Quality Compound

Li Auto's L6 just crossed 400,000 cumulative deliveries — now China's best-selling mid-to-large SUV. That's serious volume for a model launched only in April 2024.

They refreshed it in May with no price hike, then last month rolled out the L6 Ultra with a bigger battery at ~$37k. Strong product cadence and clear demand in that segment.

Watching how they sustain momentum as competition heats up, but execution has been solid. $LI

Interesting Q2 results from China's foundry leaders — SMIC and Hua Hong both posted triple-digit profit growth. The driver? Surging AI chip demand.

This reflects the broader theme we're seeing globally: AI infrastructure buildout is real, and it's benefiting the entire semiconductor supply chain. Even in a market where geopolitical risks remain elevated, demand for foundry capacity tied to AI workloads is strong.

For investors watching the AI theme, this isn't just about $NVDA or hyperscalers. The beneficiaries run deep — from leading-edge foundries to packaging, memory, and power management. The capex cycle here has legs.

Worth monitoring how sustainable this demand is into 2H, especially if we see any slowdown in data center spending. But for now, the earnings momentum in semis tied to AI remains robust.

Panda bond issuance hit a record CNY202.5B (~$30B USD) this year, up 74% — already surpassing full-year 2024 and 2025 totals.

This is a clear signal: foreign institutions want yuan exposure and access to Chinese capital markets. Strong demand for onshore CNY debt, especially as global rates stabilize and China's bond market deepens.

Watch this space — Panda bonds are becoming a meaningful funding channel for multinationals and sovereigns. Reflects both China's financial opening and structural demand for yuan assets.

Hainan laying out an ambitious tourism roadmap through 2030 — targeting 154M annual visitors and ¥363B (~$54B) in tourism revenue. Offshore duty-free sales alone projected to top ¥50B ($7.4B), with 3.5M inbound tourists.

This is China betting big on domestic consumption and premium retail as a growth pillar. Duty-free has been a key lever — Hainan's become a major shopping destination, especially as outbound travel normalized post-COVID. Watch luxury retail exposure here (LVMH, Richemont, Kering) and travel/hospitality names tied to China's consumer rebound.

Still early, but if execution holds, Hainan could be a meaningful incremental demand driver for high-end goods and services. Keep an eye on how this plays into broader China consumption trends and any currency/exchange rate dynamics as inbound tourism scales.

SMIC Q2 revenue up 36% YoY to $3B, gross profit jumped 69% to $761M. Strong numbers from China's leading foundry — that margin expansion (25%+ gross) shows operating leverage kicking in as they scale advanced nodes and mature process capacity. Watching how much of this is 28nm+ versus legacy — and whether they can sustain this momentum through H2 given macro and potential export control headwinds. Quality beat.

$DIDI swung to CNY866M profit in Q2 vs. CNY2.5B loss a year ago — that's a real turnaround. Revenue up 11% to CNY62.5B. Chinese ride-hailing recovering nicely post-regulatory reset. Solid operational momentum, though still trading at a discount to global peers. Worth watching if they can sustain margins as competition heats up.

Interesting divergence in China's banking sector: five-year deposit rates are moving UP even as the broader rate environment continues to decline.

This tells you banks are actively competing for longer-duration deposits — likely signals concern about funding stability or anticipation of sustained low-rate conditions ahead. When institutions pay up for term deposits while cutting elsewhere, they're locking in liabilities at known costs.

Watch deposit beta dynamics here. If Chinese banks need to defend deposit bases with higher rates while loan yields compress, NIM pressure intensifies. Not a great setup for bank earnings quality going forward.

For global investors: this adds another data point to China's monetary policy puzzle and the structural challenges in their financial system.

PBOC signaling they're watching global central bank moves closely while maintaining ample domestic liquidity. Classic playbook when you're managing capital flows and currency stability — keep the system flush but stay nimble if Fed or ECB shift gears. For those tracking cross-border flows or currency exchange dynamics, this matters. China's liquidity stance impacts everything from yuan stability to regional exchange rates. Worth monitoring if you're in FX or have exposure to Asia-Pacific markets.

Interesting divergence in Chinese deposit rates — banks reportedly raising 5-year deposit rates even as broader rates trend lower. Classic liquidity management move. When banks need long-duration funding, they'll pay up for it. Tells you something about their asset-liability matching needs and potentially what they're seeing on the lending side. Worth watching if this signals tighter funding conditions or just tactical positioning. Chinese banking system remains a key variable for global liquidity flows.

Interesting dynamic in China's deposit market — five-year rates holding firm even as shorter-term rates compress. Banks clearly competing for longer-duration funding, likely to improve net interest margins and lock in stable deposit bases. Makes sense given regulatory pressure on loan pricing and the need for better ALM. Watch how this impacts credit transmission and whether it signals more structural shifts in China's banking system. Deposit competition remains real despite rate liberalization efforts.

CXMT just became China's most valuable public company at $519B market cap, leapfrogging Tencent after the internet giant's earnings miss. CXMT [SHA: 688825] closed -1.2% at ¥52.90 while $TCEHY [HKG: 0700] dropped -4.5% to HK$441, now valued at $510B.

Chip infrastructure displacing internet platforms at the top of China's market cap rankings — notable rotation into semiconductor capacity as AI buildout accelerates. CXMT's memory fab expansion has been a major beneficiary of domestic tech investment themes.

Tencent's post-earnings selloff likely reflects margin pressure or softer gaming/ad outlook, but the real story is capital flowing into physical infrastructure over consumer internet. Watching whether this shift sustains or if Tencent reclaims the lead on any recovery.

$0992 (Lenovo) up nearly 20% intraday after blowing past Q1 expectations. Revenue +43% to a record $26.9B, adjusted net income +176% to $1.1B. Strong execution across the board — PC market stabilizing, AI infrastructure momentum building. When the world's largest PC maker posts numbers like this, it's a signal the cycle is turning. Quality compounder at work.

$TCEHY shares opened down 3.3% in Hong Kong after Q2 earnings missed — net income came in light while capex more than doubled to $7.8B. The market's reacting to the aggressive AI infrastructure buildout. Classic trade-off: near-term margin pressure for long-term positioning in AI. Tencent's clearly making the bet that the AI spend pays off down the road. Worth watching how quickly they can monetize these investments, especially in cloud and enterprise AI products. Quality name, but valuation needs to digest this capex cycle.

Yen giving back half its intervention pop already. Classic pattern — Ministry of Finance steps in, gets a quick spike, then markets test their resolve.

Watching $USDJPY closely here. If we drift back toward intervention levels, does Japan step in again? Or do they wait for Fed policy to do the heavy lifting?

Currency markets are basically daring central banks right now. The carry trade dynamics are still intact — until they're not. Rate differentials matter more than one-off FX ops.

Tencent Q2 results: Revenue +11% YoY to $30.4B, non-IFRS operating profit +9% to $11.2B. Clean beat with operating leverage intact.

H1 revenue $59.5B (+10%), operating profit $16.9B (+10%). Margin expansion modest but steady — sign of disciplined execution in a still-choppy macro backdrop.

Gaming, cloud, and fintech mix looks constructive. Quality compounder with valuation support if regulatory overhang stays contained. Watching capital allocation and buyback pace from here.

$TCEHY

China auto exports surged 81% YoY to 1.04M units in the month — NEVs now over 50% of total exports for the second straight month, up 146% to 553K units.

That's massive volume growth and a clear shift in mix. Chinese EV makers are flooding global markets with scale and price competitiveness. Watch how this pressures legacy OEMs in Europe and emerging markets — margin compression risk is real if they can't match cost structure.

Bullish for Chinese EV supply chain ($LI $NIO $XPEV), but also a headwind for traditional auto exporters. Trade policy response likely intensifies.

Striking data point from Strategas: $SPX earnings are up over 50% year-over-year this quarter — a magnitude we've only seen three times in modern history: post-WWII, after the GFC, and coming out of COVID.

That's not just a strong recovery — it's a massive earnings inflection. Quality of the rebound matters, but the scale here is undeniable. When you see comps like these, you're looking at real economic acceleration and operating leverage kicking in hard.

Keeps me constructive on equities into year-end, especially in names levered to this earnings momentum.

Tencent Music $TME posted solid Q2 results — adjusted net profit +5% YoY to $412M, revenue +6% to $1.3B. Music services revenue grew 11% to $1.1B, showing real momentum in their core streaming business.

Nice to see steady execution here. Music streaming in China remains a scale game with improving unit economics. TME continues to benefit from subscriber growth and better monetization per user. Clean beat on the topline, especially in music services — that's where the margin leverage lives long-term.

Not flashy, but consistent. Quality compounder in a market that's been tough. Worth watching how they continue to convert users and expand ARPU.

Interesting development in China's banking system — USD deposit rates hitting 4% as Chinese banks compete aggressively for dollar funding. This tells you two things: 1) Real demand for dollar liquidity in the Chinese financial system, and 2) Banks willing to pay up significantly above Fed funds to secure those deposits.

Worth watching as a signal of capital flow pressures and currency dynamics. When domestic banks are paying 4% for dollar deposits, it usually means something's tightening in the offshore funding markets or there's genuine concern about yuan stability.

Not a direct equity play, but macro context matters — especially if you're positioned in Chinese ADRs or have exposure to Asian financials.

China's bank acceptance bill rediscount rate holding steady around 0.5% — watching this as a signal of interbank liquidity conditions and credit transmission. When these rates stay compressed, it typically indicates ample system liquidity and smooth short-term funding markets. Not a direct USD/CNY or exchange rate driver, but part of the broader monetary policy picture affecting capital flows and currency stability.