Alibaba’s Monetization Drives Stock Price, Domestic Investors Beg for “Jia You”
Main news
Asian stocks had a good day despite a stronger US dollar, helped by outperformance from Japan, Hong Kong and South Korea. Meanwhile, mainland China and the Philippines underperformed, and Thailand used a public holiday to celebrate the birthday of His Majesty King Maha Vajiralongkorn Phra Vajiraklaochaoyuhua.
It was a quiet summer night with low volumes despite interest rate announcements from global central banks this week.
Alibaba gained +4.72% to become Hong Kong’s most traded stock by value after announcing a 0.6% service fee for merchants on its e-commerce site Taobao. The move will have a positive impact on Q3 revenue, net income, and earnings per share (EPS). Our team was treated to a demo of Taobao’s new AI tools for merchants, which were quite comprehensive and offered to merchants for free at the time. A sell-side analyst also noted Alibaba’s potential inclusion in Southbound Stock Connect in September, which we discussed at length in our webinar last week.
After Alibaba, we find Tencent, which gained +1.07%, China Construction Bank, which gained +1.3%, the energy giant CNOOC, which gained +3.52%, and Meituan, which gained +0.74%.
Internet stocks outperformed, although many hardware stocks were weak after Apple fell in China’s sales rankings, including supplier Sunny Optical, which fell -3.49%. Semiconductors were also weaker, after the recent wave of volatility in that sector.
Real estate underperformed in Hong Kong, where it fell -0.59%, and in mainland China, where the sector fell -2.57%, with troubled developer Country Garden falling -1.92% after its liquidation was postponed until January by a Hong Kong court.
Hong Kong shopping mall operator Whaf Holdings’ weak results sent its shares down -7.1%.
The national team’s favorite ETFs saw low volumes, except for a flurry of activity late in the day. The national team’s favorite ETFs saw low volumes, except for a flurry of activity late in the day.
China’s 10-year Treasury yield hit a fresh 52-week low of 2.15%. June industrial profits rose +3.6% year-on-year from +0.7% in May, although the release did not appear to have any effect on the market.
Fuyao Glass (3606 HK) fell -6.99% after, according to Bloomberg, “U.S. government agents searched some of Fuyao’s facilities following an investigation into a third-party labor service provider.” The company, which was featured in the film American factorydenied being the target, as 28 locations were raided over potential labor violations.
As an amateur ping pong/table tennis player, watching the Olympic players smash the ball is incredible to me. Amazing hand-eye coordination! Chinese fans cheer on their players by shouting “jia you,” which literally means “add oil,” i.e. “step on the gas.” Hopefully, policymakers will remember this term at the next Politburo meeting. Last week’s subsidies for household appliances and automobiles represented the first post-Zero Covid fiscal stimulus.
The Hang Seng and Hang Seng Tech indices gained +1.27% and +0.66%, respectively, on volume down -19.05% from Friday, or 82% of the 1-year average. 238 stocks advanced while 221 stocks declined. Main Board short turnover volume decreased -47.36% from Friday, or 68% of the 1-year average, as 14% of the turnover volume is short turnover volume (Hong Kong short turnover volume includes ETF turnover volume, which is determined by market makers’ ETF coverage). Value and large caps outperformed growth and small caps. The best-performing sectors were consumer discretionary, which gained +1.59%, financials, which gained +1.26%, and technology, which gained +1.16%. Meanwhile, healthcare fell -1.08%, real estate fell -0.58%, and consumer staples fell -0.54%. The best performing subsectors were retail, energy services, and banks. Meanwhile, automotive, food and beverage, and semiconductors were among the worst performers. Southbound Stock Connect volumes were light, with mainland Chinese investors buying a net $95 million in Hong Kong-listed stocks and ETFs, including Tencent, which was a moderate net buy, and CNOOC, which was a small net buy, and a moderate/large net sell in the Hong Kong Tracker ETF.
Shanghai, Shenzhen and the STAR Board diverged to close +0.03%, -0.47% and -1.70%, respectively, on volume down -3.27% from Friday, which is 72% of the year-to-date average. 2,208 stocks advanced while 2,606 declined. Value and large caps outperformed growth and small caps. The best-performing sectors were Financials, which gained +0.69%, Utilities, which gained +0.33%, and Communication Services, which gained +0.29%. Meanwhile, Real Estate fell -2.55%, Health Care fell -1.85% and Consumer Staples fell -1.84%. The best-performing sub-sectors were Highways, Aerospace/Military and Banking. Meanwhile, building materials, construction machinery and power generation equipment were among the worst performers. Northbound Stock Connect volumes were weak, with foreign investors being net sellers of mainland stocks, including CATL, Kweichow Moutai and Weichai Power. Meanwhile, ICBC, Cypc and Cambricon were small net buyers. 10-year Treasury bonds gained. The CNY and the Asian dollar index fell against the US dollar. Copper gained while steel fell.
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Last night’s performance
Last night’s exchange rates, prices and yields
- CNY for USD 7.26 vs 7.22 yesterday
- CNY for EUR 7.86 vs 7.84 yesterday
- 10-year government bond yield 2.16% vs. 2.22% yesterday
- China Development Bank 10-year bond yield: 2.23% vs. 2.26% yesterday
- Copper price: 0.34%
- Steel prices: -0.50%
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