Stocks Celebrate Free Markets After Tariff Court Loss

Li Auto Q1 Earnings Report

Li Auto (LI US, 2015 HK) reported Q1 financial results after the Hong Kong close. According to management, Q1 is “typically a seasonally slow period for auto sales”.

Revenue increased +1.1% to RMB 25.9B ($3.6B) from RMB 25.63B, versus expectations of RMB 25.12B
Adjusted Net Income declined -20.5% to RMB 1B ($139.8mm) from RMB 1.28B, versus expectations of RMB 1.96B
Adjusted EPS decreased to RMB 0.96 from RMB 1.21, versus expectations of RMB 0.76
Total deliveries for the first quarter of 2025 were 92,864 vehicles, representing a 15.5% year-over-year increase.
Q2 forecast:
- Deliveries of vehicles are expected to be between 123,000 and 128,000, representing a year-over-year increase of 13.3% to 17.9%.
- Total revenues are expected to be between RMB32.5 billion (US$4.5 billion) and RMB33.8 billion (US$4.7 billion), representing a 2.5% to 6.7% year-over-year increase.

Key News

Asian equities cheered the Court of International Trade’s decision that President Trump’s use of the International Emergency Economic Powers Act of 1977 was not legal. Japan, Hong Kong, and South Korea outperformed, Taiwan and the Philippines underperformed, and Indonesia was closed for Ascension Day, a major Christian holiday commemorating Jesus Christ’s ascension into heaven.

The Trump Administration is appealing the decision and could implement tariffs under Section 301 of the Trade Act of 1974, as he did in his first term. It does highlight the ability to challenge DC in the courts, as we saw with TikTok. We’ll enjoy the moment while it lasts, though one would hope 1600 Pennsylvania Avenue notices the strong market response.

The Financial Times, which clearly receives Trump “leaks” over the Wall Street Journal, reported “the US Department of Commerce had told so-called electronic design automation groups – which include Cadence, Synopsys and Siemens Eda – to stop supplying their technology to China” according to “several people familiar with the move”. Cadence fell by 10.67%, destroying $9.411B of investor capital based on their market cap decline, while Synopsys fell by 9.64%, destroying $7.381B of investor capital.

The Administration’s foreign student visa ban has evolved into a China student visa ban based on comments from Secretary of State Rubio. All pressure points are being applied to China trade negotiations, though President Trump’s June 14th and President Xi’s June 15 birthdays are coming, which many have speculated would result in a meeting.

Hong Kong growth stocks, other than electric vehicles and hybrids, which continue to face competition concerns, responded with a rip in response led by Meituan, which gained +6.62% on strong liquor sales at the start of the 618 e-commerce event, Tencent, which gained +0.89%, and Alibaba, which gained +2.07%. Meanwhile, Xiaomi fell -0.10%, CATL fell -1.09%, and BYD fell -0.25%. JD.com gained +4.19% on a partnership with popular app provider Xiao Hong Shu, commonly known as Little Red Book.

Zhongan Online P&C Insurance +31.56% bringing recent gains to over +70% following Hong Kong passing a stablecoin Bill as the company is “Hong Kong’s first digital bank to provide reserve-banking service for stablecoin issuers” according to Bloomberg. As one of their largest ten shareholders, we’ll take it! Again, this proves how hard it is to pick the winners.

Healthcare and the Apple ecosystem stocks Sunny Optical and AAC Technologies ripped higher on the tariff news by +4.54% and +3.11%, respectively, while Wuxi Biologics gained +10.04%, and CSPC Pharmaceuticals +11.73% after strong Q1 results.

XPeng bucked the downward trend for EV stocks, gaining +5.17% after releasing a new autonomous driving feature.

The tariff news did something the government has not been able to accomplish: raise the Mainland markets! Technology and growth stocks led the way higher versus value plays, as banks slipped. The Hang Seng Index is well above its Liberation Day Gap, Shanghai is just above it, Hang Seng Tech, and Shenzhen closed right at it. Hopefully, a little positive momentum allows for another push higher.

A Mainland media source reported that fifty cities announced home purchase subsidies, including Hefei, Taizhou, Jiangsu, Foshan, Lanzhou, and Wuhan. What is interesting is that several cities are providing subsidies for families with two or three children. In Wuhan, families with two children receive a discount of RMB 60,000 and those with three children a discount of RMB 120,000. An incentive to have more kids while addressing the housing crisis. Two birds, one stone! Interesting, right?!

Random thought: If the US government implemented tariffs due to the national crisis caused by the trade deficit, shouldn’t there be a similar response to the US government’s budget deficit?

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