Kuaishou Q4 Earnings Review
Online video platform and social media company Kuaishou Technology (1024 HK) reported Q4 and 2024 financial results after the Hong Kong market closed overnight. The company’s full-year 2024 results were strong as revenue rose by +12% year-over-year (YoY), adjusted net income rose by +72%, and adjusted EPS rose by +74%, though Q4 numbers were a touch light. The press release and conference call were all about AI integration, as “users can now generate premium videos with a simple prompt or picture” using the company’s Kling AI 1.6 model. In the Q&A portion of the call, an analyst noted that the government mentioned its artificial intelligence model at the National People’s Congress and CPPCC press conference, which is interesting. The Q&A was all about AI, though, and the company’s ecommerce efforts are doing well as more KOLs (key opinion leaders) sell goods using videos.
- Revenue increased by +8.7% to RMB 35.38 billion from 2023’s Q4 RMB 32.56 billion versus analyst expectations of RMB 35.73 billion.
- Adjusted Net Income increased by +7.8% to RMB 4.70 billion from 2023’s Q4 of RMB 4.36 billion versus analyst expectations of RMB 4.69 billion.
- Adjusted EPS increased by +9% to RMB 1.04 from 2023’s Q4 of RMB 0.93 and versus analyst expectations of RMB 1.07.
Key News
Asian stocks were higher today except for Hong Kong, following President Donald Trump’s statement that countries that import Venezuelan oil could be hit with 25% tariffs, which is an unsubtle code for China.
Driving to the train station this morning, the radio reminded me that markets are considering tariff talk, “Bad Medicine,” Bon Jovi’s 1988 hit, as U.S. futures roll over Tuesday morning. I still believe the Art of the Deal might provide a better-than-expected tariff outcome, which would be a positive catalyst for Mainland China and Hong Kong stocks, in my opinion.
Hong Kong’s sell-off was driven by growth stocks and recent outperformers, as headlines warn of a “correction.” As we mentioned Monday, the Hang Seng Index hit a 52-week high last Wednesday, and the Hang Seng Tech Index did the same last Tuesday. Everything you’ll see today speaks to the “correction” following a strong +20% year-to-date (YTD) move in the Hang Seng Index and the Hang Seng Tech Index, which is up +28% YTD. However, this rally didn’t start in mid-January 2025 with the DeepSeek news. Rather, it started in mid-January of 2024, when the final China bull was slaughtered in the final derivative-induced meltdown. From Jan. 22, 2024, to today’s close, the Hang Seng is up +64%, and the Hang Seng Tech Index is up +83%. The S&P and Nasdaq 100 are up 20.83% and +17.57%, respectively, from Jan. 22, 2024 to Monday’s close. There were a few culprits for today’s Hong Kong fall. It is worth noting Shanghai and Shenzhen were flat and barely off, though they’ve not risen nearly as much year-to-date (YTD), but still up +26% and 29%, respectively, since Jan. 22, 2024.
Xiaomi (1810 HK) fell by -6.32% after announcing Monday that it will raise $5.3 billion by selling 750 million shares. It is worth noting that Mainland investors bought a massive HKD 8.48 billion worth of Xiaomi stock via Southbound Stock Connect.
Sunny Optical (2382 HK) fell by -10.05% despite announcing annual revenue growth of +20.9% YoY and net profit growth of +145%. As Bloomberg reports, “the company warned of market restructuring due to a capacity glut.”
BYD (1211 HK and 002594 CH) fell by -3.52% in Hong Kong and by -1.54% in Mainland China despite great results IMO.
Alibaba (9988 HK) fell by -3.84% after Joe Tsai, during an interview at the HSBC Global Investment Summit, stated that the massive data center buildout might not be “entirely necessary.” However, Tsai pointed out the importance of the signaling from President Xi’s meeting with tech entrepreneurs.
Overall, it was a rough night, but corrections are healthy and to be expected. Mainland China held up much better except for technology hardware, semiconductors, automobiles, and computer stocks. Following Monday’s Reuters report of Vice Premier He Lifeng meeting with the CEOs of Apple, Pfizer, Mastercard, Cargill, Eli Lilly, Medtronic, and Corning, today he met with Blackstone Chairman Stephen Schwarzman. Commerce Minister Wang Wentao was busy meeting with Apple CEO Tim Cook, Qualcomm CEO An Meng and Boeing’s Brendan Nelson. Amazing how well business people get along with one another!
I recently caught famed tech investors Bill Gurley and Brad Gerstner’s podcast titled BG², which I recommend. The March 1st release reviewed X/Twitter’s Grok 3, China, DOGE, and public market pullback. They spoke about the Biden administration’s failed efforts to slow/harm China’s technological advance through export controls. They articulated viewing the world in a “you win, I lose” mentality made no sense to them though all investors hate capital controls. Take a listen for yourself.
The Hang Seng and Hang Seng Tech indexes fell -2.35% and -3.82%, respectively, on volume that increased +22% from yesterday, which is 172% of the 1-year average. Eighty-nine stocks advanced, while 390 stocks declined. Main Board short turnover increased by +4.86% from yesterday, which is 166% 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 “outperformed,” i.e., fell less than growth and small capitalization stocks. Materials gained +0.12% and constituted the only positive sector, as Information Technology fell by -6.09%, Consumer Discretionary fell by -3.79%, and Communication Services fell by -2.15%, making up the worst-performing sectors. The top-performing subsectors were national defense, real estate investment trusts and nonferrous metals. Meanwhile, technology hardware, consumer durables, apparel, and automobiles were among the worst-performing subsectors. Southbound Stock Connect volumes were 3x pre-stimulus levels, as Mainland investors bought a net $1.8 billion worth of Hong Kong-listed stocks and ETFs, including Xiaomi, which was a very large net buy, and Meituan, which was a moderate net buy. Meanwhile, they were sellers of Tencent, Alibaba, Semiconductor Manufacturing International (SMIC), Xpeng, and China Mobile.
Shanghai, Shenzhen, and the STAR Board diverged to close flat, -0.57% and -1.36%, respectively, on volume that decreased -13% from Monday, which is 105% of the 1-year average. 2,195 stocks advanced, while 2,795 stocks declined. Value and small capitalization stocks “outperformed,” i.e., fell less than growth and large capitalization stocks. The top-performing sectors were Utilities, up +1.25%; Energy, up +0.99%; and Materials, up +0.74%. Meanwhile, the worst-performing sectors were Information Technology, down -1.72 %; Consumer Discretionary, down -0.82%; and Communication Services, down -0.72%. The top-performing subsectors included coal and fertilizers. Meanwhile, internet services, computer hardware, and communication equipment were among the worst-performing subsectors. Northbound Stock Connect volumes were above average. CNY and the Asia Dollar Index were off slightly versus the U.S. dollar. Treasury bond prices rose. Copper and steel rose.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.26 versus 7.25 yesterday
- CNY per EUR 7.84 versus 7.85 yesterday
- Yield on 10-Year Government Bond 1.82% versus 1.84% yesterday
- Yield on 10-Year China Development Bank Bond 1.85% versus 1.85% yesterday
- Copper Price +0.94%
- Steel Price +0.88%