Week in Review
- Asian equities were mostly higher for the week as Korea outperformed and Thailand underperformed in a shortened week for Mainland China’s markets due to the market holiday celebrating the Dragon Boat Festival on Monday.
- Markets cheered the first phone conversation between Trump and Xi on Thursday, during which the two leaders were said to discuss technology restrictions, rare earth exports, and giving the go-ahead to negotiators to hammer out a deal.
- China reported mixed economic indicators for May as services sectors fared better than manufacturing, according to both the official purchasing managers’ indexes (PMIs) and the private surveys.
- Health care stocks were a bright spot in both Mainland China and Hong Kong this week after Innovent Biologics’ successful completion of a phase one trial of its new obesity medication.
Key News
Asian equities ended a positive week mixed, led by India following a larger-than-expected rate cut (0.50% vs. 0.25%). South Korea was closed for Memorial Day, and Indonesia, Pakistan, and the Philippines were closed for Eid al-Adha, also known as the Feast of Sacrifice, “a festival to honor the willingness of the Prophet Ibrahim to follow the command of Allah to sacrifice his son.”
Hong Kong and Mainland China saw profit taking in recent growth and technology outperformers despite the Trump-Xi call, as some pointed to a lack of details, though President Trump confirmed the US would be represented by Bessent, Lutnick, and Greer at a yet-to-be-determined location. The markets had risen on the chatter of a call in another example of markets’ forward-looking nature, i.e., buy the rumor and sell the news.
Short-video platform Kuaishou Technology gained +8.44% as the company announced its Kling AI, an AI online video generator, will generate $100 million in revenue by February of 2026.
E-commerce names, including Alibaba and JD.com, which fell -1.44% and -1.45%, as several provinces, including Jiangsu and Chongqing, announced they had run out of home appliance subsidies to be used in the 618 (June 18) E-Commerce sales event. I suspect the issue will be resolved in short order.
Electric vehicle (EV) stocks, including BYD, which fell -2.18%, Xiaomi, which fell -2.12%, Li Auto, which was flat, and XPeng, which fell -1.77%, were mostly lower on yesterday’s news of the Ministry of Industry and Information Technology’s (MIIT) price war warning. It seems like a positive to me!
Value plays such as telecom and precious metals outperformed. Mainland investors bought the dip in Hong Kong, with $862 million worth of net buying via Southbound Stock Connect. Meituan saw another day of strong net inflow, as 13.54% of shares are now held by Mainland investors, up from only 11% earlier this year. I don’t know what’s driving Mainland investors’ significant Meituan inflows, at 200 million shares bought, but it is interesting. Like Hong Kong, value stocks outperformed growth stocks in Shanghai and Shenzhen, as oil, precious metals, and aerospace stocks rallied.
May’s consumer price index (CPI) and producer price index (PPI) will be reported on Sunday.
The US Treasury did not label China a currency manipulator, though it does highlight the strength of the Renminbi versus the US dollar, recently. CNY hit a low of 7.34 CNY per USD on April 9th following Liberation Day, though CNY has rallied to 7.18 (CNY is quoted USD per CNY, so a decline is appreciation versus the US dollar). More surprising is that Hong Kong and US-listed China stocks haven’t rallied more due to the appreciation of the underlying businesses, as their revenues are denominated in Renminbi. Hopefully, we’ll see this move soon!
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.19 versus 7.19 yesterday
- CNY per EUR 8.19 versus 8.21 yesterday
- Yield on 10-Year Government Bond 1.65% versus 1.67% yesterday
- Yield on 10-Year China Development Bank Bond 1.70% versus 1.71% yesterday
- Copper Price 0.88%
- Steel Price 0.81%
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