By Brendan Ahern,Senior Contributor
Copyright forbes
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Week in Review
Asian equities were mostly higher this week as Hong Kong’s Hang Seng Tech Index, the Philippines, and Indonesia outperformed, while Mainland China’s Shanghai Composite Index and Australia underperformed, ending the week lower.
US-China trade talks progressed this week as representatives met in Madrid and Trump and Xi are expected to announce a deal for a significant investment in TikTok by a consortium of US tech firms.
Nvidia’s sales of its China-specific chips were reported this week to have been lackluster, as domestic firms, including Huawei, Semiconductor Manufacturing International (SMIC), and Alibaba continue to come out with cheaper and effective alternatives.
Search, cloud, AI, and autonomous giant Baidu gained nearly 21% this week, breaking a lackluster performance period for the company’s stock as investors appear to be wising up to its AI prowess.
Asian equities ended the week mixed, as the FTSE Russell and S&P Dow Jones index rebalance raised volumes throughout the region overnight.
Whatever I write here is likely to be meaningless due to the Trump-Xi phone call this morning. Mainland media stated that the call was “held” already, though the outlets I read have not provided any details. The TikTok resolution appears to be a done deal, though we will see whether a Trump-Xi summit is announced.
Liquidity events are a good way to ascertain positioning, as these big index rebalances allow institutions to move capital efficiently. China and Hong Kong were small net sells from FTSE Russell’s index rebalancing, though Hong Kong-listed growth stocks were higher. It is impossible to know whether the rise was owed to foreign investors rebalancing, especially with the upcoming quarter-end.
One factor that lifted HK was the $1.27 billion worth of net buying from Mainland investors via Southbound Stock Connect, though they only accounted for 20% of today’s volume versus the average of 25%. Hong Kong’s most heavily traded stock was Alibaba, which gained +0.44%, as internet stocks had a good day, as JD.com gained +3.35%, Tencent gained only +0.08%, despite announcing the upgrade of its AI workstation Hunyuan 3D Studio.
Autos were mixed. Li Auto fell -1.08%, despite announcing a “strategic cooperation” with electric vehicle (EV) battery giant Contemporary Amperex (CATL), which gained +2.08%.
Macau casino names and tourism-geared companies were also higher, including Trip.com, which gained +1.34%. Non-ferrous metals, mining, and precious metals were all higher in both markets.
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Mainland stocks were off. Semiconductors, insurance, and pharmaceuticals were mostly lower. Meanwhile, Apple supply chain stocks were higher, led by Foxconn, which gained +2.70%, and Luxshare, which gained +4.33%.
The Mainland-listed real estate sector was up +1.97%, making it the top-performing industry on the Mainland, following the Shanghai Municipal Government’s release of the concisely titled “Interim Measures for Shanghai to carry out the pilot project of property tax on some personal housing,” which exempts new home purchases from property taxes. The release also supports the issuance of infrastructure real estate investment trusts (REITs) for “consumer infrastructure projects”. Not to be outdone in the verbose policy release department, the Ministry of Commerce (MoC) and nine government agencies released the concisely titled “Notice on Strengthening the Construction, Expansion, and Upgrading of the First Quarter Convenience Life Circle in Cities”. The opaque “one hundred cities and ten thousand circles by 2030” can be translated as saying that 100 cities will develop 10,000 communities comprised of essential services and daily needs, all within a fifteen-minute walk.
Premier Li will attend the United Nations General Assembly (UNGA) next week in New York City. He will be welcomed to the most fantastic city in the world by its 3rd-world infrastructure!
The State Council will hold a press conference on Monday to review the financial efforts of the 14th Five-Year Plan.
China’s internet stocks’ revenues from the calendar year 2021 compared to analysts’ expectations for the calendar year 2025 indicate revenue growth of +58%. Meanwhile, the average internet stock in our portfolio is down -40% from its 2021 all-time high! Tencent’s revenue has grown by 33% but its stock price remains 7% below its all-time high. Alibaba has grown revenues by 23% but is down 39% from its all-time high. Yes, we have companies like Trip.com, which has grown revenue by 207% and increased its stock price by 88% from its 2021 high, but that is the exception, not the rule. You are more likely to find situations like that of PDD Holdings, whose expected 2025 revenue is 357% higher, but the stock remains down 36% from its all-time high. Alibaba Health has grown revenues by 73% but its stock price is down 75% from its all-time high. It is the same story for JD Health, which has grown revenue by +129% but is -60% from its all-time high. How about ‘dem apples?
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Last Night’s Performance
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Last Night’s Exchange Rates, Prices, & Yields
CNY per USD 7.111 versus 7.11 yesterday
CNY per EUR 8.36 versus 8.38 yesterday
Yield on 10-Year Government Bond 1.88% versus 1.85% yesterday
Yield on 10-Year China Development Bank Bond 1.94% versus 1.93% yesterday
Copper Price 0.05%
Steel Price 0.29%
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