Key News
It was a quiet night as DeepSeek was by far the topic du jour in the region, though Mainland China (closed until next Wednesday), Indonesia (closed until Thursday), Malaysia (closed until Friday), and Taiwan (closed until next Monday) were closed for Chinese New Year while South Korea is closed until Friday for Korean New Year.
Hong Kong (closed until next Monday) posted a small gain in a half-day on light volumes, led by internet stocks: Tencent up +1.42%, Xiaomi up +3.23%, Alibaba up +1.2%, Meituan down -1%, Baidu up +3.6%, and JD.com down -0.25% after the company announced that it will buy local retail and delivery company Dada Nexus (DADA US) for $2 a share.
DeepSeek’s effect could be felt as utilities and related energy production stocks and subsectors, such as nuclear energy and materials, were weak as AI-driven energy needs may not be as high as anticipated. A Mainland reporter asked DeepSeek how to outperform in the A-shares market. The response was to buy leading companies benefiting from policy support with strong fundamentals and technicals. The fall in US technology stocks was a significant focus, indicating the exposure in the region.
Distressed SOE developer Vanke gained +2.12% as Shenzhen Metro Chairman Xin Jie was named the Chairman of the Board after the company’s CEO resigned. There is an argument that Shenzhen’s local government is taking over and backstopping the company. Interestingly, the idea of nationalizing the property developers might be necessary based on our China/Hong Kong trip. A Mainland media source said that in January, thus far, new home sales had increased by +33% year-over-year in the twenty largest cities. India and China agreed to start direct flights again.
The Year of the Dragon is over! The 1-year/Jan. 26, 2024, to Jan. 28, 2025 return for the Hang Seng was +33%, while the Hang Seng Tech gained +50%, though technically, the Year of Dragon didn’t start until mid-February last year. Regardless, the returns are much better than most investors realize. Higher highs and higher lows are an uptrend! Hopefully that trend continues in the Year of the Snake.
The Hang Seng and Hang Seng Tech indexes gained +0.14% and +0.77%, respectively, on volume down -64.93% from yesterday, which is 38% of the 1-year average. 172 stocks advanced, while 306 declined. Main Board short turnover decreased by -65.43% from yesterday, which is 37% of the 1-year average, as 15% was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Growth and small capitalization stocks outperformed value and large capitalization stocks. The top sectors were technology, up +2.12%, consumer staples, up +1.58%, and communication services, up +1.49%, while materials fell -2.55%, financials fell -1.04%, and energy fell -1.03%. The top sub-sectors were consumer staples, household/personal products, and technology hardware, while national defense, nonferrous metals, and coal were the worst performers. Southbound Stock Connect was closed.
Shanghai, Shenzhen, and STAR Board were closed.
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