Winning Streak Snapped By Profit Taking

Key News

Asian equities closed mixed, as Japan and India outperformed and the US dollar weakened overnight.

Hong Kong’s four-day winning streak and Mainland China’s three-day winning streak both came to an end with profit taking overnight. Both markets bounced around the room on volumes that were well above their 1-year averages.

It was very interesting that Southbound Stock Connect volumes accounted for 64% of turnover in Hong Kong today. I can’t recall a percentage that high, as Mainland investors poured $673 million into Hong Kong-listed stocks and ETFs, net of selling. Does the high Connect percentage indicate a lack of foreign investor participation? I suspect so, which makes me bullish, as the charts of the Shanghai, Shenzhen, Hang Seng, and Hang Seng Tech all continue to grind higher. So far this year, Southbound buying of Hong Kong stocks is up to $92.86 billion versus 2024’s total of $103 billion, 2023’s total of only $40.70 billion, and 2022’s total of $49.20 billion.

Recent outperformers, including pharmaceutical, brokerage, and insurance stocks, were hit with profit taking on no negative news, while mining and energy outperformed.

In fact, we had positive news from the National Development & Reform Commission (NDRC) that the third round of funds for the consumption subsidies will be allocated in July. The third round will be financed by the issuance of RMB 200 billion worth of ultra-long-dated Treasury bonds.

Hong Kong’s most heavily traded stock was brokerage firm Guotai Junan International, which fell -4.32%, after rising +198% yesterday on its cryptocurrency trading approval. Alibaba fell -2.86% though I am not seeing any news. Alibaba will release its annual report after the close, which will give me something to read on my flight home tonight.

China Travel gained +85% on reports that Hong Kong tourist numbers were strong during May’s Golden Week holiday. Other tourist stocks were up around +1%, though I suspect short sellers got rolled on China Travel’s surge.

JD.com gained +0.23% as founder Richard Liu attends the “Summer Davos” in Tianjin. Shockingly, there has been little Western media coverage of the event, which makes me suspect something good is occurring. Harvard’s Graham Allison stated at the event, “I would be surprised if in the next week or so we do not see a memorandum of understanding (MOU) coming out of the discussions that have been going on between Bessent and He…,” according to the South China Morning Post. I’ve not seen that elsewhere, but it would be a significant catalyst.

Privately-held robotics company Unitree stated that the firm, founded in 2016 with one employee, now has 1,000 employees and RMB 1 billion in annual revenue. If you didn’t catch our Nasdaq bell ringing yesterday, take a look. A Unitree humanoid robot rang the bell!

All in all, a quiet night!

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.17 versus 7.17 yesterday
• CNY per EUR 8.41 versus 8.32 yesterday
• Yield on 10-Year Government Bond 1.65% versus 1.65% yesterday
• Yield on 10-Year China Development Bank Bond 1.69% versus 1.70% yesterday
• Copper Price 0.38%
• Steel Price -0.13%