China Market Update: Kuaishou, Bilibili & Full Truck Beat, Tencent Releases Valorant

Forbes

9 hours ago

Online video and social media company Kuaishou reported Q2 earnings after the close in Hong Kong, beating analyst expectations on revenue, adjusted net income, and adjusted earnings per share (EPS). Expectations were high going into the quarterly results due to the company's Kling AI, which allows users to create AI-generated video content, having launched the Kling AI 2.1 model, which the company describes as 'state-of-the-art (SOTA) large visual generation model technology'.
Daily users hit an all-time high of 409 million in Q2 as average time spent on the Kuaishou app is 126.8 minutes, confirming the tool's popularity. The company is monetizing this popularity through online marketing services, revenue from which increased +55.1% year-over-year (YoY) to RMB 19.77 billion, live streaming, revenue from which increased +30.1% to RMB 10.04 billion, and E-Commerce, which increased revenue by +14.8% to RMB 5.24 billion. Kuaishou's all-time high is HKD 415, which it reached on February 17th, 2021, versus yesterday's closing price of about HKD 72.
Online video company Bilibili reported Q2 earnings after the close in Hong Kong, beating analyst expectations on revenue, adjusted net income, and adjusted EPS. The company's advertising revenues increased by +20% YoY to RMB 2.45 billion, while mobile game revenue increased +60% to RMB 1.61 billion. The company's profitability trend continues. Daily average users increased 7% while the average daily time spent on the app is up 6 minutes to 105 minutes. The company bought 5,588,140 shares in Q2 for $100 million, bringing the buyback total to $6.4 million with another $83.6 million to buy. Bilibili's all-time high $156.37 was reached on February 10, 2021, versus yesterday's close of $25.30.
Full Truck Alliance (YMM US), often called the Uber for truck drivers, a digital freight platform, reported after the Hong Kong close beating analyst expectations on revenue, adjusted net income and adjusted EPS. The stellar earnings release was a positive sign for the company and the Chinese economy. Fulfilled orders increased +23.8% YoY to 60.8 million, and average monthly users increased +19.3% to 3.16 million. Full Truck's all-time high is June 22, 2021, with the stock at $21.50 versus yesterday's close of $11.01. I would be curious if the company touches on a potential Hong Kong listing during the conference call.
Asian equity markets were mixed as the US dollar strengthened before Powell's Friday press conference. Taiwan rebounded from yesterday's hit as Australia and Vietnam outperformed. At the same time, the Philippines were closed for Ninoy Aquino Day, which commemorates the assassination of former Senator Benigno 'Ninoy' Aquino Jr.
Hong Kong trading was mixed. Tencent gained +0.42% on the launch of its blockbuster mobile game Valorant, and NetEase gained +1.09%. Meanwhile, banks, telecom, and oil stocks all moved higher. On the downside, Alibaba fell -1.53%, despite spinning off its electric vehicle operating system unit Banma Network Technology, via a Hong Kong IPO, along with declines in Meituan, which fell -3.06%, Xiaomi, which fell -2.28%, BYD, which fell -1.76%, and CATL, which fell -0.2%. I guess that foreign investors are likely selling Hong Kong growth stocks while waiting for Powell's guidance, though Mainland investors bought today's dip via Southbound Stock Connect. Apple supplier AAC Technology was whacked -13.17% after stopping its dividend. The Hang Seng is a bit range-bound at the moment, as the 25,000 level is support while the 25,500 level is resistance.
The only big story was Premier Li's visit to healthcare companies and his voice of support for the industry, which led the sector to gain +2.61% in Hong Kong and +2.66% in Mainland China. Mainland China sold off on no news, as several recent outperformers sold off in afternoon trading. It was a pretty quiet night overall!
Mainland brokerage stocks were off despite the Mainland media source 21st Century Business Herald's article on Mainland investors opening new brokerage accounts and reactivating old brokerage accounts. The article didn't provide numbers on the number of accounts opened, other than noting a strong month-on-month increase, though nothing it was similar to the brokerage opening boom following last September's stimulus announcement. I'll try to dig up the numbers and report back.
The National Energy Administration reported that July electricity consumption increased by +8.6% as air conditioners got cranked.
Having visited two of the largest commodity-producing countries in the last quarter, I've got a new theory: the best Chinese economists are the CEOs of commodity companies. A China demand pick-up is occurring, based on reading half a dozen commodity companies' Q2 and CEO comments. We'll be publishing the whole piece in a week or so. Here is a taste from BHP Group CEO Mike Henry from the August 19th Q2 financial results:
"China exceeded economic growth expectations in the first half of this year, with strong export growth. We also saw robust domestic commodity demand from various sectors, including infrastructure and electrification, even as demand from the property sector remained subdued."
China's economic growth is expected to remain resilient, even as the pace moderates slightly in the second half as the boost from 'pulled forward' exports unwinds and new tariffs take effect. It has many policy levers to support its domestic economy, and its exports are likely to remain resilient due to its significant cost competitiveness.
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