【True Zoom Finance】May 17 noon update: Exposure to China is rising for 4 Japanese companies
"Heavyweight investors bet on Alibaba, etc.; traders increasingly turn to silver"
Market Highlights
l Japanese stocks recovered early losses, while Australian and South Korean stocks fell. U.S. stock futures were little changed after the S&P 500 and Nasdaq 100 fell 0.2%. The Dow Jones Industrial Average briefly surpassed 40,000 points before closing lower, driven by gains in Walmart and Boeing.
l The Hang Seng Index opened 1% higher, climbing 185.74 points to 19,562.27, marking a second consecutive day of gains for Hong Kong stocks. Alibaba Group Holding Ltd. contributed the most to the index's rise, surging 6.7%. Longfor Group Holdings Ltd. led the gains, rising 8.6%. In early trading, 57 of 82 stocks advanced, while 21 declined; three of four sectors rose, with commercial and industrial stocks leading the way. $Hang Seng Index(00HSI.HK)
Options Summary
l The call/put ratios for Henderson Land Development and Power Assets in the Hang Seng Index showed low and high levels, respectively.
l The open interest for China Construction Bank's call options was 2.61 standard deviations above the 20-day average, while Alibaba's was 2.19 standard deviations above its corresponding average. $BABA-W(09988.HK)
l Call and put option activity increased for Bank of China, Tencent, Alibaba, Industrial and Commercial Bank of China, and China Construction Bank. $BANK OF CHINA(03988.HK)
l The call-to-put trading ratio for Haidilao International was approximately 20:1, while for CSPC Pharmaceutical Group, it was 16 calls for every 100 puts traded.
Key News
Asian Markets
l Baidu's Hong Kong-listed shares rose as much as 5.2% after the company reported better-than-expected Q1 earnings, with particularly strong profit performance. However, Bloomberg Intelligence noted weak growth trends.
l JD.com's Hong Kong-listed shares rose up to 1.6% after the company's earnings exceeded expectations. JD's core retail segment outperformed due to cost control, while revenue matched expectations as general merchandise sales offset declines in third-party merchant contributions.
Japanese companies with exposure to China rose alongside peers in the world's second-largest economy, with the MSCI China Index rebounding nearly 30% since its January low. Beijing's policy support, low valuations, and foreign inflows have been key drivers, alongside recent proposals for local governments to buy millions of unsold homes. Earnings reports further highlight the upside potential for China-linked firms, such as those in consumer goods and industrials. Shiseido's shares rose nearly 7% after Q1 core operating income beat expectations, with about a quarter of its revenue coming from China. Meanwhile, the Topix index in Tokyo was little changed. Shiseido's premium brands like Nars are gaining traction, and its sales decline in China has slowed, according to Asymmetric Advisors' strategist Amir Anvarzadeh. Unicharm Corp. also saw quarterly profits exceed consensus, expecting a "recovery in China, which has been a concern." Factory automation firms like Yaskawa Electric and Keyence Corp. stand to benefit from a rebound in Chinese demand, which had weighed on their shares in recent months. Yaskawa's President Masahiro Ogawa noted last month that China's capital expenditure demand has bottomed and could accelerate quickly. Still, the Nikkei 225 has risen only 6.5% since the MSCI China rebound began on January 22. Many global fund managers remain hesitant to re-enter China, with half of Japan's China-exposed firms expecting economic deterioration this year, per a recent survey.
U.S./Global Markets
l Walmart's sales continue to grow as U.S. consumers flock to its stores for affordable daily essentials. Same-store sales (including digital and physical stores open at least 12 months) rose 3.8% in the quarter ending April 26, though growth slowed from last year's price-driven surge.
l Reddit (RDDT) shares jumped 11% after the social platform announced a partnership with OpenAI to bring enhanced Reddit content to ChatGPT and new products.
l Applied Materials, the largest U.S. chip equipment maker, failed to impress investors with its latest forecast despite a year-to-date stock rally. Investors watch the company for signs of chip industry recovery, as it supplies major manufacturers like TSMC, Samsung, and Intel. Shares dipped despite the upbeat forecast, as the firm is seen as a bellwether for the sector. The California-based company's stock fell 1.5% in after-hours trading after closing at $214.17 in New York, up 32% this year.
l Daily Strategy: Alibaba Group (09988.HK) $Alibaba(BABA.US) shares in Hong Kong hit a seven-month high after Michael Burry's investment firm increased stakes in the e-commerce giant and several Chinese peers. Alibaba rose over 7% to HK$85.80—its highest since October 2023—leading the Hang Seng Index's 0.9% gain. Burry's Scion Asset Management boosted holdings in Alibaba and JD.com (09618.HK) $JD.com(JD.US), the latter becoming its top holding in Q1, per a 13F filing earlier this week. Scion's JD stake grew 80%, while its Alibaba position—now its second-largest—rose by 50,000 shares to 125,000, worth ~$9 million.
l Saudi Arabia's PIF bought over 153,500 Alibaba shares in Q1, increasing its stake by 11%—one of its largest equity portfolio additions—per a Wednesday 13F filing. Its holdings in PDD and BeiGene were unchanged.
l Temasek diverged from PIF and Scion, cutting nearly 356,000 Alibaba shares (-4%). The Singapore state investor also fully exited its three-year, $96 million position in Grifols, acquired by AstraZeneca in February.
l Similarly, Bridgewater, the world's largest hedge fund, slashed China stock exposure by nearly 90% from its peak two years ago.
Today's FX & Commodity Highlights
l The yen weakened against the dollar after the BOJ left bond purchases unchanged.
l U.S. Treasuries were steady in Asia, while Australian and New Zealand yields followed Thursday's U.S. government bond climb.
l Commodities broadly advanced. U.S. oil closed at a one-week high, extending a relief rally spurred by softer inflation data that bolstered rate-cut hopes and energy demand prospects.
l Gold edged up after Thursday's dip. Bitcoin traded above $65,000 after halting its slide. Themes ETF's Taylor Krystkowiak noted traders are increasingly favoring silver, which has outperformed gold year-to-date and benefits from strong industrial demand.
Source: Goldhorse Capital Extramile
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