Asian equities were mixed overnight, led higher by Thailand and the Philippines, as President Trump’s tariff ire over the weekend was focused on the EU and Mexico.

Hong Kong grinded higher throughout the trading day. Stronger-than-expected export/import data provided a late-day boost, while Shanghai and Shenzhen bounced around the room to end slightly higher. Hong Kong saw large buying from Mainland China via Southbound Stock Connect. Internet stocks were largely higher, as Alibaba gained +0.95%, Tencent gained +0.68%, and Meituan gained +0.75%, though video platform Bilibili fell -0.35%, despite announcing 2025 gaming and advertising revenue growth targets of +20% and +15%.

Pharmaceuticals, biotech, auto, coal, non-ferrous metals, precious metals, and oil all had good sessions, while consumer services, such as hotels and restaurants, were off. The Mainland’s pockets of strength were oil, banks, electricity, telecom, and precious metals. Meanwhile, semiconductors, software, healthcare equipment, and defense were all off.

Battery maker Contemporary Amperex Technology (CATL) fell -1.1% in Mainland trading, despite a deal with Australian miner BHP.

Solar manufacturer Tongwei gained +1.18% after announcing its first half net income loss would be in a range from RMB -3.9 billion to -5.2 billion, despite installed capacity growth due to “the imbalance between supply and demand in the industry, which has not improved significantly, and the product prices of each link have been continuously depressed.” Peer LONGi Green Energy Technology fell -0.55% after announcing its first half net income loss will be between RMB -2.4 billion and RMB -2.8 billion.

Hopefully, overcapacity efforts kick into gear as investors look up China’s government’s new buzzword: anti-involutionary. Involution is when intense competition leads to diminished returns. Solar, steel, cement, autos, and E-Commerce are areas highlighted by the government to face “anti-involutionary” measures. The effect could bring the end of China’s deflationary effect on the global economy as well as its domestic economy. It could also lead to higher margins and profits for listed corporations. It is also very aligned with President Trump’s China demands.

Export/import and credit data release was stronger than expected.

Some additional metrics to consider include the following.

The People’s Bank of China (PBOC) held a press conference overnight. The release noted “the effect of monetary policy supporting the real economy is relatively obvious”, as social financing, new loans, and M2 data all beat expectations. Since 2020, the bank reserve requirement ratio has been cut twelve times, along with “9 policy rate reductions, lowering 1-year and 5-year LPR by 115 basis points and 130 basis points, respectively.” (The 5-Year Loan Prime Rate determines the mortgage rate). Lower interest rates have lowered the average corporate loan yields by 0.45% to 3.30% and new housing loan rates by 0.60% to 3.10%. Efforts will continue “to implement moderate loose monetary policy… better promote the expansion of domestic demand…”. The release also stated that the market expects interest rate cuts in the second half of the year, as the “misalignment of the monetary policy cycle between China and the United States will be improved”, as spreads narrow.

It is funny that the PBOC and Trump both think Powell should cut US interest rates. GDP, new and second-hand home sales, retail sales, industrial production, and fixed asset investment will all be reported today.

On Friday, I stated that Hank Paulson’s conversation with Vice Premier Ding Xuexiang received significant attention in China. I incorrectly stated that Paulson was a Democrat. Paulson was Secretary of the Treasury under George W. Bush. My bad! He did endorse Hillary Clinton in 2016, despite being a lifelong Republican.

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