Key News
Asian equities were mixed on a stronger US dollar, following President Trump’s not-so-subtle reminder that the July 9th tariff reprieve is approaching, which appeared aimed at the Japanese government.
Yesterday’s release from the Central Committee for Financial and Economic Affairs, headed by President Xi, influenced markets in Hong Kong and Mainland China, as a significant policy pivot might be occurring to address “low-price and disorderly competition” and “promote the orderly exit of backward production capacity,” i.e., overcapacity. The only Western media sources to note a potential anti-deflation game changer were Bloomberg yesterday and Reuters today. A government media article today cited by Reuters noted that “It singled out industries such as photovoltaics, lithium batteries, electric vehicles, and e-commerce platforms.”
Today, solar stocks ripped higher on reports from Mainland media sources that “leading photovoltaic glass enterprises plan to collectively reduce production by 30% in July,” which will lead monthly production to drop to 45 gigawatts.
Overcapacity absolutely crushed the profits and stock prices of companies such as Tongwei, which gained +10% overnight but is off -73% from its July 22, 2022, high. Polysilicon futures rose 7% on the Guangzhou Futures Exchange, though I am the furthest thing from a commodity expert, so I don’t want to get over my skis. Steel, another industry plagued by overcapacity that might benefit from less production, was the top-performing subsector in Hong Kong and Mainland China, followed by home construction, as the government’s real estate policy pivot is slowly improving demand.
Alibaba fell -0.36% after announcing $7 billion worth of subsidies, highlighting the “disorderly” competition issue that the Chinese government wants to address. The company has $19.3 billion left in its board-approved buyback program expiring in Q2 2025.
Value sectors, including banks, mining, and coal outperformed in both markets, while growth stocks underperformed in both markets. Meanwhile, technology hardware, semiconductors, and pharmaceuticals were all off on tariff news.
The Ministry of Finance announced it would speed up the issuance of ultra-long-term special bonds to support consumption subsidies. I am surprised that internet names were mixed, as Alibaba was off, Meituan gained +0.56%, JD.com gained +0.08%, and Trip.com gained +1.32% on reports of more policy support for tourism.
Macau casinos ripped on yesterday’s news of strong gaming numbers.
June’s Caixin Manufacturing purchasing managers’ index (PMI) was 50.4 versus expectations of 49.3 and May’s 48.3.
Mainland investors bought a net $641 million worth of Hong Kong-listed stocks today via Southbound Stock Connect.
According to Cn EV Post, BYD sold 382,585 new energy vehicles (NEVs), which includes both hybrids and electric vehicles, in June, 90,049 of which were sold outside of China. June sales were up +11.98% year-over-year (YoY) and +0.03% month-over-month (MoM). Tesla China sold 71,599 vehicles in June, which is up +0.83% YoY and +16.2% MoM.
Last Night’s Performance
| Country/Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.6% |
| Hang Seng Tech | HSTECH Index | -0.6% |
| Hong Kong Turnover | HKTurn Index | -0.8% |
| Hong Kong Short Sale Turnover | HKSST Index | 31.9% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 12.9% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 0 |
| China (Shanghai) | SHCOMP Index | -0.1% |
| China (Shenzhen) | SZCOMP Index | -0.7% |
| China (STAR Board) | Star50 Index | -1.2% |
| Mainland Turnover | .chturn Index | -6% |
| Nouthbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 0.1% |
| Japan | NKY Index | -0.6% |
| India | SENSEX Index | -0.3% |
| Indonesia | JCI Index | -0.5% |
| Malaysia | FBMKLCI Index | 0.6% |
| Pakistan | KSE100 Index | 1.6% |
| Philippines | PCOMP Index | -0.1% |
| South Korea | KOSPI Index | -0.5% |
| Taiwan | TWSE Index | 0.1% |
| Thailand | SET Index | 0.5% |
| Singapore | STI Index | 0.5% |
| Australia | AS51 Index | 0.7% |
| Vietnam | VNINDEX Index | 0.5% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today’s Volume % of 1-Year Average | 121 | 105 |
| Advancing Stocks | 341 | 1592 |
| Declining Stocks | 147 | 3364 |
| Outperforming Factors | Value, Low Volatility, Dividend Yield | Value, Low Volatility, Buybacks |
| Underperforming Factors | Momentum, Buyback, Growth | Momentum, Quality, Growth |
| Top Sectors | Materials, Financials, Utilities | Materials, Energy, Real Estate |
| Bottom Sectors | Communication, Discretionary | Tech, Healthcare, Communication |
| Top Subsectors | Steel, Construction Materials, Consumer Services | Steel, Construction Machinery, Coal |
| Bottom Subsectors | Semis, Consumer Durables/Apparel, Household/Personal Products | Soft Drink, Aerospace/Military, Education |
| Southbound Connect Buys | Meituan, SMIC (Moderate), Chongqing Iron (Small) | N/A |
| Southbound Connect Sells | Alibaba (Large), Tencent, Xiaomi (Moderate), Guotai Junan (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 152 | 0.41 |
| Communication Services | 9 | -0.54 |
| Consumer Discretionary | 30 | -0.07 |
| Consumer Staples | 13 | 0.11 |
| Energy | 7 | 1.71 |
| Financials | 23 | 1.84 |
| Health Care | 13 | 0.63 |
| Industrials | 19 | 1.02 |
| Information Technology | 10 | 0.22 |
| Materials | 10 | 3.09 |
| Real Estate | 6 | 0.31 |
| Utilities | 12 | 1.76 |
| Mainland China Listed | 432 | -0.13 |
| Communication Services | 9 | -0.75 |
| Consumer Discretionary | 31 | -0.15 |
| Consumer Staples | 27 | 0.1 |
| Energy | 16 | 0.98 |
| Financials | 63 | 0.2 |
| Health Care | 40 | -1.02 |
| Industrials | 69 | -0.17 |
| Information Technology | 85 | -1.37 |
| Materials | 68 | 1.16 |
| Real Estate | 7 | 0.41 |
| Utilities | 17 | 0.13 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -0.3 |
| Alibaba HK | 9988 HK Equity | -0.4 |
| JD.com HK | 9618 HK Equity | 0.1 |
| NetEase HK | 9999 HK Equity | -1.3 |
| Yum China HK | 9987 HK Equity | 3.4 |
| Baozun HK | 9991 HK Equity | 0.6 |
| Baidu HK | 9888 HK Equity | 0.7 |
| Autohome HK | 2518 HK Equity | 3.4 |
| Bilibili HK | 9626 HK Equity | -2.2 |
| Trip.com HK | 9961 HK Equity | 1.3 |
| EDU HK | 9901 HK Equity | -0.7 |
| Xpeng HK | 9868 HK Equity | 2.2 |
| Weibo HK | 9898 HK Equity | -1.2 |
| Li Auto HK | 2015 HK Equity | -3.2 |
| Nio Auto HK | 9866 HK Equity | -2.2 |
| Zhihu HK | 2390 HK Equity | 2.5 |
| KE HK | 2423 HK Equity | -1.9 |
| Tencent Music Entertainment HK | 1698 HK Equity | -1.6 |
| Meituan HK | 3690 HK Equity | 0.6 |
| Hong Kong’s Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | -0.4 |
| TENCENT HOLDINGS LTD | -0.3 |
| XIAOMI CORP-CLASS B | 0.3 |
| MEITUAN-CLASS B | 0.6 |
| SEMICONDUCTOR MANUFACTURING | -2.6 |
| CHINA CONSTRUCTION BANK-H | 2.9 |
| BYD CO LTD-H | -0.2 |
| POP MART INTERNATIONAL GROUP | -3.2 |
| CHONGQING IRON & STEEL CO-H | 91.1 |
| GUOTAI JUNAN INTERNATIONAL | 0.9 |
| Shanghai and Shenzhen’s Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| EAST MONEY INFORMATION CO-A | -0.7 |
| ZHONGJI INNOLIGHT CO LTD-A | -4.4 |
| RONGFA NUCLEAR EQUIPMENT C-A | 6.6 |
| SUZHOU DONGSHAN PRECISION-A | -4.7 |
| SHENZHEN FORMS SYNTRON INF-A | -3.4 |
| HENGBAO CO LTD-A | -1.6 |
| BEIJING HIGHLANDER DIGITAL-A | 5.6 |
| EOPTOLINK TECHNOLOGY INC L-A | -1.7 |
| NORTH INDUSTRIES GROUP RED-A | -6.4 |
| NORTH COPPER CO LTD-A | 7.7 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.17 versus 7.17 yesterday
- CNY per EUR 8.43 versus 8.44 yesterday
- Yield on 10-Year Government Bond 1.64% versus 1.64% yesterday
- Yield on 10-Year China Development Bank Bond 1.68% versus 1.69% yesterday
- Copper Price 0.75%
- Steel Price 1.51%
—
Originally Posted July 2, 2025 – Solar Soars As Policy Addresses Overproduction, Who’s Next?
Author Positions as of 7/2/25 are KLIP, KBA, KALL, KCNY, KFYP, KCNY, KEMQ, BZUN, HSBC, KWEB, KHYB, LI US
Charts Source: KraneShares
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