The Flow Show, Week In Review

Week in Review

Asian equities were mixed for the week as tariffs continue to be a top focus for investors.
BYD reported that it sold over 4 million vehicles in 2024, while Tesla sold less than 2 million.
The CEOs of Qualcomm, Pfizer, Cargill, and Boeing met with Premier Li this past Sunday and Vice Premier He Lifeng on Saturday in Beijing.
Online video and social media company Kuaishou Technology reported Q4 and 2024 financial results and joined the AI frenzy as it was a major focus during the company’s earning call.

Key News

Asian equities ended the week with a thud as Japan, Taiwan, South Korea, Thailand, and Malaysia fell more than -1% as tariff talk (terror?) curtails animal spirits and Indonesia closed for Hindu Saka New Year.

Thailand’s market closed afternoon trading following a severe earthquake as we hope our friends and their families there are safe. Obviously, investors are nervous about the April 2^nd Trump tariff announcement. After the close, Mainland media reported that Premier Li and the State Council presided over a meeting focused on promoting “cross-border E-Commerce”. Another not-so-subtle sign following President Xi’s meeting with tech entrepreneurs and Wednesday’s Vice Premier Zhang Quoqing meeting with undisclosed “platform enterprises,” i.e., internet companies. That meeting was to promote the platform economy in the “food delivery, online retail, live streaming E-Commerce, and transportation services.” I assume Meituan, Alibaba/JD/PDD, Bytedance, and Didi are the companies hinted at.

Internet stocks had a good day on an absolute and relative basis, with Alibaba up +0.69%, NetEase up +0.38%, Trip.com up +1.3%, JD.com down -0.12%, Meituan down -1.66%, Baidu down -1.84%, and Bilibili down -0.71%. Tencent gained +0.1% following Ubisoft, which it owns 10% of, announced it would spin off its several marquee games, including Assassin’s Creed and Tom Clancy’s Rainbow Six, in a new company that Tencent will take a 25% stake in, according to Bloomberg.

The real drivers of today’s Hong Kong and Mainland China weakness were the bank, insurance, energy (including gas and coal), auto, and hard technology like semiconductors, technology hardware, and electronic equipment sectors. Mainland investors bought the Hong Kong dip via Southbound Stock Connect with $1.059 billion of net buying today, which brings the year-to-date (YTD) total to $56 billion! That’s half of 2024’s total of $103 billion, more than 2023’s $40 billion and 2022’s $49 billion.

After the close, the following companies reported 2024 results (% is year-over-year):

SF Holdings’ net profit was up +23.51%.
ICBC’s net profit was up +0.50%.
CCB’s net profit was up +0.28%.
Agricultural Bank’s (ABC) net profit was up +4.70%.

Reuters reported that President Xi met with the CEOs of BMW, Mercedes, and Qualcomm. Chinese Foreign Minister Wang Yi and France’s Foreign Minister Jean-Noel Barrot met to discuss Ukraine and trade. The People’s Bank of China (PBOC) held its 2025 Financial Stability Work Conference, though I don’t see anything out of the ordinary. Chinese Vice Premier Ding Xuexing spoke at the Boao Forum For Asia on “promoting inclusive economic globalization”.

There is a lot of attention on the YTD performance of US, European, and Chinese equities. There are also lots of questions on what inning we are in the China rally. One indication of where we are would be the flows into funds investing in the space. Below is data we pulled from Bloomberg showing the YTD inflow (net of selling) of US-listed European and Chinese equity ETFs as of Wednesday’s close (we took all equity funds in the geographic category and added each fund’s inflows or outflows). Despite outperforming by 2X YTD, the Chinese funds have received just over $1 billion versus European funds receiving nearly $10 billion.10X! No one has allocated! No one! The pain trade is higher, IMO.

The Hang Seng and Hang Seng Tech fell -0.65% and -1.48%, respectively, on volume that was down -4.18% from yesterday, which is 137% of the 1-year average. 177 stocks advanced, while 302 declined. Main Board short turnover decreased by -9.5% from yesterday, which is 141% of the 1-year average, as 16% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Value and small capitalization stocks “outperformed”/fell less than growth and large capitalization stocks. The top sectors were healthcare, up +0.84%, and materials, up +0.67%, while technology fell -1.66%, energy fell -1.57%, and utilities fell -1.14%. The top sub-sectors were machinery, pharmaceuticals, and commercial/professional services, while semiconductors, household/personal products, and steel were the worst. Southbound Stock Connect volumes were 3x pre-stimulus levels as Mainland investors bought $1.059 billion of Hong Kong stocks and ETFs, as Alibaba, SMIC, and Tencent were moderate net buys, CNOOC Finance and Kuaishou were small net buys, NCI and Xiaomi were small net sells.

Shanghai, Shenzhen, and the STAR Board fell -0.67%, -0.90%, and -1.07%, respectively, on volume that was down -5.83% from yesterday, which is 93% of the 1-year average. 1,084 stocks advanced, while 3,943 declined. Momentum, quality, dividends, and large capitalization stocks “outperformed”/fell less than value, growth, and small capitalization stocks. Utilities and communication were the only positive sectors, up +0.16% and +0.20%, while energy fell -1.2%, technology fell -0.78%, and industrial fell -0.61%. The top sub-sectors were precious metals, diversified financials, and cultural media, while fertilizer/pesticides, chemical fiber, and energy equipment were the worst. Northbound Stock Connect volumes were well above average. CNY and the Asia dollar index fell versus the US dollar. Treasury bonds were flat. Copper and steel fell.

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