China Weekly Wrap: Markets, Macro & Tech – Key Developments This Week
a week that was 26-30 May 2025
Good Morning,
Sometimes a quiet week is exactly what you need to get good work done—and this one delivered.
We published two major pieces:
– First, a deep dive into China’s food and beverage chains, where we explored the economics of unit growth, digital integration, and what it takes to scale in a competitive, fast-moving consumer landscape.
– Second, a full breakdown of SenseTime, where we looked beyond the AI headlines to unpack the company’s real business model, policy alignment, and market positioning. That piece is free to read, and a good entry point if you’re new to the blog.
Together, they offer a window into how China’s domestic economy is evolving—through both digital consumer infrastructure and the contested frontiers of AI.
If you haven’t yet caught up, both posts are live on the blog. And as always, subscriber-only content comes with full access to our research archive, interviews, and deeper takes on the big themes shaping China’s market outlook.
Next week we’ll taking a detour: we're going to look at the comings and goings in Indonesia, what the plan there is and what, if anything should an investor do about it? Very excited for that.
Serious about investing in Asia? Then your process needs more Panda.
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Right now, we’re working with clients on China’s consumer landscape, the 2Q25 macro outlook, and yes robotics.
See what we offer here, and connect with us today or message us directly.
Nothing in this Substack is Investment Advice. This information is provided for informational purposes only and does not constitute financial, investment, or other advice. Any examples used are for illustrative purposes only and do not reflect actual recommendations. Please consult a licensed financial advisor or conduct your own research before making any investment decisions. The authors, publishers, and affiliates of this content do not guarantee the accuracy, completeness, or suitability of the information and are not responsible for any losses, damages, or actions taken based on this information. Past performance is not indicative of future results.
Weekly Relative Performance Observations
As of May 30, 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. We’ll do a full end-of-month reconciliation in next week’s wrap. (*see notes at the end of the post).
Performance in Chinese Equities
🇭🇰 Hang Seng Index (HSI)
-1.20%
Highlights: The HSI declined by 1.20% this week, closing at 23,289.77. Despite the weekly loss, the index posted a strong MTD gain of 5.29%, marking its largest monthly percentage increase since February 2025 .
Context: The week’s decline was primarily driven by renewed U.S.-China trade tensions. A U.S. appeals court reinstated tariffs previously blocked, leading to a sell-off in tech stocks, with the Hang Seng Tech Index dropping 2.59%. Major tech firms like Alibaba and Baidu fell over 3% . However, the property sector showed resilience, with some stocks gaining on speculation of easing measures.
🇨🇳 CSI 300 (SHSZ300)
-0.48%
Highlights: The CSI 300 index edged down by 0.48% to close at 3,840.23, marking its second consecutive weekly decline.
Context: The index faced pressure from the financial and consumer discretionary sectors. Investor sentiment was dampened by the lack of concrete policy support and ongoing concerns over economic growth. The reinstated U.S. tariffs added to the cautious mood, affecting sectors sensitive to export dynamics .
🇨🇳 Shanghai Composite (SHCOMP)
-0.47%
Highlights: The SHCOMP fell by 0.47% to close at 3,347.49. Despite the weekly loss, the index recorded a 2.09% gain for May, its best monthly performance since February .
Context: The decline was attributed to investor concerns over trade tensions and the absence of new domestic stimulus measures. While industrial and state-owned enterprises provided some support, overall market participation remained subdued.
🇨🇳 ChiNext Index
-0.96%
Highlights: The ChiNext Index dropped by 0.96% to close at 1,993.19, continuing its downward trend.
Context: High-valuation tech and biotech stocks led the decline, reflecting investor caution amid policy uncertainties and global trade issues. The index’s performance underscores the market’s sensitivity to external shocks and the need for clearer policy direction to restore confidence .
Regional Peers
🇰🇷 KOSPI: +4.07% Rebounded strongly on semiconductor strength and dip-buying in large-cap tech.
🇯🇵 TOPIX: +2.41% Gained on yen weakness and optimism ahead of the BOJ’s policy meeting.
🇮🇳 NIFTY 50: -0.41% Slight decline due to election-related positioning and sectoral pressures.
🇹🇼 FTSE TWSE Taiwan 50: +1.03% Continued gains in semiconductors, though momentum moderated.
🇵🇭 PSEi Philippines: -2.35% Declined amid FX volatility and disappointing earnings.
🇮🇩 FTSE Indonesia: +0.42% Modest gains supported by banks and commodities.
Key Takeaways
Trade Tensions Resurface: The reinstatement of U.S. tariffs reignited concerns over U.S.-China trade relations, impacting investor sentiment and leading to declines in major indices.
Tech Sector Vulnerability: High-valuation tech stocks, particularly in the Hang Seng Tech Index and ChiNext, were notably affected, highlighting the sector’s sensitivity to geopolitical developments.
Policy Clarity Needed: The lack of new domestic stimulus measures and policy direction continues to weigh on market confidence, emphasizing the need for decisive action to support economic growth.
Regional Divergence: While some Asian markets like Korea and Japan posted gains due to sector-specific strengths, others like the Philippines faced challenges from macroeconomic factors.
In The News This Week
Trade Talks “Stalled”; Bessent Pushes for Trump–Xi Call
Announced by: U.S. Treasury Secretary Scott Bessent
Date: May 30, 2025
Bessent said U.S.–China trade talks were “a bit stalled” and floated the idea of a direct Trump–Xi call to reenergize negotiations.
This Indicates:
The geopolitical thaw remains incomplete. Diplomatic progress may hinge on top-level engagement. Markets are likely to remain headline-driven as election-year U.S. politics heightens sensitivity to China.
China’s State Narrative Turns Defensive on U.S. Tensions
Announced by: Qiushi Journal (Communist Party of China)
Date: May 29, 2025
An article emphasized “bottom-line thinking” and preparation for worst-case U.S. scenarios, stressing the need for comprehensive countermeasures.
This Indicates:
Beijing is preparing for a prolonged period of strategic and economic rivalry. The tone signals continuity in its self-reliance agenda and narrative resilience ahead of further tech containment.
Beijing Signals Openness to EU on Rare Earths
Announced by: China Commerce Ministry
Date: May 30, 2025
Officials briefed EU partners on possible easing of rare earth export controls during bilateral semiconductor supply chain talks.
This Indicates:
China is softening its stance toward the EU to hedge U.S. risks and protect access to critical export markets. Tech diplomacy is being finely calibrated.
Five Ministries Rein in Meituan, JD, Ele.me Over Platform Conduct
Announced by: Multiple regulatory agencies
Date: Mid-May 2025
Authorities summoned top food delivery and e-commerce platforms, enforcing an earlier pact on anti-competitive practices and pricing conduct.
This Indicates:
The state is not micromanaging but refereeing within a defined rulebook. Meituan and JD are adapting—shedding exclusivity and limiting subsidies. The outcome is calibrated competition: efficient, but rule-bound.
“Made in China” Successor Plan in the Works
Announced by: Unnamed officials (via MKTNews sources)
Date: May 26, 2025
China is crafting a high-tech manufacturing blueprint to follow “Made in China 2025,” emphasizing chipmaking and smart equipment without provocative branding. A separate 2026–2030 Five-Year Plan is also under review.
This Indicates:
Beijing intends to double down on industrial capacity, despite external pressure to rebalance. Long-term policy continuity remains clear: secure the tech base, sustain manufacturing’s GDP share, and tread carefully around Western sensitivities.
Goldman: Steel Exports to Fall as Global Barriers Rise
Announced by: Goldman Sachs
Date: May 26, 2025
Steel exports are forecast to decline by 3% in 2025 and one-third in 2026, pressured by anti-dumping measures and weaker domestic production.
This Indicates:
A turning point for Chinese overcapacity and industrial trade friction. Policymakers may quietly welcome a slowdown in exports as part of their supply-side recalibration.
Instant Commerce Crackdown and Platform Equilibrium
Announced by: Sichuan Provincial Watchdog
Date: Late May 2025
Following Meituan’s compliance shift, JD was reprimanded for storefront manipulation and ultra-low price subsidies. Enforcement followed the August 2024 e-commerce pact.
This Indicates:
Beijing’s approach to tech governance is settling into a new rhythm: let firms innovate, but within a state-defined competitive framework. Consumers gain, and Beijing reaffirms its regulatory credibility without shocks.
PBoC to Deliver Less Stimulus Than Expected Amid Deflation Risks
Announced by: Scope Ratings / Analysts
Date: May 28, 2025
Despite a modest upward revision in GDP forecasts (to 4.5%), analysts now expect the PBoC to cut its policy rate only 10 bps in Q4 and lower the reserve ratio by just 50 bps—less than markets had priced.
This Indicates:
The improved external trade environment is allowing Beijing to be more conservative with stimulus, but deflation remains a macro drag. The muted easing path suggests policy is in “wait-and-see” mode, and sectors dependent on stimulus may face pressure.
Moody’s Affirms Bank Ratings, Maintains Negative Outlook
Announced by: Moody’s Ratings
Date: May 27, 2025
Moody’s affirmed the ratings of eight major Chinese banks but maintained negative outlooks following its recent downgrade of China’s sovereign rating.
This Indicates:
Systemic financial risks remain a concern for global investors. The negative outlooks underscore persistent concerns about asset quality, local government debt exposure, and long-term growth capacity in the banking system.
Platform Price Wars Under Fire in People’s Daily
Announced by: People’s Daily (Renmin Ribao)
Date: May 26, 2025
An editorial titled “Anti-Involution: Act When You Must” criticized the escalating price wars among delivery platforms like JD.com, Meituan, and Ele.me. It emphasized that while consumers may benefit in the short term, unsustainable subsidies hurt long-term industry health.
This Indicates:
Beijing is actively shaping public sentiment against destructive competition. The use of authoritative party media reinforces the political risks of undercutting behavior, especially amid tighter enforcement of fair competition norms from regulators.
Moody’s Lifts Outlook on Hong Kong’s Credit Rating
Announced by: Moody’s
Date: May 27, 2025
Moody’s raised its outlook on Hong Kong’s AA3 rating from Negative to Stable, citing resilience in the face of trade frictions and global headwinds. The outlooks for China and Macao SAR remained unchanged at Negative.
This Indicates:
While macro challenges persist, Hong Kong’s institutional credibility and fiscal buffers continue to reassure global investors. The move may help reinforce Southbound flows into Hong Kong equities and strengthen the case for long-term portfolio allocation.
Regulators Enforce Pact on Platform Competition
Announced by: Five Ministries including SAMR (State Administration for Market Regulation)
Date: Mid-May 2025 (enforcement visible by late May)
Multiple regulators summoned JD.com, Meituan, and Ele.me to enforce the August 2024 platform competition pact. JD was criticized for ultra-low pricing and storefront misrepresentation; Meituan was asked to eliminate exclusivity clauses.
This Indicates:
China is actively implementing its digital economy rulebook, focusing on taming price wars and protecting merchant rights. The push aligns with broader state goals to foster “orderly competition” and ensure consumer welfare, especially in the food delivery and local services sectors.
Data Released This Week
China’s latest economic data offered a more constructive tone:
Key indicators for May surprised to the upside, particularly in manufacturing, where momentum picked up for a second month. Profit growth continued to recover, and the composite PMI rose again, reinforcing a tentative but broadening stabilization narrative. While risks remain—especially in employment and real estate—the near-term macro pulse is firmer than many expected.
Industrial Profits (YTD, Jan–Apr 2025)
Actual: +1.4% YoY | Consensus: +1.2% | Previous: +0.8%
This Indicates:
Profitability continued its slow recovery, helped by improved margins in upstream sectors and renewed strength in machinery and autos. April’s data suggest industrial policy support is gaining traction, though growth remains uneven. On a year-to-date basis, the trend is now firmly positive—marking a notable shift from Q1’s sluggish start.
NBS Manufacturing PMI (May 2025)
Actual: 49.5 | Consensus: 49.5 | Previous: 49.0
This Indicates:
The second straight monthly improvement brings the index close to expansion territory. Key sub-indices such as production and new orders showed healthy sequential gains. The data suggests industrial sentiment is stabilizing, supported by inventory normalization, trade resilience, and ongoing stimulus. While still below 50, the direction of travel is clearly positive.
NBS Non-Manufacturing PMI (May 2025)
Actual: 50.3 | Consensus: 50.5 | Previous: 50.4
This Indicates:
Services growth remains in modest expansion, though momentum slightly softened. Real estate and construction components were a drag, while consumer services like hospitality and transport held up. The broad takeaway is that demand is stabilizing, not surging—a reflection of gradual consumer normalization rather than a full-blown rebound.
NBS Composite PMI (May 2025)
Actual: 50.4 | Previous: 50.2
This Indicates:
The composite reading improved again, suggesting China’s economic activity is on a firmer footing. A modest uptrend in both manufacturing and services implies a maturing recovery dynamic, with policy support gradually filtering into the real economy. The data should give policymakers confidence to maintain a steady hand rather than rushing into additional stimulus.
Complete Index Performance List:
Performance Analysis
Week of May 25–30, 2025
General Trends
Chinese equity markets posted a mixed performance this week. Onshore indices mostly declined, with growth segments under pressure, while offshore markets showed selective resilience, buoyed by financials and property-related names. Investor sentiment continues to hinge on policy signaling and geopolitical noise, with market participation still skewed toward state-linked names and defensives.
The standout feature this week was the loss of upward momentum in onshore markets, particularly in the ChiNext and SME boards, while Hong Kong benefitted from rotation into dividend-yielding and reform-linked stocks. That said, the Hang Seng Tech Index slumped, underscoring the fragility of growth sentiment in the current macro and regulatory backdrop.
Mainland Indices: Choppy Trade, Growth Names Drag
Shanghai Composite (SSE): −0.03% to 3,347.49
CSI 300 (SHSZ300): −1.08% to 3,840.23
ChiNext Index: −1.40% to 1,993.19
Shenzhen 100: −1.83%
SSE SME Innovation Index: +1.50% (notable exception)
SSE Dividend Index: +0.16%
SSE Mega-cap Index: −1.25%
Interpretation:
Onshore equities pulled back for a second week as investors faded stimulus hopes and rotated away from speculative growth names. The ChiNext and broader SME space underperformed, dragged by tech, software, and clean energy names. However, a modest recovery in SOE-heavy indices and the SME Innovation Index suggests rotation toward policy-supported niches. Volume remains thin, and conviction is still lacking.
Offshore Indices: Rebound in Property and Financials
Hang Seng Index (HSI): −1.32% to 23,289.77
HS Tech Index: −1.46%
HSCEI Index: −1.77%
HSI Financials: +0.06%
HSI Red Chips: +1.14%
HSI Property Index: +2.01%
VHSI (Volatility Index): +0.70% to 23.05
Interpretation:
Despite headline weakness, Hong Kong saw positive rotation into property and SOEs, with developers and landlords rallying on renewed talk of policy support. Banks and insurance stocks held ground, continuing to attract yield-focused inflows. The drop in tech underscores how macro noise and tariffs continue to weigh on platform names. Volatility ticked higher but remains well below March highs.
Macro Takeaway
This week’s upbeat macro data—including stronger-than-expected PMIs and profit growth—was not enough to spark a broad rally, indicating that policy expectations remain the key catalyst. The lack of follow-through on real estate funding and fiscal acceleration is keeping risk appetite in check.
Investor behavior reflects:
Tactical rotations into SOEs, dividend names, and property
Caution toward growth tech and consumer names, especially those exposed to U.S. tariffs or local regulatory headlines
A preference for quality defensives and strategic sectors
Sector & Style Trends
EVs and Autos: Leadership Returns to the OEMs
BYD (1211.HK): −15.56% (profit-taking after strong run)
Li Auto (2015.HK): −13.20%
Xiaomi-W (1810.HK): −3.87%
CATL (300750.SZ): +3.03%
Interpretation:
After several strong weeks, automakers gave back ground. The pullback reflects profit-taking and sector-wide cooling post-earnings. CATL’s mainland shares rose, supported by its successful Hong Kong IPO and investor optimism over battery supply chain scale-up.
Healthcare & Biotech: Quiet Strength
JD Health (6618.HK): +8.22%
Wuxi AppTec (2359.HK): +1.41%
Sinopharm (1099.HK): +2.70%
Wuxi Bio (2269.HK): +4.61%
Interpretation:
The sector remained firm amid defensive rotation. Despite geopolitical headwinds, fund flows into healthcare ETFs and biotech names with domestic policy alignment helped maintain momentum.
Financials & SOEs: Policy Plays in Focus
CM Bank (3968.HK): +6.74%
CCB (0939.HK): +4.06%
Ping An (2318.HK): +0.86%
HSBC (0005.HK): +2.25%
Interpretation:
Banks and insurers benefitted from the rate cut narrative, high dividend visibility, and SOE reform speculation. Southbound flows and index rebalancing have also supported sustained demand.
Property & REITs: Stabilisation Signs Emerge
Link REIT (0823.HK): +3.87%
HSI Property Index: +2.01%
SHK PPT (0016.HK): +3.44%
Interpretation:
A notable rebound in property plays as speculation grows around new funding measures and targeted developer support. Investors are beginning to differentiate higher-quality names, especially in asset-heavy REITs.
Staples & Consumer: Slow and Steady
Nongfu Spring (9633.HK): +7.26%
WH Group (0288.HK): +4.32%
Hengan Intl (1044.HK): −3.19%
Mengniu Dairy (2319.HK): +1.50%
Interpretation:
Defensives held up well, favored for cash flow durability and limited correlation to geopolitical risk. Consumer names with strong brands and stable distribution fared best.
Top & Bottom Performers (Select Highlights)
Offshore Momentum Stalls, Onshore Weakness Deepens
Hong Kong’s recent outperformance paused this week, with the Hang Seng Index (−1.3%), HS Tech Index (−1.5%), and HSCEI (−1.8%) all slipping. While property names rebounded on easing hopes, tech and platform stocks were hit by renewed regulatory tension and geopolitical overhang. Meanwhile, onshore markets remained under pressure, as the ChiNext (−1.4%) and Shenzhen 100 (−1.8%) extended losses.
The divergence between macro data resilience (strong PMIs, industrial profits) and market performance underscores persistent caution—particularly in onshore growth sectors.
Selective Rotation, Not Broad Risk-On
The rally narrowed sharply. Investors rotated into high-visibility defensives—healthcare, consumer staples, and SOEs—while trimming exposure to crowded or geopolitically exposed names like autos, internet, and semiconductors.
Strong movers included:
JD Health (+8.2%) and Wuxi Bio (+4.6%) on healthcare defensiveness.
SHK PPT (+3.4%) and Link REIT (+3.9%) on policy-driven property optimism.
Nongfu Spring (+7.3%), WH Group (+4.4%), and CCB (+4.1%) as core income plays.
But weakness in BYD (−15.6%), Li Auto (−13.2%), and Tencent (−3.8%) reveals a hesitant risk appetite, with little interest in unprofitable or uncertain growth stories.
Policy Tone Encouraging, But Execution Lags
This week’s strong May PMIs and profit growth rebound should have boosted sentiment—but markets largely faded the data. The gap between central policy signaling and transmission into earnings or liquidity remains a core drag.
Beijing’s tone has clearly shifted toward strategic reassurance—via CATL’s HK IPO, Jamie Dimon’s Beijing visit, and public commentary on manufacturing and SOE reform—but domestic participation is still thin, and many investors are waiting for more forceful fiscal follow-through.
Geopolitics Back in Focus
The renewed chill in U.S.–China trade talks, with Treasury Secretary Bessent calling for a Trump–Xi reset, cast a shadow over sentiment. This was compounded by China’s “bottom-line” strategic messaging, preparing for a long-term economic contest with the U.S., and regulatory pressure on JD and Meituan—reminders that tech remains under scrutiny.
On the other hand, measured overtures toward the EU (e.g., potential easing of rare earth controls) show China still playing a nuanced diplomatic game, which helped insulate SOEs and exporters from broader selling.
Defensives Hold the Line Amid Uncertainty
In a market still marked by low conviction and narrow participation, defensives continued to outperform:
Staples like Nongfu Spring, WH Group, and Hengan remained strong on earnings visibility.
Banks and insurers—CCB, CM Bank, Ping An—benefitted from steady dividends and reform signals.
SOEs stayed in demand, aided by index rebalancing and rising expectations of selective fiscal backstops.
With VHSI stable and macro volatility low, these sectors are serving as anchors for capital, even as the broader equity narrative remains cautious.
Company Results (May 25–31, 2025)
Li Auto (LI:US, 2015:HK)
Announced: May 28, 2025
Details: Q1 2025 results showed steady topline progress with revenue up 1.1% YoY to RMB25.9B. Net income was RMB646.6M (+9.4% YoY), despite a sharp sequential drop from Q4. Gross margin remained robust at 20.5%. Deliveries came in at 92,864 units, up 15.5% YoY. Management guided for a return to 50K monthly L-series deliveries and shared plans for the i8 BEV launch in July and the i6 in September. Long-term overseas ambitions were also highlighted, targeting 30% of sales outside China.
Market Reaction: Shares firmed as guidance reassured and margins held steady despite softer Q/Q deliveries.
Implications: Li Auto is leaning into premium electrification with product cadence (i8, i6) and capacity expansion. Investor focus is on ramping overseas exposure and maintaining margin discipline amid intense BEV competition.
JD.com (9618:HK, JD:US)
Announced: Multiple updates across the week
Details:
JD’s early 618 shopping festival saw over 500M orders and livestream revenue quadrupling YoY as of May 27.
JD and Xiaohongshu deepened their partnership with a new ad-to-checkout integration (“RedNote-to-JD”), launching June 5.
Q1 revenue rose 16% YoY, helped by government subsidies and strong promotional activity.
Market Reaction: Positive, especially for retail ecosystem expansion. JD stock was marginally up for the week despite onshore weakness.
Implications: JD is firing on multiple cylinders—logistics, live commerce, and social retail integration. Margins remain pressured, but growth traction is real, especially as subsidies and partnerships (Xiaohongshu, 618 festival) drive GMV gains.
PDD Holdings (PDD:US)
Announced: May 27, 2025
Details: Q1 2025 revenue grew 10% YoY to RMB95.7B, but net income dropped 47% to RMB14.7B amid aggressive merchant subsidies. Operating profit fell 38%. Domestic GMV rose +15%, while Temu continued its lead globally versus Shein and AliExpress based on app and Google Trends data.
Market Reaction: Mixed. Investors applauded market share growth but remained cautious on margin sacrifice.
Implications: PDD is pursuing market dominance at the expense of near-term profitability. It remains the fastest-growing e-commerce player, but investors want a clearer path to monetization—especially from Temu overseas.
Meituan (3690.HK)
Announced: May 27, 2025
Details: Meituan beat expectations in Q1 2025 with revenue of RMB86.6B (+18% YoY) and adjusted EBIT of RMB11.2B (+62% YoY), both above consensus. Food delivery and in-store commerce showed robust growth. However, the company warned of profit pressure in Q2 due to rising losses from new businesses and fierce domestic competition.
Market Reaction: Shares fell sharply following the print, with investor focus turning to deteriorating profit guidance and rising expansion costs.
Implications: Despite strong operational momentum, investor sentiment was dampened by concerns over scaling losses in local commerce and high investment burn in new initiatives.
Corporate Strategy & Capital Markets (May 25–31, 2025)
Alibaba (BABA:US, 9988:HK)
Announced: May 26, 2025
Details: Taobao Instant Commerce hit 40M daily orders within a month of launch, signaling explosive traction in rapid delivery. This milestone confirms Alibaba’s pivot into instant delivery as it battles Meituan and JD.
Implications: Reinforces Alibaba’s ecommerce rebound, though monetization and margins in the high-CAPEX instant model are key concerns.
Tongyi Lab / Alibaba Group
Announced: May 30, 2025
Details: Released technical specs for WebAgent, an autonomous web-seeking AI using ReAct-style logic. The project aims to benchmark agentic systems (WebDancer and WebWalker) for open-domain browsing and knowledge-seeking.
Implications: A strong signal of Alibaba’s continued push into LLM infrastructure and autonomous agents. While not monetized yet, this boosts Alibaba Cloud’s credibility in AI applications, especially vis-à-vis Tencent and ByteDance.
DeepSeek (Chinese AI Research)
Announced: May 30, 2025
Details: DeepSeek-R1 upgraded to 128K context and increased coding ability—still offered free. The release triggered buzz across Chinese AI and quant communities. Separately, Goku, another Chinese quant team, claimed superior training efficiency over DeepSeek and OpenAI in the “AI Olympics.”
Implications: Confirms China’s momentum in AI systems and model innovation. Expect rising investor interest in Chinese AI chipmakers, model developers, and cloud enablers as this arms race deepens.
BYD (1211.HK)
Announced: May 27, 2025
Details: BYD kicked off a new round of price cuts starting May 27, lowering prices by up to RMB15,000 on several key models including Song Plus and Dolphin. The move appears aimed at defending market share amid intensifying domestic EV competition.
Market Reaction: Shares dropped −15.56% this week, among the worst performers in the Hang Seng Index, reflecting investor concerns over margin compression and the sustainability of price-led volume growth.
Implications: While BYD remains a leader in scale and branding, the return to aggressive discounting reinforces concerns about oversupply, competitive saturation, and pressure on profitability in China’s EV market.
This week brought a firming sense of direction across Chinese markets: policy signaling remained active, data surprised on the upside, and investors continued to rotate tactically—favoring defensives, EV leaders, and earnings-backed stories.
May macro data helped reset the tone. Industrial profits accelerated to +1.4% YTD, while the official manufacturing PMI ticked up to 49.5—beating expectations and suggesting early signs of stabilization in factory sentiment. Non-manufacturing and composite PMIs both held above 50, reinforcing the notion that China’s recovery remains bumpy but intact.
Corporate earnings painted a mixed but clarifying picture.
Li Auto posted solid margins and reaffirmed aggressive launch plans, reinforcing its position as the most capital-efficient EV play.
PDD and JD.com showed GMV growth, but rising promotional intensity and regulatory scrutiny weighed on sentiment.
Meituan’s beat was overshadowed by worries about escalating costs and competition, with CLSA trimming its target price.
And BYD’s surprise price cuts sparked a sector-wide pullback, reflecting just how sensitive markets remain to margin risks.
In tech and AI, sentiment stayed constructive but selective. JD’s partnership with Xiaohongshu and Alibaba’s Tongyi Lab WebAgent launch highlighted China’s edge in consumer-AI integration. Meanwhile, DeepSeek’s open release of a 128k-token model intensified the local AI arms race—drawing renewed investor attention despite sharp pullbacks in software names this week.
At the policy level, the state narrative leaned more interventionist.
The People’s Daily editorial on anti-involution and delivery-platform subsidies shows regulators are actively reshaping competition rules.
Moody’s upgrade of Hong Kong’s rating outlook to stable was a tailwind for offshore sentiment.
But tensions remain: from ongoing platform probes to a Qiushi Journal piece stressing “bottom-line thinking”on U.S. risks, Beijing is clearly preparing for long-term rivalry and economic resilience.
Thanks again for reading and sharing. Have a great weekend—
Leonid
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.