腾讯因AI资本开支担忧下跌，市场反应负面

It's 9 a.m. in Shanghai, Shenzhen, and here in Hong Kong, you're watching the China show. I'm David Ingles with Yvonne Man. We are counting down to the open markets in Greater China today. Let's get to your top stories. Stocks across the Asia-Pacific rising on a subdued U.S. inflation reports easing concerns here about imminent fed rate hikes. The S&P 500 is within striking distance of a fresh record, but U.S. listed Chinese shares slipped.

We'll be watching Tencent in Hong Kong after 80 hours fell, with markets skeptical about its big boost. And eye spending can help it catch up, with rivals also ahead to PBoC stepping up reverse repo usage planning mid-month operations for the very first time. And China mourns Jerome G. The former premier who overhauled the economy, has died at age 97. Oh. We cleared out two certain things here overnight. Right. When it comes to not just the ten cent earnings, which we'll talk about, but that US inflation print was pretty in line with estimates, pretty modest at best.

So I think that really kind of cleared the pathway for stocks for gold to do quite well here today. But then said I think, you know, we were we've been waiting for this I CapEx. Well they gave it and investors not quite like again. No it was quite a quite a big jump from the previous year. They also went negative and free cash flow which we'll get into in a moment. But yes, I think the market reaction to Tencent was, I guess in some ways unsurprising given how markets have been reacting to big CapEx bands of late.

So we'll obviously track how that drags into the benchmark today. Um, we're looking at a big drop, of course, in uh, 80 hours overnight. In fact, let's have a look at how that's faring. Right. So everything excluding the Chinese oriented equities and securities are actually doing well, uh, Although I should mention the sum of the earnings in the after hours session in the U.S. are somewhat pulling down the index on the Nasdaq.

But all that is also to say the S&P did gain. Um, and then you did get also a very strong rally in the semis when you look at the Philly semiconductor index, which really outperformed in the overnight session. Also, I guess that goes into the next board that's coming up on your screen. There's a really, really bullish tailwind coming through on hardware place because of what took place overnight. So you have Taiwan. You have Korea, which is now I believe back in a technical bull market.

About 20% of that Singapore is coming online. And of course Japan also the feeling a tailwind there. Of of the CapEx story 1.5% to the upside. Okay. We talked about Tencent, how we did overnight. We're also looking at some changes to MSCI China with the likes of Kony AI, one of the many stops that were shifted out. You have a lot more shifted back in as well. Well, we'll get to that iteration in a moment here. 2.4%, as we were pointing out here, going against the grain.

Of risk assets overnight 10%, 5.5% overnight and A50 futures are coming up on your screen should show itself slightly to the upside. Last we check. There we go. 4/10 of 1% A50 of course. More indicative of onshore trading one seven on the ten year. Yeah we have a bond option bond sales here in Hong Kong. I mentioned that to at 675 on the exchange rate today. All right. Things are looking pretty positive right now. Let's let's break down of course the ten cent second quarter results of bringing our China correspondent below with you know, what stood out to you beyond just that CapEx spend?

Yeah, the CapEx spend, I think has been the main thing that investors are watching out for. And in fact, some analysts are reducing the price target because of the higher, uh, higher investments they spend so much that we are seeing the first negative cash flow since 2021. They're spending more than they are taking in from operational income. And that's even with very strong revenue, double digit growth, 11%, which was better than estimates.

And it's coming from their bread and butter business, like the gaming business. AD revenue that's up by 14, I think, and 22% respectively. And it's thanks to I that allowed clients to better target their users. But again, when it comes to eye investments, um, the company didn't give us a multi-year guideline, unlike Alibaba, which has pledged $50 billion in three years. They did say they're going to double investments in AI products this year, and any additional investment is going to be tied to returns on their existing investments.

Yeah. And if they can't use up the capacity, they said there's also always the worst case option of renting some of the assets out. That's why that was a bit of a controversial statement because according to our Bloomberg Intelligence analyst, Robert Lee, he's saying that that really doesn't show you confidence that they are, you know, sure about their eye strategy, but you cut it another way. You could see it as a form of reassurance to investors that this CapEx spending is coming with very limited downside, right?

Because yes, if they over invested and they have excess capacity. They can just rent it out. Um, the company that say that they are going to prioritize that I infrastructure for themselves, for their long term product development. So they might sacrifice a bit of that short term gain because they can immediately make a quick buck by renting it. Renting out compute. But first of all, their products are still lagging behind, especially when you talk about the foundational model when you and it's now rebranded as high three, just launched recently, but it's still a very, very small model.

If you compare it to the frontier models like kami, K3 or Alibaba. Uh, Quinn. Um, so the company says it's going to invest in a state of the art model high four, which will be released later this year. Some of its other applications have been doing quite well. Like one body that's an A desktop, I imagine it just launched in March, but already has zoomed to the top of the most used products out there, outperforming its competitors.

So that creates a positive feedback loop because it is powered by their genuine model. They're also testing the AI agent for WeChat as well. That's in a prototype phase. Um, so yeah, so in that process of trying to make WeChat an eye first app, but again, longer term to profitability, uh, and the payoff in that investment is going to be key to one. Yeah, I think I work, but they said it's achieving rapid user growth.

Did they give any clear timeline on the return on investment on I they did not give a very clear, uh, timeline on there. They have kept it a little bit vague. And they just mentioned that I investments is going to uh, future AI investments is going to be tied to current returns. Um, yeah. So again, I think it's still pretty impressive. This is one of the few companies that can spend so much and still have, you know, that double digit growth in revenue to give that cash flow buffer, right?

Um, so, I mean, it's the sort of clout and cash reserves that the pure play names like minimax and people will not be able to compete with. So that is its competitive mode right now. All right women, thank you. China correspondent Mimi Lo there. And it's not just ten cent right. We got a busy, busy earnings day here when it comes to Hong Kong and China. You take a look at what it comes to see as IT holdings. Judge you have some of the semiconductors that are reporting as the big one for home semi.

Hi. Got it. JD health and JD logistics Datacom Lenovo. That's a big one here as well MTR and of course Smic. So Dave you've been kind of crunching the numbers. You've been looking at really what we need to be looking out for in this earnings season in particular. Yeah. So I think today we're looking at north of 350 billion in terms of combined market cap. And of course the benchmark we're using there is the broader benchmark here in Hong Kong.

Of course there are others that are also reportin

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