Week in Review
- Asian equities were mostly higher for the week after the US and China announced a 90-day tariff pause for negotiations over the coming weeks.
- Internet earnings season kicked off in earnest this week. JD.com, Tencent, KE Holdings, and NetEase squarely exceeded expectations, while Alibaba missed estimates on its top and bottom line.
- New loans and aggregate financing for April, reported on Wednesday, came in below expectations, explaining the People’s Bank of China’s (PBOC) decision to cut rates last week.
- Mainland-listed shares of battery giant Contemporary Amperex Technology (CATL) were up over +6% this week in anticipation of its listing of shares in Hong Kong next week. We found out this week that CATL and its underwriters plan to list shares at the top end of its initial price range.
- Check out our latest video where Xiabing interviews exporters on the impact of tariffs
Key News
Asian equities were mixed but mostly lower overnight as Indonesia and Australia outperformed while Vietnam and Mainland China underperformed.
Stock Connect volumes were light overnight and for the week. Mainland investors were net sellers of $1.1 billion worth of Hong Kong-listed stocks and ETFs, taking profits from strong moves on the 90-day tariff reduction and a potential US-China comprehensive deal.
China’s State Administration for Market Regulation (SAMR) stated overnight that it will make efforts to curb “rat race competition” among domestic companies. It was referring to solar and E-Commerce companies. Alibaba, Meituan, and JD have all begun to fiercely compete for instant commerce wallet share. Instant commerce refers to food delivery or the delivery of general goods in 30 to 50 minutes. These companies are using massive consumer subsidies to drive adoption along with technology, as Meituan has rolled out drone delivery in multiple cities. The SAMR statement could cause some of them to tap the brakes, though the lower prices ultimately benefit the consumer, so intervention here is likely to be light. The instant commerce race has also caused geographic expansion into faster-growing markets in Western and rural China. Some reports are saying that E-Commerce grew +30% in Western China in 2024.
Related to the instant commerce race, express delivery company ZTO will become part of the Hang Seng Index in Hong Kong.
NetEase continued substantial gains from yesterday on its stellar Q4 earnings.
The electric vehicle (EV) ecosystem was mostly higher overnight. CATL has released a battery that can reach a full charge in about 5 minutes. The fast charge should drive EV adoption, and it is far from what is available here in the US.
Alibaba fell less in Hong Kong overnight than its US shares yesterday on a challenging earnings release. Alibaba may not have benefited as much as its peers, especially JD.com, from trade-in subsidies. Although Alibaba continues to reward its shareholders, buying back $11.9 billion worth of shares in the past year, directing capital toward shareholders and away from investments in technology for growth may have dented its top-line growth. Nonetheless, cloud growth accelerated significantly to 18%, driven by strong adoption of AI models, especially Alibaba’s industry-leading Q-wen. Alibaba may, in future quarters, devote more capital to R&D and investment in growth than in previous quarters, which should benefit its earnings overall. We had some subscribers write in about our report on Alibaba’s earnings from yesterday, in which we highlighted growth in key segments despite the thorough earnings miss. We did not mean to write off the miss, only to say that the company’s focus on shareholder returns and AI was not fully appreciated.
Also weighing on Alibaba was Ant Group’s profit decline of -31%. The decline was driven by the fintech’s investments in AI and other initiatives.
KE Holdings’ Q1 revenue was RMB 23.3B ($3.2B) versus expectations of RMB 22.5B ($3.1B) for Q1. Yesterday, we quoted the annual figure. Mea culpa! Please click here to view the revised post.
Trip.com fell -1.5% before its earnings release on Monday. Meanwhile, China retail sales, industrial production, and real estate sales are expected to be released this weekend.
Bond yields continued to fall on China’s rate cuts and US economic data pointing to rate cuts later this year from the US Fed.
The humanoid robot ecosystem was higher overnight on Elon Musk’s comments that there could be tens of billions of the robots in the future.
New Content
Read our latest article:
New Drivers For China Healthcare: AI Med-Tech Innovation, Cancer Treatment, & Favorable Balance of Trade
Please click here to read
Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
CNY per USD 7.21 versus 7.21 yesterday
CNY per EUR 8.07 versus 8.06 yesterday
Yield on 10-Year Government Bond 1.68% versus 1.68% yesterday
Yield on 10-Year China Development Bank Bond 1.72% versus 1.71% yesterday
Copper Price -0.32%
Steel Price -1.15%
Read the full article here
