Week in Review
- Asian equities were mostly higher in a shortened week for Mainland China and Hong Kong, as Korea and Vietnam outperformed, while Hong Kong and Pakistan underperformed.
- CF Pharmatech, a biotech company, listed shares publicly in Hong Kong for the first time on Wednesday, rising 161% on its debut.
- Mainland China’s markets reopened from a week-long market holiday on Thursday to gains, with particular strength in the technology-oriented STAR Market.
- China’s “Golden Week” holiday saw significant increases in travel data compared to last year and a surge in use of Alibaba’s “Amap” AI-enabled mapping app.
Key News
Asian equities were mostly lower overnight though Vietnam and Korea managed gains, while Mainland China’s STAR Market and Hong Kong underperformed.
Investors appear to have taken profits overnight in recent outperformers, including semiconductors and internet names. There was a rotation into banks, telecom, and real estate overnight, as investors dumped growth in favor of value. Real estate was also supported by an article in the Securities Times, a Mainland financial news source, about new measures to boost real estate demand unleashed by some cities.
Mainland investors were net sellers of Hong Kong-listed stocks and ETFs overnight. However, the net sale was small at only $50 million.
Alibaba’s Chairman Joe Tsai urged the US to reconsider its approach to the AI race with China. He said “There’s no such thing as winning the race. I think it’s a long marathon.” He also commented that adoption of AI is the most important aspect, noting that now 50% of firms in China say they have adopted AI. Alibaba was Hong Kong’s most heavily-traded stock overnight, falling nearly 5%.
The electric vehicle ecosystem and auto stocks were lower despite the Ministry of Industry & Information Technology (MIIT) expanding the scope of tax exemptions for purchases. The new specifications for tax exemption, which broadened the range of vehicles included, will be in place through 2027. We have said that the US electric vehicle is likely to suffer from the expiration of Biden-era tax credits. Meanwhile, China has tax preferences and rebates in effect through 2027.
Materials names, which had done so well yesterday, fell hard today under selling pressure. The sector and subsector leaders and laggards chart looks like a mirror image of yesterday.
Trip.com was an outperformer, gaining +1.43% on positive travel data from the “Golden Week” holiday this week.
The Brooklyn Nets and Phoenix Suns played in Macau today, marking the return of the NBA to China after six years.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
CNY per USD 7.12 versus 7.13 yesterday
CNY per EUR 8.24 versus 8.23 yesterday
Yield on 10-Year Government Bond 1.85% versus 1.85% yesterday
Yield on 10-Year China Development Bank Bond 1.97% versus 1.97% yesterday
Copper Price 0.00%
Steel Price 0.52%