% in Hong Kong versus its ADR yesterday, which fell -7.33%. Large-cap stocks were off, with insurance, banks, software, telecommunication, and oil all lower on high volumes and poor breath.
Hong Kong volumes have increased significantly since September One factor has been an increase in trading through Southbound Stock Connect, which allows Mainland investors to buy stocks in Hong Kong. Today, 49% of Hong Kong’s volume was from Southbound Connect. Mainland investors bought a healthy $2.8 million worth of Hong Kong-listed stocks via Southbound Stock Connect, and Alibaba saw another major inflow.
The only bigger macroeconomic news was the release of the “Law on the Promotion of the Private Economy” in advance of the Dual Sessions. Mainland China was off as mega-capitalization stocks in banking, energy, beverage, and insurance weighed down on indices. Breadth was off, while volumes were very high at RMB 1.88 trillion. Several banks announced cutting their deposit rates. The Mainland market is clearly indicating more policy support is needed.
We’ve previously hosted Copley Fund Research’s Steven Holden. He tracks the holdings of actively managed funds. He recently posted on LinkedIn a look at 334 actively managed global equity funds’ China allocation. These funds are benchmarked to the MSCI All Country World Index, which had a 66.41% U.S. weight versus 2.68% weight to China as of January 31, 2025. Shockingly, 25% of the funds had ZERO exposure to China, while 89% had less than a 5% exposure. Since bottoming in January 2024, Chinese growth & technology stocks have outperformed the S&P 500 and Nasdaq 100 by 2X. The 4th largest country in ACWI starts with a C and ends in A but isn’t the 2nd largest economy in the world but 10th largest: Canada. Meanwhile, China is only the 5th largest country by weight. It appears that approximately 77% of 344 funds have a weight of less than 3% to China. In my opinion, this means a great deal of dry powder to use to increase an allocation. Check out Steven’s work on LinkedIn and his website, copleyfundresearch.com.
The Hang Seng and Hang Seng Tech indexes fell -1.32% and -1.57%, respectively, on volume that decreased -7.44% from yesterday, which is 221% of the 1-year average. 101 stocks advanced, while 393 declined. Main Board short turnover increased by 2.59% from yesterday, which is 222% of the 1-year average, as 15% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Value and large capitalization stocks fell less than growth and small capitalization stocks. Technology gained +1.68% while consumer discretionary fell -3.28%, communication services fell -2.63%, and consumer staples fell -2.25%. The top sub-sectors were national defense, consumer services, and technology hardware, while consumer discretionary distribution, media, and consumer staples distribution were the worst. Southbound Stock Connect volumes were very high/well above the average as Mainland investors bought a healthy $2,833 million of Hong Kong stocks and ETFs, with Alibaba a large net sell, Tencent and Li Auto a large/moderate net buy, SMIC a moderate net buy, Xiaomi small net buy, China Mobile a small net sell, Meituan and Hua Hong Semi moderate net sells.
Shanghai, Shenzhen, and the STAR Board diverged to close -0.80%, -0.82%, and +0.26%, respectively, on volume down -8.9% from yesterday, which is 166% of the 1-year average. 1,464 stocks advanced, while 3,549 declined. Growth and small capitalization stocks fell less than value and large capitalization stocks. All sectors were negative, led lower by consumer staples down -1.89%, communication services down -1.81%, and materials down -1.37%. Top sub-sectors were led higher by construction machinery, power generation equipment, and industrial machinery, while agricultural, cultural media, and office supplies were worst. Northbound Stock Connect volumes were high/above the average. CNY and the Asia dollar index fell versus the U.S. dollar. Treasury bond prices rallied. Copper gained, and steel fell.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.25 versus 7.25 yesterday
- CNY per EUR 7.62 versus 7.59 yesterday
- Yield on 10-Year Government Bond 1.73% versus 1.76% yesterday
- Yield on 10-Year China Development Bank Bond 1.74% versus 1.77% yesterday
- Copper Price +0.22%
- Steel Price -0.70%
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