Pinduoduo Beats Estimates, Hong Kong Cheers Internet Earnings, Week In Review

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week in review

  • Asian equities had a relatively upbeat week overall as President Biden toured the region and China’s internet earnings season saw some surprises among names including Alibaba, Baidu, Kuaishou, NetEase, and Pinduoduo.
  • However, sentiment declined in Asia on Tuesday on account of Snapchat’s dismal earnings in the US.
  • John Tuttle (Vice President and Chief Commercial Officer at the New York Stock Exchange) joined Cranshare CEO Jonathan Crane on a panel in Davos this week, where he said he believes the NYSE will reduce China’s ADR listings in the future. instead of watching more. Regulators in the US and China work towards an audit deal. View full panel discussion here,
  • The State Council organized a conference with one hundred thousand participants urging them to “…seize the time window and try to get the economy back on the normal track,” deeper than expected by the PBOC. after the cut. Prime lending rate last Friday.

Friday’s top news

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Asian equities were mostly overnight higher as Hong Kong outperformed led by internet stocks after a strong showing in US-listed China internet stocks yesterday.

Alibaba HK and Baidu HK gained +12.21% and +14.26%, respectively, following their expectation-beating financial results, which we covered in yesterday’s note.

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This morning, after markets closed in Hong Kong, e-commerce company Pinduoduo (PDD US) released earnings that beat analysts’ expectations on revenue, adjusted EPS, monthly users and active buyers. Below is the release of Pinduoduo.

Following the closure in Hong Kong, HKEX announced that a Hong Kong-listed ETF would be added to Southbound Stock Connect. Although the date of inclusion has not yet been announced, Mainland investors are apt to be interested in growth-oriented ETFs such as Internet Proxy. An easing of rules for foreign investors in China’s onshore bond market was also announced.

Pinduoduo (PDD US) reported Q1 results pre-market open. The results beat expectations, leading to a pre-market rally in stocks. However, the management was conservative in its approach. Unfortunately, neither management nor analysts spoke on the earnings call about the prospects for Pinduoduo to be re-listed in Hong Kong. I’m surprised the company hasn’t filed publicly yet, although, theoretically, they may have filed privately. Management did a good job keeping costs down. They also did a decent job of maintaining profitability, which is important in this market environment.

  • Revenue grew +7% to RMB 23.793B ($3.753B), while RMB 20.649B . expectations of
  • Average monthly users increased +4% and 7% at 751.3mm and 881.9mm . Have become
  • RMB 15.568B . Total operating expenses decreased to RMB 14.479B ($2.284B) from
  • Adjusted net income exceeded expectations by RMB 4.200B ($662.6mm) versus a loss of RMB -1.890B by RMB 2.65B
  • Adjusted EPS Expectations of RMB 2.95 ($0.47) vs. RMB 1.52
  • Cash on Books Amount RMB 92.9B . increased to RMB 95.2B ($15B)

Hang Seng and Hang Seng Tech Indexes rose +2.89% and +3.8% respectively, up +25.7% as compared to yesterday, which is 85% of the 1-year average. 307 stocks rose while 161 declined. Hong Kong’s short sell volume grew +19.28% since yesterday, which is 88% of the 1-year average. Growth factor outperformed value factor as large caps outperformed small caps. All sectors were in the green, led by Discretionary, which received +6.63%, Healthcare, which received +3.89%, and Communications, which received +2.53%. Outperforming subsectors include contract research organizations (CROs, or outsourced pharma research and manufacturing operations), e-commerce, and cloud stocks. Southbound stock volumes were average in mixed trading, although Tencent saw a small net sell and Meituan saw a small net buy.

Shanghai, Shenzhen, and Star Board closed down +0.23%, 0.00%, and -1.05%, respectively, down -1.2% compared to yesterday, which is 75% of the 1-year average. 1,574 shares rose while 2,743 shares declined. Large and mega caps outperformed small caps, while growth and value factors were even. The top sectors were energy, which received +2.33%, healthcare, which received +1.6%, and financial, which received +0.88%. Meanwhile, communications fell -0.12% and real estate fell -0.7%. CRO and energy exploration were among the top sub-sectors while cement, semiconductors and software stocks were closed. Foreign investors bought Mainland shares worth $581 million through the Northbound Stock Connect. Treasury bonds edged higher, with the CNY up +0.43% versus the US dollar at 6.71 and copper up +0.84%.

Last Night’s Exchange Rates, Prices and Yields

  • CNY/USD 6.70 vs. 6.74 yesterday
  • CNY/EUR 7.18 vs. 7.23 Yesterday
  • Yield on 1-Day Government Bond 1.20% vs. 1.25% yesterday
  • Yield on 10-Year Government Bonds 2.70% Vs Tomorrow’s 2.71%
  • Yield on 10-year China Development Bank bond 2.94% versus 2.93% yesterday
  • Copper price +0.84% ​​overnight

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