Happy Days Are Here Again
6 Min. Read Time
Key News
Asian stocks surged overnight on easing United States–China geopolitical tensions, a weaker United States dollar, and renewed optimism for further interest rate cuts by the Federal Reserve.
The Hang Seng and Hang Seng Tech indices broke their seven-session losing streak, each rebounding strongly after both had previously set a 52-week high on October 2. Market breadth was robust, with all industry sectors positive, completely reversing yesterday’s declines, and trading volume rose to 134% of the one-year average. Growth stocks outperformed in both the Hong Kong and Mainland China markets.
Mainland investors were rare net sellers of Hong Kong stocks via Southbound Stock Connect, selling their positions in the Hong Kong Tracker Exchange-Traded Fund (ETF) that had been bought on the recent dip; however, they were net buyers of several individual names. JD.com (9618 HK) climbed 2% following the announcement of a partnership with GAC Group and Contemporary Amperex Technology Co., Ltd (CATL). CATL to build an electric vehicle (EV) priced between RMB 100,000 and RMB 120,000. The optics of the move were mixed, as the company’s recent expansion into restaurant delivery had negatively impacted earnings per share and net income.
Cloud Walk Robotics’ initial public offering (IPO) shares jumped 75% in pre-market trading. Baidu (9888 HK) gained 2.73% despite analyst expectations for its third-quarter core search revenue remaining fairly pessimistic, projecting a decline of between 7% and 11%.
Mainland China’s equity markets had a strong session, although breadth lagged behind Hong Kong, as the energy, shipping, and air freight sectors finished lower. The country’s deflationary pressures moderated in September, as the Consumer Price Index (CPI) fell 0.3% year-over-year (YoY), compared to August’s 0.4% decline and market expectations of a 0.2% decrease. The Producer Price Index (PPI) dropped 2.3% YoY, an improvement from August’s 2.9% contraction and matching expectations. CPI weakness was driven primarily by falling food prices (-4.4% YoY), though food prices rose 0.1% month-over-month (MoM).
Core consumer price index (CPI), excluding food and energy, rose 1% YoY in September versus a 0.9% increase in August. It remains to be seen whether the slower rate of producer price declines reflects the impact of China’s recent anti-involution campaign. Loan data released at the Mainland’s close indicated September’s year-to-date new loans reached RMB 14.75 trillion, up from RMB 13.46 trillion in August but slightly missed expectations, while aggregate financing rose to RMB 30.09 trillion, ahead of consensus, from August’s RMB 26.56 trillion.
We recently emphasized the importance of following statements from commodity executives regarding China’s economic health, rather than relying on the negative bias in much of the Western media coverage of the subject. LVMH’s latest results showed a recovery among China’s high-end consumers: sales in Asia ex-Japan, including China, rose 2% in the third quarter, after prior declines of 11% in the first and 6% in the second quarter.
Earlier in the week, my colleague Brian argued that there is a “Trump put” on United States–China relations, anchored in the President’s focus on supporting financial markets. On Tuesday, United States Trade Representative Greer confirmed that United States and Chinese officials had met, highlighted by the newswire headline: “Greer: We Always Watch the Stock, Bond Markets.”
The note also drew attention to the largely unseen influence of the Washington, D.C., policy bureaucracy. For instance, the United States Bureau of International Security and Nonproliferation informed the Dutch government in June that Nexperia—the Chinese parent of Dutch semiconductor firm Wingtech—had been added to the United States' sanctions list, meaning the Dutch company would be included, by extension, as of September 30. The Dutch government subsequently seized Nexperia, arguing that the move protected local jobs and prevented the company's destruction, although some may view it as an uncompensated expropriation.
There are likely additional factors, as the United States Department of Commerce also played a role. This phenomenon is not isolated to the United States: Treasury Secretary Bessent recently suggested that China’s issuance of rare earth export licenses was the result of bureaucratic action, not a top-down order from President Xi Jinping. The broader point is that both President Trump and President Xi have the power to halt these slow-moving, bureaucratically-driven escalations.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 1.8% |
| Hang Seng Tech | HSTECH Index | 2.6% |
| Hong Kong Turnover | HKTurn Index | -20.8% |
| Hong Kong Short Sale Turnover | HKSST Index | -30.2% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 13.9% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | -695.21 |
| China (Shanghai) | SHCOMP Index | 1.2% |
| China (Shenzhen) | SZCOMP Index | 1.6% |
| China (STAR Board) | Star50 Index | 1.4% |
| Mainland Turnover | .chturn Index | -19.5% |
| Northbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 2.2% |
| Japan | NKY Index | 1.8% |
| India | SENSEX Index | 0.7% |
| Indonesia | JCI Index | -0.2% |
| Malaysia | FBMKLCI Index | 0% |
| Pakistan | KSE100 Index | -0.3% |
| Philippines | PCOMP Index | 0.3% |
| South Korea | KOSPI Index | 2.7% |
| Taiwan | TWSE Index | 1.8% |
| Thailand | SET Index | 1.6% |
| Singapore | STI Index | 0.3% |
| Australia | AS51 Index | 1% |
| Vietnam | VNINDEX Index | -0.2% |
| Indicator | Hong Kong | Mainland |
|---|---|---|
| Today's Volume % of 1-Year Average | 134% | 124% |
| Advancing Stocks | 439 | 3765 |
| Declining Stocks | 54 | 1204 |
| Outperforming Factors | EPS Revisions, Growth, Momentum | Momentum, Growth, EPS Revision |
| Underperforming Factors | ||
| Top Sectors | Materials, Discretionary, Healthcare | Tech, Industrials, Healthcare |
| Bottom Sectors | ||
| Top Subsectors | Steel, Construction Materials, Machinery | Precious Metals, Electrical Power Grid, Construction Machinery |
| Bottom Subsectors | Commercial/Professional Services | Marine/Shipping, Forest, Port |
| Southbound Connect Buys | Alibaba (Large), Hua Hong Semi (Moderate), Tencent, Xiaomi (Small) | |
| Southbound Connect Sells | HK Tracker ETF (Massive), HS China Enterprise ETF (Very Large), SMIC (Moderate), SD Gold (Tiny) |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 152 | 2.07 |
| Communication Services | 9 | 1.22 |
| Consumer Discretionary | 28 | 3.04 |
| Consumer Staples | 13 | 2.04 |
| Energy | 6 | 0.95 |
| Financials | 24 | 1.72 |
| Health Care | 12 | 2.34 |
| Industrials | 21 | 2.06 |
| Information Technology | 10 | 2.27 |
| Materials | 10 | 3.44 |
| Real Estate | 7 | 1.46 |
| Utilities | 12 | 0.66 |
| Mainland China Listed | 395 | 1.69 |
| Communication Services | 7 | 0.55 |
| Consumer Discretionary | 29 | 1.69 |
| Consumer Staples | 24 | 0.76 |
| Energy | 13 | 0.41 |
| Financials | 64 | 1.29 |
| Health Care | 32 | 1.74 |
| Industrials | 61 | 2.33 |
| Information Technology | 90 | 2.92 |
| Materials | 54 | 1.16 |
| Real Estate | 6 | 0.22 |
| Utilities | 15 | 0.02 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 1 |
| Alibaba HK | 9988 HK Equity | 3.9 |
| JD.com HK | 9618 HK Equity | 2.1 |
| NetEase HK | 9999 HK Equity | 1.6 |
| Yum China HK | 9987 HK Equity | 1.3 |
| Baozun HK | 9991 HK Equity | -0.8 |
| Baidu HK | 9888 HK Equity | 2.7 |
| Autohome HK | 2518 HK Equity | 3.2 |
| Bilibili HK | 9626 HK Equity | 4.5 |
| Trip.com HK | 9961 HK Equity | 0.8 |
| EDU HK | 9901 HK Equity | 4.3 |
| Xpeng HK | 9868 HK Equity | 4 |
| Weibo HK | 9898 HK Equity | 2.3 |
| Li Auto HK | 2015 HK Equity | 3.4 |
| Nio Auto HK | 9866 HK Equity | 1.2 |
| Zhihu HK | 2390 HK Equity | 0.1 |
| KE HK | 2423 HK Equity | 3 |
| Tencent Music Entertainment HK | 1698 HK Equity | 2.2 |
| Meituan HK | 3690 HK Equity | 1.6 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | 3.9 |
| TENCENT HOLDINGS LTD | 1 |
| SEMICONDUCTOR MANUFACTURI-H | 3.6 |
| HUA HONG SEMICONDUCTOR LTD-H | 5.3 |
| XIAOMI CORP-CLASS B | 1.8 |
| POP MART INTERNATIONAL GROUP | 3.8 |
| MEITUAN-CLASS B | 1.6 |
| PING AN INSURANCE GROUP CO-H | 3.3 |
| LAOPU GOLD CO L-H | 9.2 |
| ZIJIN MINING GROUP CO LTD-H | 4.7 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| CHINA NORTHERN RARE EARTH -A | -4 |
| SUNGROW POWER SUPPLY CO LT-A | 8.3 |
| VICTORY GIANT TECHNOLOGY -A | 6.3 |
| LUXSHARE PRECISION INDUSTR-A | 5.8 |
| CONTEMPORARY AMPEREX TECHN-A | 3.2 |
| ZHONGJI INNOLIGHT CO LTD-A | 2.3 |
| ZTE CORP-A | 0.4 |
| ZHEJIANG SANHUA INTELLIGEN-A | 10 |
| FOXCONN INDUSTRIAL INTERNE-A | 6.1 |
| EOPTOLINK TECHNOLOGY INC L-A | 1.9 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 7.12 versus 7.14 yesterday
- CNY per EUR 8.28 versus 8.25 yesterday
- Yield on 10-Year Government Bond 1.84% versus 1.84% yesterday
- Yield on 10-Year China Development Bank Bond 1.94% versus 1.94% yesterday
- Copper Price -0.88%
- Steel Price -0.52%
