Key News
Asian equities were mixed overnight as Indonesia outperformed, Taiwan underperformed, and South Korea was closed for Independence Day.
Hong Kong and Mainland China bounced around the room on volumes that were down from Friday’s massive MSCI index rebalance driven trading, though still strong despite Trump’s threatened tariffs casting a shadow on today’s trading. Investors are waiting for policy direction from China’s big policy meetings, which kick off tomorrow. In advance of the 14th National People’s Congress, which begins Wednesday, there will be a noon press conference tomorrow to review the agenda.
The six-day Chinese People’s Political Consultative Conference, which starts Tuesday and ends March 10, held an uneventful pre-meeting press conference on Monday. Will China respond to Trump tariffs with big domestic consumption stimulus? Expectations are low.
The “dual sessions” will outline the 2025 economic agenda and tomorrow’s note will include a full overview.
Bubble tea maker Mixue Group gained +43.21% after the company raised $444 million. Amazingly, the company has 45,300 stores since its founding in 1997. The IPO is another signal of the cyclical bottom, as retail investors oversubscribed for the IPO by a mere 5,258 times while HSBC announced Hong Kong investment banking job cuts recently.
Hong Kong volumes have been exceedingly high so far this year, as UBS expects 30 Mainland companies will list this year.
At the Mobile World Congress in Barcelona, Xiaomi launched the 15 Ultra in Europe at a cost of €1,499, which is more than the iPhone 16 pro Max. Xiaomi, which fell -1.74%, was Hong Kong’s most heavily traded stock by value, followed by Alibaba, which gained +2.27% on strong downloads of its Wanxiang large language model, which has exceeded downloads of DeepSeek’s R1 model.
Tencent gained +0.96%, Semiconductor Manufacturing International fell -4.1%, and Meituan, which gained +0.37%.
Autos were mixed as they reported January and February sales. The months were combined due to Chinese New Year. Reporting automakers saw the following results:
- BYD fell -2.15% on rumors it might sell shares at a discount despite electric vehicle (EV) and hybrid sales increasing +90.44% year-over-year (YoY) to 614,679 cars in January and February.
- Li Auto fell -4.85% after selling 26,263 cars in February, which represents an increase of +29.69% YoY, though -12% from January.
- Xpeng gained +1.94% after selling 60,803 cars in January and February, which represents an increase of +375% YoY.
Hardware names were off, including SMIC, which fell -4.1%. Communication equipment and household appliance names were also off, as Midea fell -3.91% and Haier fell -2.42%. Mainland investors bought a healthy net $1.25 billion worth of Hong Kong-listed stocks via Southbound Stock Connect, including Alibaba, which was a large net buy.
February’s Caixin Manufacturing PMI was 50.8 versus expectations of 50.4 and January’s 50.1.
Following President Xi’s meeting with tech entrepreneurs and private sector executives, the People’s Bank of China Governor Pan Gongsheng stated that the central bank will push financial institutions to support the private economy.
Mainland China saw small caps outpace large caps, especially mega-cap banks, insurance, energy and mobile companies. Metals had a strong day while semiconductors and communication equipment companies were weak, including ZTE, which fell -6.52%.
The U.S. House has several bills involving China that will be voted on this week, though it is hard to tell whether they will make it through the Senate. Warren Buffett’s anti-tariff comments were big news in China, as the Wall Street Journal’s front page appears to warn the White House that tariffs are inflationary, which is one reason Biden was voted out. It is perfect timing for us to meet with former U.S. Ambassador to China Terry Branstad on Tuesday, as China announced U.S. farmers will be targeted in tariff retaliation.
The Hang Seng and Hang Seng Tech indexes diverged to close +0.28% and -0.58%, respectively, on volume that decreased -25.69% from Friday, which is 196% of the 1-year average. 259 stocks advanced while 230 stocks declined. Main Board short turnover decreased -29.15% from Friday, which is 172% 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 value factor and small caps outperformed the growth factor and large caps. The top-performing sectors were Materials, which gained +1.95%, Consumer Staples, which gained +1.32%, and Industrials, which gained +0.96%. Meanwhile, the worst-performing sectors were Information Technology, which fell -1.52%, and Health Care, which fell -1.64%. The top-performing subsectors were consumer services, consumer durables, apparel, and consumer staples distribution. Meanwhile, semiconductors, household appliances, and technology hardware were among the worst-performing subsectors. Southbound Stock Connect volumes were high as Mainland investors bought a net $1.25 billion worth of Hong Kong-listed stocks and ETFs, including Alibaba, which was a large net buy, Tencent, and SMIC, which were moderate net buys. Meanwhile, Meituan, XPeng, ZTE, and Xiaomi were small net buys, and Li Auto was a small net sell.
Shanghai, Shenzhen, and the STAR Board diverged to close -0.12%, +0.33%, and -1.52%, respectively, on volume that decreased -13% from Friday, which is 140% of the 1-year average. 3,008 stocks advanced while 1,918 stocks declined. The growth factor and small caps gained more than the value factor and large caps. The top-performing sectors were Materials, which gained +1.55%, Industrials, which gained +0.98%, and Real Estate, which gained +0.8%. Meanwhile, the worst-performing sectors were Information Technology, which fell -1.14%, Consumer Staples, which fell -0.79%, and Utilities, which fell -0.71%. The top-performing subsectors were fine chemicals, leisure products, and base metals. Meanwhile, household appliances, communication equipment, and forest industry were among the worst-performing subsectors. Northbound Stock Connect volumes were above average. Treasury bond yields fell. Copper and steel were basically flat.
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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 7.29 versus 7.28 Friday
- CNY per EUR 7.64 versus 7.54 Friday
- Yield on 10-Year Government Bond 1.70% versus 1.72% Friday
- Yield on 10-Year China Development Bank Bond 1.72% versus 1.75% Friday
- Copper Price +0.01%
- Steel Price +0.03%
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