Trip.com Earning’s Review
Trip.com (TCOM US, 9961 HK) beat expectations on the big three: revenue, net income, and EPS. According to Executive Chairman James Liang, “The year 2024 has begun with a significant increase in both domestic and outbound travel demand in China…”. On the company’s earnings call, Liang noted that inbound tourist travel increased 400% year over year, driven by China waiving visas for fifteen European and Asian countries. CEO Jane Sun noted, “Our domestic hotel and air ticket booking increased by 20% and 30% year-over-year….”. Outbound tourism is expected to reach 80% of 2019 levels, though the company plans to attract more users from broader Asia, which is 1.5X larger than China.
- Revenue increased by +29% to RMB 11.90B ($1.6B) from Q1 2023’s RMB 9.20B and versus expectations of RMB 11.62B.
- Adjusted Net Income increased by +96% to RMB 4.10B ($561mm) from RMB 2.07B versus expectations of RMB 2.79B.
- Adjusted EPS increased by +95% to RMB 6.0 ($0.83) from RMB 3.07 versus expectations of RMB 4.07.
Key News
Asia markets were a sea of red as Palo Alto Network’s post-close miss raised concerns heading into Nvidia’s results tomorrow. Hong Kong underperformed as the rally took a breather, and profit-taking ruled the day, with only 49 advancing stocks and 444 decliners in Hong Kong. Even after today’s pullback, the Hang Seng and Hang Seng Tech have outperformed the S&P 500, Nasdaq 100, MSCI Japan, and India by approximately 20% and 30% year-to-date. Outperforming growth stocks were clipped, while Li Auto’s Q1 miss/weak guidance led to a broad sell-off in EV stocks. Pre-US market open, Xpeng beat analyst expectations on the big three while curtailing its net income loss.
Hong Kong’s most heavily traded by value were Tencent -2.89%, as a new game was pulled only an hour after launch for unknown reasons (too much demand? Malfunction?), Li Auto -19.27%, Meituan -2.1%, Alibaba HK -1.11%, on AI price cuts, and Bank of China +1.02%. JD.com was down -3.51%, though after the market closed, it announced a $1.5B convertible sale to fund further stock buybacks. Southbound Stock Connect was a net buy of +$60mm, though HK Tracker ETF saw a big outflow. Mainland China was off small versus Hong Kong’s “foreign freak out”. Mainland financial media is still very much focused on the recent PBOC real estate policy support, speculating that new apartment sales will lead to more home appliance sales. Fairly quiet otherwise.
The Hang Seng and Hang Seng Tech fell -2.12% and -3.74% on volume -3.77% from yesterday, which is 149% of the 1-year average. 49 stocks advanced, while 444 declined. Main Board short turnover declined -6.23% from yesterday, which is 121% of the 1-year average, as 14% of turnover was short turnover (remember HK short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). All factors were negative, with value and large caps falling less than growth and small caps. All sectors were negative: healthcare -4.25%, materials -4.09%, and communication -3.2%. Household products were the only positive subsector, while auto, pharmaceutical, and materials were the worst. Southbound Stock Connect volumes were high/1.5X the average as Mainland investors bought $60mm of Hong Kong stocks and ETFs as China Mobile and CCB were small net buys, and the HK Tracker ETF and Meituan were large net sells.
Shanghai, Shenzhen, and STAR Board fell -0.42%, -0.75%, and -0.7% on volume -19.74% from yesterday, which is 94% of the 1-year average. 987 stocks advanced, while 3,981 declined. Low volatility and dividends were among the few positive factors, while value and large caps fell less than growth and small caps. The top sectors were energy +0.51%, financials +0.16%, and utilities +0.03%, while materials -2.11%, healthcare -0.86%, and discretionary -0.58% were the worst. The top sub-sectors were coal, banking, and aviation, while precious metals, energy equipment, and base metals were the worst. Northbound Stock Connect volumes were light as foreign investors sold $277mm of Mainland stocks, with CATL a moderate net buy, CMOC and Cits small net buys, while Foxconn, Cosco Shipping, and Weichai Power were small net sells. CNY and the Asia dollar index were off small versus the US dollar. Treasury bond prices fell. Copper and steel were up.
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Last Night’s Performance
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.23 versus 7.23 yesterday
- CNY per EUR 7.86 versus 7.86 yesterday
- Yield on 10-Year Government Bond 2.31% versus 2.32% yesterday
- Yield on 10-Year China Development Bank Bond 2.41% versus 2.41% yesterday
- Copper Price +0.47%
- Steel Price +0.16%
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