Baidu’s Ernie Bot Powers Hong Kong Rise

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Asian stocks were mixed as North Asia (Japan, South Korea, Taiwan, China and Hong Kong) posted gains while South Asia (India, Singapore, Indonesia, Malaysia, Philippines, etc.) posted losses.

No reason to bury the headline as Baidu HK gained +15.33% on solid volume after it confirmed the March launch of their ChatGPT-like AI chatbot called Ernie Bot. Baidu took profits from their search business and invested in new areas, including their Apollo EV technology platform and AI. He doesn’t often get credit for this strategy, although two years ago, he noted that non-search revenue would exceed search revenue in a few years.

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Most traded in Hong Kong were Tencent +0.85%, Baidu HK +15.33%, Alibaba HK +1.55%, and Meituan -0.24% as Internet names massively outperformed following the “deflating” performance of China ADRs. Did. Yesterday was an opportunity for underweight active managers to buy the dip! Volume was light overnight, although short turnover fell to only 13% of total turnover.

Real estate in mainland China was the top performer as the removal of purchase caps in some areas of Wuhan is seen as the first to become a trend. Hong Kong and mainland shares are heaving a sigh of relief after four months of strength.

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Tonight we have an earnings report from Yum China. The Q1 outlook is providing more of a catalyst than Q4’s financial results.

Hang Seng and Hang Seng Tech gained +0.36% and +1.15%, 82% of the 1-year average, on volume -23.17% since yesterday. 258 stocks advanced, while 201 declined. Main board short turnover declined by -42.35% since yesterday, which is 60% of the 1 year average. Growth factors beat value factors as small caps outperformed large caps. Top sectors were communications +2.26%, healthcare +0.81%, and energy +0.78%, while tech -0.31% and staples -0.13%. The top sub-sectors were software, media and energy, while food, consumer services and business services were the worst. Southbound Stock Connect volume was light as mainland investors bought $2mm of Hong Kong stocks, with smaller net purchases from Tencent and Meituan.

Shanghai, Shenzhen, and StarBoard were up +0.29%, +0.36%, and -0.42% on mixed -3.35% volume since yesterday, which is 93% of the 1-year average. 3,213 scrips advanced, while 1,400 scrips declined. Value factors beat growth factors as small caps outperformed large caps. Top sectors were real estate +1.7%, utilities +1.29%, and energy +0.51%, while tech was -0.57%, healthcare +0.49%, and communications +0.28%. The top sub-sectors were internet, environmental protection and precious metals, while office supplies, software and catering were the worst. Northbound Stock Connect volume was light as foreign investors sold $568mm of Mainland stocks. The CNY was slightly lower against the US Dollar, Treasury bonds edged higher, and copper and steel were down overnight.

Major Chinese Cities Mobility Tracker

A picture tells a thousand words. It reminds me of a 1980s movie line: “They’re back.”

last night’s performance

Last Night’s Exchange Rates, Prices and Returns

  • CNY per USD 6.79 vs 6.80 yesterday
  • CNY per EUR 7.27 vs 7.31 yesterday
  • 10-year government bond yield 2.90% as against 2.90% yesterday
  • The yield on the 10-year China Development Bank bond yesterday was 3.05% versus 3.06%
  • Copper Price -0.70% Overnight
  • Steel Price -0.52% Overnight

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