Jack Is Back, Health Care’s Prescription Is AI, Week In Review

Week in Review

Asian equities were mostly higher this week, led by Hong Kong, as the Hang Seng Index gained +7%, and Mainland China, while India and Indonesia underperformed.
Alibaba announced the integration of DeepSeek’s AI models into its large language model (LLM) platform on Monday, the latest in a litany of platforms to decide to do so in China, right before the company was tapped by Apple to run the new AI tools to be featured in iPhones sold in China.
China reported a healthy increase in consumer prices of +0.5%, the highest reading in five months, on strong Lunar New Year holiday spending, a positive indicator for the consumer.
Real estate and health care were among the top-performing sectors this week both in Hong Kong and on the Mainland, with varying, mostly policy-driven catalysts, after a challenging period for the industries in recent years.

Key News

Asian equities ended the week mixed, led higher by Hong Kong, especially Hong Kong-listed growth stocks, while Taiwan underperformed.

For the week, Hong Kong was a strong outperformer in the region, led by growth stocks. Meanwhile, Mainland China, South Korea, Australia, Thailand, and Singapore posted small gains, while India, Japan, Indonesia, and the Philippines posted losses. Hong Kong volumes were massive. The most heavily traded stock by value usually sees around HKD 5 billion in turnover. But, today’s top performers were Tencent, which gained +7.42% with a value of volume traded at HKD 34.4 billion, Alibaba, which gained +6.34% with a volume of value traded of HKD 31.7 billion, Xiaomi, which gained +7.32% with a volume of value traded of HKD 15.2 billion, Meituan, which gained +6.39% with a value of volume traded at HKD 12.5 billion, and Semiconductor Manufacturing International (SMIC), which fell -0.98% and had a value of volume traded at HKD 10.5 billion. Remarkably, these values are slightly off from yesterday!

Boosting Hong Kong sentiment before the market open was President Trump’s lack of tariff details, indicating there is time for more “Art of the Deal” and Reuters reporting that President Xi will host “a symposium to boost private sector sentiment that will be attended by leaders” including Alibaba’s Jack Ma, Tencent’s CEO Pony Ma, Xiaomi CEO Lei Jun, Yushu Technology CEO Wang Xing Xing, and DeepSeek found Liang Wenfeng. As Reuters notes, President Xi “rarely” chairs such events, as the last time was in 2018. Jack Ma’s attendance has obvious implications, i.e. that he is out of the doghouse.

Mainland investors understood the invitation’s implication with a massive net buy via Southbound Stock Connect, as now 5% of shares outstanding owned are by Mainland investors. This should double in the next year thanks to Tencent and Meituan’s over 10% Southbound ownership levels.

Today’s rally was very broad with all sectors rising, only two sub-sectors declining, only 38 stocks declining versus 462 advancers.

BYD gained +7.43% after the company reported integrating DeepSeek into its driver assistance system.

Healthcare was the best-performing sector on reports of companies integrating DeepSeek AI into various applications, as Alibaba Health gained +29.1%. It is important to note that the Global Industry Classification System (GICS) places it in the Consumer Staples sector. Ping An Healthcare gained +17.95% and Wuxi Biologics gained +11.75%.

While it was not widely cited as a catalyst, January New Loans Year-to-Date (YTD) came in at RMB 5.1 trillion, versus an expected RMB 4.5 trillion. At the same time, Aggregate Financing YTD came in at RMB 7.1 trillion, versus an expected RMB 6.5 trillion.

Mainland China opened lower but managed to grind higher, led by growth stocks on strong volumes, though mixed breadth (advancers versus decliners). The ETFs favored by China’s “National Team”, i.e. investment firms associated with sovereign wealth, had average volume, though several mega-cap stocks had strong days, indicating there may have been some help and intervention. Domestic investors might be getting more involved as indicated by the high volumes.

The Hang Seng and Hang Seng Tech indexes gained +3.69% and +5.56%, respectively, on volume that increased +3.91% from yesterday, which is 258% of the 1-year average. 462 stocks advanced while 38 stocks declined. Main Board short turnover increased +2.41% from yesterday, which is 245% of the 1-year average, as 15% of turnover was short turnover (Hong Kong’s short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). The growth factor and small caps gained more than the value factor and large caps. All sectors were positive, led by Health Care, which gained +7.03%, Communication Services, which gained +6.64%, and Consumer Discretionary, which gained +6.08%. The top-performing subsectors were consumer staples distribution, software, and services. Meanwhile, petroleum & petrochemicals and semiconductors were among the worst-performing subsectors. Southbound Stock Connect volumes were 4x pre-stimulus levels as Mainland investors bought a net $990 million worth of Hong Kong-listed stocks and ETFs, led by Alibaba, which was a very large net buy, Tencent, Meituan, Kuaishou, Alibaba Health, and Xiaomi. SMIC and CNOOC were net sells.

Shanghai, Shenzhen, and the STAR Board gained +0.43%, +0.75%, and +0.53%, respectively, on volume that decreased -5.81% from yesterday, which is 154% of the 1-year average. 2,287 stocks advanced while 2,656 stocks declined. The growth factor and small caps outperformed the value factor and large caps. The top-performing sectors were Communication Services, which gained +4.88%, Health Care, which gained +2.65%, and Consumer Discretionary, which gained +2.06%. Meanwhile, Energy was flat and Real Estate fell -0.52%. The top-performing subsectors were healthcare services, software, and telecom. Meanwhile, soft drinks, leisure products, and retail were among the worst-performing subsectors. Northbound Stock Connect volumes were well above average. CNY and the Asia Dollar Index rose versus the US dollar. Treasury bonds fell. Copper rose while steel fell.

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