China Weekly Wrap
a week that was 9 February - 14 February 2025
Good Evening,
China continued its opening and returning to work this week, amid a reasonably robust market. We’ve had a 1 half session wobble on Thursday afternoon, but otherwise it’s been a pretty good week. BABA continues its run as the general tech names.
This is interesting in the context of that the DeepSeek saga won’t go away, while the European analogue that is potentially as good but got none of the fanfare. This to us is an interesting data point, and highlights the “coiled spring” argument for China and China Tech in particular - it’s not that they needed something amazing - they needed a reason to go. They go it it now, and its now playing out. We may need to take a break from the original publishing schedule to address this next week, as we announce an EMERGENCY big Tech focus week. We’ll try to cover the current discourse around the US-listed names BABA, BIDU and PDD, given the run they are on and the amount interest that they are generating.
Thats for next week though, so far this week we stayed on schedule and focused on the first instalment of our Hard Tech review - the Industrial Automation Space. Its been a busy week, as we released 2 major articles:
Do check those out if you haven’t already. The next scheduled article is on Estun Automation which will resume after we’ve done the emergency section on the :Arge Cap space.
This Sunday, we’re back with another portfolio review, and it’s been another strong week for the Panda companies—delivering solid results both in absolute and relative terms. This update is exclusive to premium subscribers, so join us to access key insights and be part of the discussion.
A reminder to check out our portfolio services if you have an asian portfolio (or a part of the portfolio) that you would like to be sure is set up appropriately for 2025.
As of February 14, 2025 close of business, here’s a summary of the weekly, month-to-date (MTD), and year-to-date (YTD) performances of major Chinese and Hong Kong stock indices that we follow.
Notes:
Shanghai Composite Index (SHCOMP): Tracks all stocks (A and B shares) traded on the Shanghai Stock Exchange.
CSI 300 Index (SHSZ300): Represents the top 300 stocks traded on the Shanghai and Shenzhen Stock Exchanges.
China A50 Index (512150 CH): Comprises the top 50 A-share companies listed on the Shanghai and Shenzhen Stock Exchanges.
ChiNext Price Index (159954 CH): Focuses on innovative and high-growth enterprises listed on the Shenzhen Stock Exchange.
SSE STAR 50 Index (83151 HK): Represents the top 50 companies listed on the Shanghai Stock Exchange’s STAR Market, emphasising science and technology innovation.
Hang Seng Index (HSI): Measures the performance of the largest companies listed on the Hong Kong Stock Exchange.
Hang Seng China Enterprises Index (2828 HK): Includes major H-share companies listed in Hong Kong.
Currency Considerations:
Chinese Indices (SSEC, CSI300, China A50, CNT, STAR50): These indices are denominated in Chinese Yuan (CNY). To present their performance in USD terms, currency exchange rate fluctuations between the CNY and USD have been considered.
Hong Kong Indices (HSI, HSCEI): Denominated in Hong Kong Dollars (HKD). Their performance in USD terms reflects the HKD/USD exchange rate stability, as the HKD is pegged to the USD.
Weekly Relative Performance Observations:
From the perspective of a Chinese equities investor, this week saw strong performance across major Chinese indices, with renewed buying momentum and increased investor confidence. The MSCI China Index led regional peers, surging by +7.38%, marking a sharp rebound that suggests improving sentiment. The rally was broad-based, driven by optimism around policy support and a recovery in key growth sectors, but the clear leaders were the US-listed tech names.
Strong Performance in Chinese Equities:
• MSCI China Index (+7.38%) was the clear leader among major Asian indices, reflecting a broad recovery in investor confidence.
• Shenzhen Index (+1.86%) followed with solid gains, bolstered by strength in technology and innovation-driven sectors.
• Shanghai A Shares (+1.30%) showed moderate gains, indicating that while sentiment is improving, domestic markets remain selective in their rebound.
• Hong Kong Hang Seng Index (+3.69%) mirrored the mainland’s positive momentum, suggesting growing confidence in offshore-listed Chinese stocks.
Regional Peers’ Performance:
• Japan’s Nikkei 225 (+0.82%) and TOPIX (+0.80%) posted modest gains, indicating that Japanese equities may be consolidating after recent strength.
• India’s Nifty 50 (-2.68%) and FTSE TWSE Taiwan 50 (-2.97%) saw notable declines, underperforming the region and contrasting sharply with China’s positive momentum.
ETF & Index Highlights:
• HSCEI ETF (+4.26%) and Premia STAR50 ETF (+2.48%) were strong performers, reflecting increased appetite for Hong Kong-listed Chinese companies and key growth sectors.
• Ping An ChiNext ETF (+1.57%) gained moderately, highlighting selective buying interest in tech and high-growth sectors.
• UBS MSCI China A ETF (+1.19%) lagged behind, suggesting that domestic A-shares saw relatively subdued performance compared to offshore listings.
• The Yuan (USD/CNH) depreciated slightly (-0.14%), reflecting some currency volatility but not enough to derail foreign investor interest.
Key Takeaways for Chinese Markets:
• Broad-based rally: Both onshore and offshore Chinese equities performed well, with strong investor demand for exposure to growth and policy-supported sectors.
• Hong Kong’s resurgence: The Hang Seng and HSCEI ETF’s gains suggest renewed optimism in Hong Kong-listed Chinese firms, potentially driven by valuation appeals and policy tailwinds.
• Selective sector performance: While tech and policy-driven industries saw strong demand, some parts of the A-share market underperformed, pointing to selective investor positioning.
• Regional divergence: China outperformed most of its regional peers this week, particularly Taiwan and India, marking a stark contrast in sentiment.
Overall, this was a strong week for Chinese equities, with the market showing signs of stabilisation and renewed buying interest, positioning itself as a regional leader in performance.
In the news this week:
President Xi to Chair Business Leaders Symposium
• Announced by: Chinese Government
• Date: February 14, 2025
• Details:
President Xi Jinping will chair a high-profile symposium next week, attended by top Chinese business leaders, including Alibaba’s Jack Ma, Tencent’s Pony Ma, as well as executives from Xiaomi and Unitree Robotics. The meeting is expected to focus on economic policies, industry challenges, and potential government support for major private-sector firms. This is a significant engagement amid ongoing efforts to restore business confidence and encourage investment.
China Encourages Tech M&A and Expands Pension Finance Initiatives
• Announced by: China Securities Regulatory Commission (CSRC)
• Date: February 13, 2025
• Details:
The CSRC introduced a series of measures to enhance industry consolidation, support financial services for tech firms, and encourage investment in the “Silver Economy.”
• Encourages tech firms to pursue upstream and downstream M&A to drive industry transformation.
• Strengthens financial support across the entire lifecycle of tech companies.
• Directs private equity and venture capital funds toward hard technology investments with long-term objectives.
• Expands pension finance and elderly care investments, supporting financial products tailored to the aging population.
• Explores asset-backed securities and REITs related to elderly care facilities.
These policies align with China’s broader economic restructuring efforts and are expected to bolster capital markets.
China Imposes Retaliatory Tariffs on U.S. Goods
• Announced by: Ministry of Commerce of China
• Date: February 10, 2025
• Details:
In response to the U.S.’s recent tariff hikes, China imposed retaliatory tariffs on $14 billion worth of U.S. imports, including liquefied natural gas, coal, and automotive products. Additionally, China has launched antitrust investigations into Google and Illumina, blacklisted a U.S. clothing company, and tightened controls on rare earth metal exports critical for global supply chains. These moves reflect China’s firm stance in the escalating trade dispute, while maintaining a pretty reserved rhetoric on both sides.
China’s Central Bank Signals Policy Adjustments
• Announced by: People’s Bank of China
• Date: February 13, 2025
• Details:
The People’s Bank of China has pledged to adjust monetary policies to support economic growth amid weakening domestic demand and external pressures. Planned measures include:
• Lowering reserve requirements to ensure sufficient liquidity.
• Stabilizing the yuan exchange rate to prevent excessive volatility.
• Encouraging credit growth to stimulate business investments.
These efforts aim to counteract deflationary trends and maintain economic stability.
China to Reduce Clean Energy Subsidies
• Announced by: National Development and Reform Commission (NDRC)
• Date: February 9, 2025
• Details:
With solar and wind power capacity surging 45% YoY, China is scaling back subsidies for new clean energy projects. The NDRC will require projects after June 2025 to compete in market-based bidding, shifting toward a self-sustaining renewable energy market. Big Development for the solar value chain - unlikely to see bi volume push, but rather a push for better economics.
China and UK Hold Talks to Rebuild Bilateral Ties
• Announced by: Chinese and British Governments
• Date: February 13, 2025
• Details:
China’s Foreign Minister Wang Yi met with UK Foreign Secretary David Lammy in London, resuming formal diplomatic engagements after nearly seven years. Topics included economic cooperation, human rights, China’s stance on Ukraine, and Hong Kong. This one is personal, so it felt important to include.
China Expresses Readiness to Share AI Advancements
• Announced by: Chinese Vice Premier Zhang Guoqing
• Date: February 11, 2025
• Details:
Speaking at an AI summit in Paris, China expressed willingness to collaborate on AI security and development. The initiative aligns with Beijing’s diplomatic push for “a community with a shared future for mankind” to enhance international tech cooperation. Once again the DeepSeek effect is being utilised way beyond anything anyone thought possible even a week ago. No wonder we had to pivot to cover it.
Data Released This Week:
Consumer Price Index (CPI YoY) – January 2025
• Announced by: National Bureau of Statistics (NBS)
• Date: February 9, 2025
• Event: January 2025 Consumer Price Index (Year-over-Year)
• Details:
The CPI increased by 0.5% year-on-year in January, marking the fastest rise in five months and exceeding economists’ expectations of a 0.4% increase. This uptick was primarily driven by heightened consumer spending during the Lunar New Year holiday, with notable price increases in services and food sectors. Despite this, underlying deflationary pressures persist in the economy.
Producer Price Index (PPI YoY) – January 2025
• Announced by: National Bureau of Statistics (NBS)
• Date: February 9, 2025
• Event: January 2025 Producer Price Index (Year-over-Year)
• Details:
The PPI declined by 2.3% year-on-year in January, matching the previous month’s decrease and indicating ongoing deflationary trends in the industrial sector. This persistent decline reflects weak factory demand and falling commodity prices, raising concerns about corporate profitability and potential impacts on the manufacturing industry’s investment outlook.
New Bank Loans – January 2025
• Announced by: People’s Bank of China (PBOC)
• Date: February 14, 2025
• Event: January 2025 New Bank Loans
• Details:
Chinese banks extended a record 5.13 trillion yuan in new loans in January, surpassing analysts’ expectations of 4.5 trillion yuan. This surge is attributed to the PBOC’s efforts to support economic recovery amid external challenges, including trade tensions. While January typically sees a boost in lending due to annual bank quotas, the current economic uncertainties have also influenced credit demand. Corporate loans accounted for 4.78 trillion yuan, while household loans, including mortgages, totaled 443.8 billion yuan.
M2 Money Supply (YoY) – January 2025
• Announced by: People’s Bank of China (PBOC)
• Date: February 10, 2025
• Event: January 2025 M2 Money Supply (Year-over-Year)
• Details:
The M2 money supply, representing the broadest measure of money in circulation, grew by 7.3% year-on-year in January. This expansion reflects the central bank’s monetary easing policies aimed at ensuring sufficient liquidity in the financial system to support economic activity amid domestic and international challenges.
Total Social Financing (TSF) – January 2025
• Announced by: People’s Bank of China (PBOC)
• Date: February 14, 2025
• Event: January 2025 Total Social Financing
• Details:
In January 2025, China’s Total Social Financing (TSF)—a broad measure of credit and liquidity in the economy—expanded by a record 7.06 trillion yuan, surpassing the previous month’s 2.86 trillion yuan and exceeding market forecasts of 6.4 trillion yuan. This surge reflects the government’s intensified efforts to stimulate economic activity amid external challenges and domestic deflationary pressures. The substantial increase in TSF indicates robust credit support to the real economy, aiming to bolster investment and consumption. Analysts anticipate that this momentum will continue, supported by proactive fiscal policies and monetary easing measures.
This significant rise in TSF complements the record 5.13 trillion yuan in new yuan-denominated loans issued by Chinese banks in January, highlighting a concerted effort to enhance liquidity and support economic growth.
Vehicle Sales (YoY) – January 2025
• Announced by: China Association of Automobile Manufacturers (CAAM)
• Date: February 10, 2025
• Event: January 2025 Vehicle Sales (Year-over-Year)
• Details:
Vehicle sales in China increased by 10.5% year-on-year in January, indicating a robust demand in the automotive sector. This growth is partly attributed to government incentives and a rebound in consumer confidence, despite broader economic uncertainties.
These data releases provide insights into China’s economic conditions, highlighting areas of growth and ongoing challenges within the economy.
Complete Index Performance List:
General Trends
Chinese equity markets delivered broad-based gains this week, signaling improving investor confidence. The rally was supported by strong economic data, expectations of continued policy easing, and sector-specific tailwinds favoring technology and innovation-driven industries.
The Shanghai Composite Index (SSE) rose +1.30%, closing at 3,346.72, driven by robust performance in growth and industrial stocks.
The Shenzhen Composite Index (SZSE) outperformed, advancing +1.64% to 10,749.46, buoyed by tech-heavy stocks and innovation-focused companies.
In Hong Kong, the Hang Seng Index (HSI) surged +7.04%, fueled by a powerful rally in the technology sector, with the HS TECH Index up +7.30%.
This broad market strength suggests a healthy and sustainable rally, underpinned by supportive government policies and renewed risk appetite.
Relative Outperformance
CHINEXT Index (+1.88%)
The CHINEXT Index, which tracks small-cap and growth-oriented firms, recorded strong gains, driven by continued investor interest in technology, biotech, and AI-related sectors. The index benefited from positive sentiment around China’s push for technological self-reliance and strong earnings reports from key growth stocks.
SSE SME Innovation Index (+2.84%)
The SSE SME Innovation Index was one of the week’s best performers, reflecting growing demand for small and medium-sized enterprises (SMEs) involved in high-tech manufacturing and R&D. Investors are betting on fiscal incentives for SMEs and targeted government support for emerging industries.
HS TECH Index (+7.30%)
The HS TECH Index was the standout performer among all indices, soaring +7.30%. This reflects strong investor optimism toward China’s tech giants, driven by expectations of policy tailwinds, including financial support for the sector and potential relaxation of regulatory constraints.
HSCEI Index (+7.03%)
The Hang Seng China Enterprises Index (HSCEI), which tracks Hong Kong-listed Chinese firms, gained +7.03%, mirroring strong offshore investor interest in Chinese equities.
Shenzhen 100 Index (+1.06%)
The Shenzhen 100 Index recorded solid gains, reinforcing Shenzhen’s position as China’s innovation hub, with growth in tech, green energy, and advanced manufacturing stocks.
Sector-Specific Dynamics
Commodity and Industrial Sectors
The SSE Commodity Equity Index fell -0.56%, as commodity prices faced short-term headwinds, despite China’s commitment to infrastructure investment.
The SSE Industry Top Index (+2.07%) showed broad-based strength in key industrial stocks, signaling increased expectations for fiscal stimulus and manufacturing growth.
Financials & Real Estate
The HSI Financial Index (+4.89%) posted strong gains, reflecting improving sentiment toward the sector as concerns over bad debts eased.
The HSI Property Index (+3.46%) rose as policy measures aimed at stabilizing the real estate sector boosted investor confidence.
Technology and Growth Stocks
Tech-heavy indices such as CHINEXT (+1.88%) and HS TECH (+7.30%) led gains, reflecting increasing optimism in China’s innovation-driven economic transition.
Investors are betting on AI, semiconductor, and biotech firms, following China’s regulatory push to support next-generation industries.
Large-Cap vs. Small-Cap Performance
Large-Cap Indices
The SSE Mega Cap Index gained +1.37%, reflecting solid but more tempered gains compared to small and mid-cap stocks.
Investors rotated into high-growth areas, seeking better returns in the face of continued policy support.
Small-Cap & Innovation-Focused Indices
SSE SME Innovation Index (+2.84%) and CHINEXT (+1.88%) significantly outperformed, reflecting a clear rotation into smaller, high-growth companies.
This reinforces confidence in China’s strategic focus on innovation, digitalization, and high-tech development.
Additional Observations
Hong Kong’s Strongest Rally in Months
The HSI (+7.04%) posted its best weekly performance in months, with broad participation from large-cap tech firms.
The tech-heavy HS TECH Index (+7.30%) was the week’s biggest winner, highlighting a resurgence in investor confidence in Chinese technology giants.
Turnover & Market Participation Remain Strong
Trading volumes were elevated, particularly in HS TECH Index and HSI Commerce & Industry, indicating strong market participation and bullish sentiment.
Divergence Within Defensive Sectors
While growth-oriented stocks outperformed, defensive sectors lagged:
The HSI Utilities Index fell -0.08%, and SSE Dividend Index gained only +0.52%, signaling a clear “risk-on” sentiment shift. Investors are moving away from defensive plays and into high-growth sectors.
The Shift Toward Industrial and AI Development
China’s strategic push toward AI, industrial automation, and clean energy technology is evident in market behavior. The SSE Industry Top Index (+2.07%) and CHINEXT (+1.88%) benefited from stronger capital inflows into advanced manufacturing, semiconductors, and renewable energy.
Key Takeaways
Strong Market Sentiment Driven by Economic & Policy Factors
• The broad-based rally aligns with improving macroeconomic indicators and growing confidence in China’s economic policies.
• The tech and innovation sectors remain the primary beneficiaries, with government initiatives supporting R&D and AI development.
Commodities Lag as Growth Stocks Take the Lead
• While commodity-linked equities struggled, growth and tech stocks saw strong inflows, reflecting a shift toward riskier, higher-reward investments.
Strong Hong Kong Recovery, Led by Tech
• The Hang Seng Index (+7.04%) and HS TECH (+7.30%) showcased robust gains, confirming a major turnaround in offshore-listed Chinese stocks.
Small-Cap and Innovation-Driven Stocks Lead
• Investors favored growth and SME indices, such as SSE SME Innovation (+2.84%) and CHINEXT (+1.88%), reflecting a risk-on shift and increased appetite for high-growth sectors.
The Rally remains Broad-Based & Well-Supported
• Gains were not isolated to a single sector but spread across tech, finance, and industrial stocks.
• This suggests a strong and potentially sustainable rally, provided macro conditions remain favorable.
Top 20 Index Constituents:
Bottom 20 Index Constituents:
Corporate News this week:
General Motors to Close Plant in China Amid Restructuring
• Company: General Motors (GM)
• Date: February 14, 2025
• Details: GM announced the closure of its plant in Shenyang, China, by the end of February. This decision is part of a broader restructuring strategy in response to increasing competition from domestic automakers benefiting from government subsidies. The Shenyang facility currently manufactures Buick GL8 minivans and Chevrolet Tracker SUVs for the Chinese market. Despite incurring $4 billion in restructuring charges, including plant closures, GM reported positive equity income in the region for the fourth quarter. Moving forward, the company plans to focus on its Cadillac, Buick, and premium import brands in China, aiming to enhance their appeal among Chinese consumers.
China Vanke Receives Government Support Amid Debt Challenges
• Company: China Vanke
• Date: February 12, 2025
• Details: Chinese authorities are formulating a plan to assist property developer China Vanke in addressing a 50 billion yuan ($6.84 billion) debt shortfall. The proposed measures include allocating 20 billion yuan in special local government bonds to acquire unsold properties and vacant land from Vanke. Additionally, Shenzhen Metro, a major shareholder, has extended a 2.8 billion yuan loan on favorable terms to the company. These interventions aim to stabilize Vanke’s financial position and restore investor confidence in China’s real estate sector.
Moody’s Downgrades China Vanke Amid Liquidity Concerns
• Company: China Vanke
• Date: February 11, 2025
• Details: Moody’s Investors Service has downgraded China Vanke’s corporate family rating from ‘B3’ to ‘Caa1’ due to escalating liquidity issues and weak sales in the struggling property market. The downgrade reflects Vanke’s reduced financial flexibility and uncertain sales outlook, compounded by a projected net loss of $6.2 billion for 2024. Despite government interventions, including management oversight and financial support, Moody’s cites ongoing operational challenges and a lack of a clear refinancing plan for upcoming debt maturities as key concerns.
China’s Blacklisting of PVH Corp Raises Concerns Among U.S. Businesses
• Company: PVH Corp (owner of Calvin Klein and Tommy Hilfiger)
• Date: February 13, 2025
• Details: China has added PVH Corp to its “unreliable entities” list, citing the company’s refusal to source cotton from Xinjiang due to concerns over forced labor allegations. This blacklisting permits Chinese authorities to impose sanctions, including fines and operational restrictions, heightening uncertainties for U.S. businesses in China. PVH’s operations in China account for approximately 6% of its revenue. The company is actively seeking to resolve the issue, but its brands have currently suspended activities on Chinese social media platforms. This development underscores the complexities U.S. companies face amid escalating geopolitical tensions and regulatory challenges in China.
Looking for the continuity of the rally next week and the home sales prices and volumes news to support it.
Have a great week ahead,
Leonid