TikTok Rival Kuaishou Beats Expectations As Hong Kong Internet Gains

Mar292022

China Last Night

KraneShares

Key News

Asian equities had a strong day on Ukraine peace talks in Turkey while China was off though not significantly. The Hang Seng Index gained +1.12% led by Hong Kong internet stocks as the Hang Seng Tech +2.52% as Meituan added another +5.78% following its Q4 financial results post Hong Kong close Friday. JD.com HK gained +6.05% after spinoff JD Health gained +17.88% after announcing a buyback. There is talk JD sent laid-off workers a graduation card though I hardly see that as a reason to buy or sell. A factor for JD.com is Chinese investors in China can only sell the shares received from Tencent via Southbound Stock as they did yesterday and today. Southbound Connect was a net sale but not by a significant amount as Mainland investors were net buyers of Tencent and Meituan.

TikTok rival Kuaishou jumped +4.6% in advance of Q4 financials which were released after the Hong Kong close beating expectations. Hong Kong volumes were -6.83% from yesterday which is only 84% of the 1-year average as advancers 251 outpaced decliners 221. Healthcare was a strong performer in Hong Kong +2.85% and China +0.72% as Shanghai’s mass testing makes headlines. Real estate was off in both markets Hong Kong -2.25% and China -1.46% as real estate developer Suanc -17.41% delayed its Q4 financial release. Tech was off in both markets Hong Kong -0.34% and China -1.84% as investors worry about Apple’s factories closing for lockdown due to China’s covid outbreak. Apple AirPods makers GoerTek (002241 CH) and Luxshares (002475 CH) were off -7.76% and -6.11%.

Mass testing of Shanghai’s 25mm population is occurring as the outbreak is taken very seriously due to China’s elderly population. Shanghai eased -0.33% while Shenzhen -0.57% and STAR Board -0.99% on volume off slightly overnight which is 81% of the 1-year average. The PBOC added liquidity to the financial system for the third day in the row which some are taking as a sign more policy support is coming. Energy was the top performer again +2.13%. Fertility related stocks gained as China rolled out a RMB 1,000 tax deduction per month for every child parents have under the age of 3. I would expect further policies coming as China address its low birth rate. Foreign investors sold -$51mm of Mainland stocks via Northbound Stock Connect. Treasury bonds and CNY were flat while copper gained.

The Japanese Yen’s decline versus the US $ is a sleeper story that is gaining traction in my world. According to Google Trends, there have been 55 mentions of China currency manipulator versus 0 mentions of Japan currency manipulator since January 30th through Feb 5^th of this year. Interesting!

The rumor that US asset manager State Street would be replaced as the manager of the Hong Kong Tracker was confirmed as Hang Seng Investment Management will take over. State Street ran into the issue of the Hang Seng Index including Executive Order banned securities though they owned the names regardless after flip flopping on holding them. The new manager is lowering the fee so it might not be completely about the EO.

Short video, live streamer and TikTok rival Kuiashou (1024 HK) reported Q4 financial results after the Hong Kong close today that largely beat analyst expectations. The topline results look very strong as expectations going into the release were low as the stock hasn’t done much since bottoming out back in August 2021. % comparison are year over year i.e. Q4 2022 versus Q4 2021.

Revenue grew 35% to RMB 24.4B from RMB 18.1B and analyst expectations of RMB 23.12B
Revenue breakdown: online marketing services grew +55.5% to RMB 132B from RMB 8.5%, live streaming +11.7% to RMB 8.8827B from RMB 7.899B
Gross merchandise Value of e-commerce +35.7% to RB 240.3B from RMB 177.1B
Monthly average users increased +21.5% to 578mm from 475.7mm, daily users increased +19.2% to 323.3mm from 271.3mm
Selling/market expenses +50.8%, Admin Expenses +54.5%, R&D +65.3%
Loss for period declined -67.8% to RMB -6.202B from RMB -19.263B
Adjusted net loss RMB -3.468B from RMB -4.616B
Adjusted EDITDA loss RMB -1.29B from RMB 3.174B
Cash/cash equivalents increased to RMB 49.6B from 272B