JD.com & CATL Results Beat Expectations

Key News

Asian equities were largely lower with India, Thailand, and Indonesia outperforming.

The real action took place after the market’s close with a multitude companies listed in Hong Kong reporting quarterly results and companies listed in China reporting semi-annual results including two significant companies JD.com (JD US, 9618 HK) and global EV battery maker CATL (300750 CH). JD.com had a very strong quarter despite a challenging macro environment beating low expectations as revenue grew 5.4% year over year (YoY) to RMB 267.6 billion (US $40 billion) versus expectations of RMB 261 billion up from RMB 253 billion YoY, Adjusted Net Income RMB 6.5 billion (US $1 billion) versus expectations of RMB 4.42 billion up from RMB 4.6 billion YoY, and Adjusted EPS RMB 4.06 (US $0.61) versus expectation of RMB 2.80 up from RMB 2.90 YoY. Shenzhen-listed CATL reported revenue RMB 113 billion versus estimate of RMB 102 billion up from RMB 44 billion YoY, net income increased +82% to RMB 8.17 billion and EPS increased to RMB 3.50 from RMB 1.93 YoY.

Hong Kong struggled as Hong Kong’s most heavily traded by value were Tencent +0.71%, Alibaba HK -0.11%, and Meituan -1.4% as Mainland investors trim stock in advance of Friday’s earnings release as internet names were mixed overnight despite a good performance in US ADRs yesterday. Hong Kong short sellers pressed their bets again as 21% of total turnover was short with Tencent, Meituan, Alibaba HK, and JD.com HK seeing elevated short turnover today. JD shorts are likely going to feel some pain. The Mainland market was flat despite many large/mega caps having a decent day and the recent loan prime rate cut. Foreign investors sold $1.3 billion of Mainland stocks via Northbound Stock Connect. It is very clear that real estate is a very significant focus from the government. The government’s track record on preventing the first domino from dropping/developing into a crisis is very good. Yes, photos of Shanghai’s Pudong turning off office building lights garner western media headlines, this is not an event in China. The US $ continues to rise though only a minor gain versus CNY overnight.

The Hang Seng and Hang Seng Tech fell -0.78% and-0.26% respectively on volume +4.26% from yesterday which is 65% of the 1-year average. 121 stocks advanced while 357 declined. Hong Kong short sale turnover increased +24.9% from yesterday which is 85% of the 1-year average as short sale turnover accounted for 21% of total turnover. Growth and value factors both did well today while large caps outperformed small caps. Top sectors were energy +1.53, utilities +0.84%, and communication +0.72% while healthcare -1.91%, tech -1.75%, and financials -1.21%. Top sub-sectors included coal, oil, gas, and online education while CRO, auto, and biotech were among the worst. Southbound Stock Connect volumes were light/moderate as Mainland investors sold -$5 million of Hong Kong stock with Meituan seeing another healthy sell day, Tencent sold small, and Kuaishou bought small after a decent buy day yesterday.

Shanghai, Shenzhen, and STAR Board closed -0.05%, -0.04%, and 0.0% on volume -2.42% from yesterday which is 94% of the 1-year average. 2,126 stocks advanced while 2,342 stocks declined. Value factors outperformed growth factors as large caps outperformed small caps. Top sectors were energy +2.17%, utilities +0.76%, and industrials +0.01% while staples -1.32%, healthcare -1.32%, and communication -1.25%. Top sub-sectors included gas, oil, and solar while CRO, Tik Tok ecosystem, biotech, and liquor were among the worst. Northbound Stock Connect volumes were moderate as foreign investors sold $1.347 billion of Mainland stocks today. Treasury bonds sold off, CNY was off slightly down -0.03% versus the US $ and copper was off -0.1%.

Last Night’s Exchange Rates, Prices, & Yields

• CNY/USD 6.85 versus 6.84 yesterday
• CNY/EUR 6.79 versus 6.85 yesterday
• Yield on 10-Year Government Bond 2.61% versus 2.59% yesterday
• Yield on 10-Year China Development Bank Bond 2.80% versus 2.79% yesterday
• Copper Price -0.10% overnight