XPeng & CATL Drive Hong Kong Market Higher

China Last Night

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Key News

Asian equities were mixed overnight on higher volumes following the US Fed’s rate hike, due to optimism that the Fed’s tightening cycle is drawing to a close.

Hong Kong outperformed as Xpeng, the most heavily traded stock by value, gained +33.88%, outperforming its US listing, which gained +26.69% yesterday on Volkswagen’s $700 million investment in the EV automaker. The news lifted the EV ecosystem though real estate was the top Hong Kong sector, +4.11% on the impending rollout of supportive policies.

There was shockingly little coverage of EV and power battery maker CATL’s strong financial results with a profit of +154% in the first half of 2023 on revenue that increased +67.5%, net profit that increased to RMB 20.72B from RMB 8.17B, and EPS that increased to RMB 4.71 from RMB 1.95. Interestingly, Mainland investors sold Xpeng’s Hong Kong share class via Southbound Stock Connect though maybe just booking profits.

Autohome reported its Q2 results last night, with revenue at 1.83 billion CNY versus an expected 1.79 billion CNY and adjusted EPS at 4.61 CNY versus an expected 4.10 CNY.

The lack of tangible policies weighed on the Mainland market, which was off slightly. However, there was a joint meeting of the Ministry of Science and Technology, the PBOC, and the Ministry of Industry and Information Technology on “financial support for technological innovation to strengthen and optimize the real economy.” The agencies will coordinate activities to promote loans to “technology-based enterprises.” The conference didn’t move the Mainland market though it is worth noting.

June Industrial Profits fell -8.3% year-over-year (YoY) and -16.8% year-to-date though the release was a non-event. As our trading buddy Dave says, “If market no care, you no care.”

Hong Kong-listed internet companies outperformed overnight as the Hang Seng Index approaches the 20k level while the Shanghai stayed above 3,200 and the Shenzhen above 2,000.

The restrictions included by the Senate on investment in sensitive technologies in China are said to be less strict than anticipated. While the House and final version might change, it appears more focused on private equity than public equity. We’ll keep you posted as we hear more.

The Hang Seng and Hang Seng Tech gained +1.41% and +2.9%, respectively, on volume that increased +29.8% from yesterday, 101% of the 1-year average. 364 stocks advanced, while 123 declined. Main Board short turnover increased +19.91% from yesterday, 99% of the 1-year average, as 16% of turnover was short turnover. Value and growth factors were mixed as small caps outpaced large caps. The top sectors were real estate, +4.07%, tech, +2.97%, and discretionary, +2.23%, while materials and energy were off -0.11% and -1.05%. The top sub-sectors were auto, technical hardware, and real estate, while energy, media, and materials were the worst. Southbound Stock Connect volumes were moderate as Mainland investors sold -$471mm of Hong Kong stocks and ETFs, with XPeng a large net sell, Tencent a large/moderate net sell, and Meituan a small net.

Shanghai, Shenzhen, and STAR Board fell -0.2%, -0.48%, and -0.97%, respectively, on volume that decreased -1.28% from yesterday, 87% of the 1-year average. 1,623 stocks advanced, while 3,291 stocks declined. Value factors outperformed growth factors, while large caps outpaced small caps. The top sectors were staples +0.73%, discretionary +0.41%, and financials +0.19%, while communication -1.33%, tech -1.31%, and utilities -0.57%. The top sub-sectors were auto parts, catering/restaurants, and steel, while forest industry, household products, and semis were the worst. Northbound Stock Connect volumes were light as foreign investors bought $524mm of Mainland stocks, with Longi Green Tech a moderate net sell, Kweichow Moutai and Foxconn moderate net buys. CNY and the Asia dollar index made a small gains versus the US dollar, with the former closing at 7.14. Treasury bonds were bought while copper was off slightly and steel was up slightly.

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