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“Technology”

Technology company isn’t necessarily asset-light.

GE was also a leading “technology” company in its days.

A technology company has no boundary.

It’s a group of brightest minds that bind together and shine wherever they sees darkness.

The TAM expansion is what makes “technology” companies amazing investments.

Tesla is not asset light.

Tesla is a technology company that is expanding its TAM.

Engineers that can only make cars make a company a car company. But if these engineers can do all sorts of designs and create new stuff, they make a tech company.

What I don’t understand about robotaxi…

For the same destination, Baidu’s Apollo robotaxi in Shenzhen will charge RMB 125 (before coupon) vs RMB 40 on Didi express (affordable tier, before coupon) and RMB 50 for regular taxi.

What’s also interesting is that Baidu’s robotaxi estimates that it will take 79 minutes!

Meanwhile Didi estimates it’s about 31 minutes, which is in-line with other map apps’ estimates.

Baidu robotaxi charges more than 2x the taxi price and takes more than 2x the time…

Well done.

Attaching the breakdown of Baidu robotaxi fare (before coupon)

BYD hit a ceiling in China?

BYD domestic volume in May shows no growth yoy, despite overseas growth of 137% yoy.

YTD (Jan-May), BYD domestic volume has grown 27.5% yoy, but in May it’s flattish yoy at below 300k.

The big promotion in May is probably a reason – dealers might had been waiting for the discount, so that May volume is low.

Current consensus is for BYD to sell ~5.4mn cars in 2025, with overseas contributing 0.8mn and domestic sales reaches 4.6m (to grow near 20% yoy).

China overall passenger car market can grow actually, with cheaper models, large population (4x US!), and shorter holding period for each car (due to battery).

In 2024, U.S. new vehicle sales reached approximately 15.9 million units.

16mn x 4 is 64 million cars per year for China vs. ~22.6 mn passenger cars sold in 2024 in China.

The infrastructure is unlikely to support a sudden increase, but if it increases to 30mn pear year, 70% NEV -> 21mn, 30-33% m/s for BYD -> ~6-7mn is probably the ceiling of domestic volume for BYD.

Endowment’s tax

Recently read the interesting discussion on endowment taxes from Matt Levine.

If endowments’ tax rate were to increase, they need to pay more on their investment income.

However, they might as well just include more payroll in its expenses, so that income before tax is significantly less.

Sounds very smart…

What’s the catch?

I guess –

if the entity needs to grow, it usually involves “net profit”. Thus it may grow slower, as more taxes will need to be paid each year for positive profits, unless net income is managed well to avoid near term taxes, or there is just no profit, which means it’s hard to grow (organically).

HKD is USD or not?

HKD is pegged to USD. The fixed range is 1 USD = 7.75 – 7.85 HKD.

However, a weird thing is happening recently.

HIBOR (Hong Kong Interbank Offered Rate) is dropping dramatically.

For a USD-pegged currency, its borrowing rate normally increases or decreases with USD, and is similar to USD, otherwise arbitrage may happen.

Fed’s fund rate currently is 4.25% to 4.50%.

HIBOR 1-month dropped from 4% to below 1%. from May to Jun.

May 2nd, 1 Month HIBOR is 3.98363% vs. Jun 19th, it’s 0.53506%

A 350 bps drop in 1.5 month! Crazy world.

Three things may happen:

1/ Fed to decrease interest rate.

That will probably happen within the next 12month, but not in the July meeting.

Possible in Sep and/or Dec meeting.

2/ HK to limit money outflow.

It will become more like mainland.

But why?

HK doesn’t have the incentive to do this. And Beijing also wants a special international finance center.

Thus, unlikely.

However, there might be more mainland’s RMB converting into HKD – think about SOEs.

Since they are under the direction of Chinese gov, they won’t participate in every corner of the global capital market.

These HKD will behave like under the capital control.

3/ HKD-USD peg breaks

Too big a thing.

In short-term, seems unlikely.

In early May, HKMA needs to sell HKD and buy USD.

In early May, the exchange rate hit the strong-side CU of HK$7.75 to US$1 four times on three trading days, during both Hong Kong and non-Hong Kong trading hours. The HKMA sold HK$129.4 billion in exchange for US$16.7 billion in accordance with the LERS mechanism.

After Fed’s rate decision in June, HKMA expects carry trades may drive USD stronger against HKD and makes HIBOR higher.

If carry trades are to persist, the Hong Kong dollar exchange rate may weaken further, and may even trigger the weak-side Convertibility Undertaking. In such a case, the HKMA would then sell US dollars in exchange for Hong Kong dollars in accordance with the LERS, leading to a corresponding decline in the Aggregate Balance, hence driving Hong Kong dollar interbank rates to gradually increase.

Why TACO?

1/ Trump has a family business to grow.

The world can’t go too chaotic.

(Rich) people can’t hate the Trump brand.

2/ Trump wins by tough negotiations.

This I am not sure. But if two sides are not talking, how could negotiation happen?

If negotiation is not happening… that’s where Trump does the best.

However, if people all believes it’s only negotiation… then it becomes tougher for Trump to gain in negotiation.

That’s why I am not sure.

Fourth year of decline in household’s new debt

Charting this…

From Jan to May, China’s household added 834.7 billion mid-to-long-term rmb debt.

This is only ~30% of 2021 level (near 3tn), and 40% of 2016 level (2tn rmb). This is the 4th year of decline of newly added debt; it’s only 3% below 2024 level though.

For the full year of 2016 and 2021, China’s household added 5.7 trillion and 6.1 trillion mid-to-long-term rmb debt.

Household’s mid-to-long-term debt is mostly for home buying.

Notable decline in Baijiu stocks

See my previous posts on Baijiu here (Jun 2024) and here (Sep 2024) – concerns on volume growth and the ability to further increase profitability.

While premium Baijiu company like Moutai can still do ok, as key product’s market price is still higher than its ex-factory price, the price gap is narrowing, which means Moutai’s distributors are having a bad time.

The end demand is additionally weak after Chinese gov’s recent liquor ban.

Moutai’s stock price has declined by ~15% since mid-May (1645 -> 1401). Currently, Jun 16 is one of the lowest closing price in 2025, worse than Apr 7 when tariff hit.

However, this represent a buying opportunity I believe.

Besides Moutai, other Baijiu brands stock also declined. Wuliangye has declined about 15% from its peak this year. In fact, it’s more than 10% lower than end of 2019 level (~rmb 133 per share)!

Luzhou Laojiao has declined about 25% from its peak this year.

They are trading at 20x (5% earnings yield, Moutai) and 14x (7% earnings yield, Wuliangye), and 12x (8% earnings yield, Laojiao) LTM earnings, compared with ~1.6% China’s gov bond yield.

China’s home price continued to weaken MoM

Following the previous near flattish China’s real estate price in February 2025, China is seeing weakening in Apr and May, despite the yoy comparison still looks okay.

Key cities’ MoM existing home price index % change was -0.3% and -0.7% in Apr and May 2025.

The yoy comparison shows decline of less than 2% – existing home price index is only down 1.8% and down 1.3% in Apr and May 2025.

VC investing and HF investing

I have worked in both industries, venture capital and hedge fund.

I found that sometimes they can be exactly the opposite in how to make money.

While in venture capital, the deals that are more successful are those that are consensus. Capital pile in, and those with capital runs faster, adding to the moat.

While in hedge fund, the stocks that work better are those that are considered un-investable. When other holders cut loss / exit, it creates better risk reward profile and the perfect buying opportunity.