Alibaba Monetization Lifts Stocks, Domestic Investors Beg ‘Jia You’

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Asian shares had a good day despite a stronger U.S. dollar, as Japan, Hong Kong and South Korea outperformed. Meanwhile, mainland China and the Philippines were weaker, while Thailand was free from trade, celebrating the birthday of His Majesty King Maha Vajiralongkorn Phra Vajiraklaochaoyuhua.

It was a quiet summer night with light trading volumes despite global central bankers announcing interest rates this week.

Alibaba gained +4.72% to become the most traded stock in Hong Kong by value after announcing a 0.6% service fee for sellers on its Taobao E-Commerce website. This move will have a positive impact on Q3 revenue, net income and earnings per share (EPS). Our team was given a demo of Taobao’s new AI-based seller tools, which were fairly comprehensive and offered to sellers for free at the time. The sell-side analyst also noted Alibaba’s potential inclusion in Southbound Stock Connect in September, which we discussed in detail in our webinar last week.

Alibaba was followed by Tencent, up 1.07%, China Construction Bank, up 1.3%, energy giant CNOOC, up 3.52%, and Meituan, up 0.74%.

Internet-related names fared best, although many hardware-related names were weak after Apple fell in the China sales rankings, led by supplier Sunny Optical, which fell 3.49%. Semiconductor-related names also fared weaker after the sector’s recent period of volatility.

Property fared poorly in Hong Kong, down 0.59%, and in mainland China, where the sector fell 2.57%, with troubled developer Country Garden down 1.92% as its liquidation was postponed until January by a Hong Kong court.

Weak results for Hong Kong shopping mall operator Whaf Holdings sent shares down 7.1%.

Overseas favorites Kweichow Moutai and CATL, which fell -1.70% and -2.55% respectively, weighed on mainland markets after overseas sales via the Northbound Stock Connect. National Team-favored ETFs saw light 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%. Industrial earnings rose 3.6% year-on-year in June from 0.7% in May, although the release did not appear to have had much of an impact 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 the third-party labor service provider.” The company, which was featured in the film American factorydenied it was targeted as 28 locations were searched for potential labor law violations.

As an amateur ping pong/table tennis player, watching Olympic athletes smash the ball is amazing to me. Amazing hand-eye coordination! Chinese fans encourage their players by shouting “jia you” which literally translates to “pour oil”, meaning “pedal to the metal”. I hope policymakers remember this phrase at the upcoming Politburo meeting. Last week’s subsidies for household appliances and cars were the first fiscal stimulus after Zero Covid.

The Hang Seng and Hang Seng Tech indices gained +1.27% and +0.66% respectively on volume that was down -19.05% since Friday, which is 82% of the yearly average. 238 stocks rose, while 221 stocks fell. Main Board short turnover was down -47.36% since Friday, which is 68% of the yearly average, as 14% of turnover was short turnover (Hong Kong short turnover includes short ETF volume, which is driven by market maker ETF hedges). Value factor and large caps outperformed growth and small caps. The top performing sectors were consumer discretionary, which was up +1.59%, financials, which was up +1.26%, and technology, which was up +1.16%. Meanwhile, Healthcare fell -1.08%, Real Estate fell -0.58%, and Consumer Staples fell -0.54%. The top performing sub-sectors were Retail, Energy Services, and Banks. Meanwhile, Automotive, Food & Beverage, and Semiconductors were among the worst performers. Southbound Stock Connect volumes were light as mainland investors bought a net $95 million worth of 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 STAR Board ran away, closing +0.03%, -0.47% and -1.70% respectively, on volume that was down -3.27% since Friday, which is 72% of its yearly average. 2,208 stocks rose, while 2,606 fell. Value and large-cap factors outperformed growth and small-caps. The top performing sectors were Financials, up +0.69%, Utilities, up +0.33% and Communication Services, up +0.29%. Meanwhile, Real Estate fell -2.55%, Healthcare fell -1.85% and Consumer Staples fell -1.84%. The top performing sub-sectors were Highways, Aerospace/Military and Banking. Meanwhile, Construction Materials, Construction Machinery and Power Equipment were among the worst performers. Northbound Stock Connect volumes were light as foreign investors were net sellers of Mainland stocks including CATL, Kweichow Moutai and Weichai Power. Meanwhile, ICBC, Cypc and Cambricon were small net buyers. 10-year Treasuries rose. CNY and the Asian dollar index fell against the US dollar. Copper gained and steel fell.

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Yesterday’s performance

Yesterday’s exchange rates, prices and yields

• CNY per USD 7.26 vs 7.22 yesterday
• CNY per EUR 7.86 compared to 7.84 yesterday
• Yield on 10-year government bond 2.16% vs. 2.22% yesterday
• China Development Bank’s 10-year bond yield 2.23% vs. 2.26% yesterday
• Copper price: 0.34%
• Steel price: -0.50%