4th Plenum’s “AI Plus” Lifts Growth Stocks, Week In Review

Week in Review

• Asian equities were mostly higher for the week as Mainland China’s STAR Board and Hong Kong’s Hang Seng Tech index outperformed, while Vietnam and the Philippines underperformed.
• Hopes for a US-China trade deal whipsawed this week after Trump initially said he would not meet with Xi, then Scott Bessent confirmed a meeting with Vice Premier He Lifeng, followed by Trump saying that he would be scheduling a meeting with Xi next week.
• China's Q3 GDP growth of 4.8% year-over-year was better than expected, though housing prices declined across the board in September, according to data released Monday.
• Battery giant CATL reported preliminary net income increased 41% in the third quarter on Tuesday, as China’s corporates gear up for earnings season.

Friday’s Key News

Asian stock markets rallied on optimism for US-China trade talks as President Trump shifted his attention to another country starting with a C and ending in an A. Taiwan was closed for Taiwan Restoration Day, which commemorates Japan’s surrender of Taiwan and the Penghu Islands.

The State Council Information Office, Central Policy Research Office, National Development & Reform Commission (NDRC), Ministry of Science and Technology, and the Ministry of Commerce and National Health Commission held a joint press conference and live Q&A with reporters reviewing this year’s 4^th Plenum, the conclusion of the 14^th Five Year Plan period, and the drafting of the 15^th Five Year Plan. For investors, there were numerous positives, including policies supporting the digital economy, an “AI Plus” initiative, data governance reform, platform reform, and increased openness for foreign capital. The line “domestic demand will be further expanded to become the main engine and anchor of economic growth” indicates policy support will continue.

Key points for investors include:

Economic Growth and Industrial Modernization:

• The Chinese government emphasized high-quality development as the central economic goal, seeking “effective improvement in quality and reasonable growth in quantity” of output.
• The plan prioritizes industrial upgrading, with a focus on consolidating the real economy and modernizing traditional sectors such as chemicals, machinery, and shipbuilding. This policy could open about 10 trillion yuan of new market opportunities over five years.
• Strategic emphasis will be placed on building emerging and future industries, including new energy, new materials, aerospace, quantum technology, biotechnology, and hydrogen energy — expected to generate “trillions or even larger” new markets.

Financial and Market Policy:

• China plans to expand domestic demand, enhancing consumption and investment efficiency through infrastructure and household spending, while unifying market rules and breaking local protectionism.
• Continued support for platform economy normalization, implying a balanced approach of growth encouragement and supervision rather than restriction.
• Government investment will prioritize livelihood sectors, aiming to improve investment returns and increase the leverage effects of public spending.

Innovation, Technology, and Artificial Intelligence:

• The plan includes a major push for scientific and technological self-reliance, with over 3.6 trillion-yuan R&D spending in 2024, targeting leadership in semiconductors, industrial machinery, and AI.
• China identified the digital economy and Artificial Intelligence (AI) as central “new quality productive forces” driving modernization. It pledged to make AI a “core growth engine” for finance, manufacturing, healthcare, and consumer services.
• The government emphasized accelerating AI algorithm and chip innovation, developing humanoid robots, and promoting “large-model technologies.” The number of AI enterprises exceeded 4,500 by 2024, and this will keep increasing, suggesting long-term support for AI-linked tech firms.
• Firms in semiconductors, industrial software, AI, and online services can expect tax incentives and subsidies under new “innovation joint bodies.”
• Artificial Intelligence will be integrated broadly across manufacturing, finance, and healthcare, becoming a “new engine for economic growth.” The government will strengthen AI regulation, promote basic research, and expand global cooperation.

Sustainability and Energy Transition:

• The plan accelerates the green transformation of industry and energy, pledging that most new electricity demand by 2030 will be covered by clean energy.
• The green economy, currently valued at about 11 trillion yuan, is expected to double in size within five years

The Ministry of Foreign Affairs confirmed President Xi will attend the APEC conference in Gyeongju, South Korea from October 30^th to November 1^st.  Premier Li Qiang will attend the ASEAN conference in Kuala Lumpur, Malaysia from October 27^th and 28^th, following a pit stop in Singapore to meet premier Huang Xuncai.

Growth stocks in both Hong Kong and Mainland China ripped higher on easing trade tensions and the afternoon press conference.

Additionally, the Central Committee of the CPC held an open forum to discuss the unreleased draft of the coming 15^th Five Year with the following line jumping out to me: “High-level self-reliance in science and technology is the strategic support for high-quality development.”

Internet, semiconductors, and electronic equipment were higher, though Xiaomi fell -1.75% and Li Auto fell -2.07% on reports of an electric vehicle (EV) fire.

Biotech contract research organization Wuxi XDC gained +5.86% in advance of financial results.

Hong Kong’s volumes were a touch light as foreign investors likely wait for further clarity on US-China trade talks, though Mainland investors did not hesitate to buy a net $439 million worth of Hong Kong-listed stocks and ETFs, as Southbound trading accounted for 25% of Hong Kong’s volume.

Hong Kong-listed metals and mining companies rebounded, along with brokers, on “opening up” comments.

The State Administration of Market Regulation (SAMR) noted a look into delivery companies’ food safety has the cooperation of JD.com, which gained +0.08%, Meituan, which gained +0.60%, and Alibaba’s Ele.me. It would be great if SAMR’s “anti-involution” campaign finally ends excess competition in the space.

Autonomous driving company Pony.ai is expected to raise $500 million in a Hong Kong IPO within the next few weeks. On the Mainland, technology hardware, communications equipment, software, and semiconductors absolutely ripped higher, led by the STAR Board, which gained +4.35% due to semiconductor company Cambricon’s gain of +9.01%. There was also talk about DeepSeek utilizing Cambricon’s chips over Nvidia’s.

The Apple ecosystem was led higher by Foxconn, which gained +5.09%, despite August overall mobile phone sales decreasing -6% year-over-year (YoY) to 22.6 million, though 5G phone sales increased 1.2% to 19.99 million.

Growth crushed value on the Mainland, as Kweichow Moutai fell -1.22% and PetroChina fell -1.31%. Metals and mining companies rebounded on the Mainland, similar to in Hong Kong.

Following President Trump’s sanctions on Russian energy companies Rosneft and Lukoil, Chinese SOE oil companies stopped buying seaborne Russian oil. Isn’t this a major concession to Trump? Yes, pipeline oil is not affected, but I am shocked that folks aren’t connecting the dots on this.

Monday’s note highlighted the significant underweight to Chinese stocks from US institutional investors despite strong performance since January 2024 (not January 2025!). I’m keeping my fingers crossed for now, but, wow, doesn’t Boeing airplane and soybean purchases in exchange for US chips and the free flow of rare earths sound like a good deal? I get it, we need the Kubicki theater and saber-rattling noise to make the big bosses look important, but this looks obvious to me.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	0.7%
Hang Seng Tech	HSTECH Index	1.8%
Hong Kong Turnover	HKTurn Index	-7.6%
Hong Kong Short Sale Turnover	HKSST Index	-17.2%
Short Turnover as a % of Hong Kong Turnover	N/A	13.9%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	436.04
China (Shanghai)	SHCOMP Index	0.7%
China (Shenzhen)	SZCOMP Index	1.4%
China (STAR Board)	Star50 Index	4.4%
Mainland Turnover	.chturn Index	20%
Northbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	Not Available
Jing Daily China Global Luxury Index	CHINALUX Index	0.2%
Japan	NKY Index	1.4%
India	SENSEX Index	-0.4%
Indonesia	JCI Index	0%
Malaysia	FBMKLCI Index	0.3%
Pakistan	KSE100 Index	-0.6%
Philippines	PCOMP Index	-1.1%
South Korea	KOSPI Index	2.5%
Taiwan	TWSE Index	Closed
Thailand	SET Index	0.9%
Singapore	STI Index	0.1%
Australia	AS51 Index	-0.2%
Vietnam	VNINDEX Index	-0.2%

Indicator	Hong Kong	Mainland China
Today's Volume as % of 1-Year Average	95	117
Advancing Stocks	292	2745
Declining Stocks	183	2262
Outperforming Factors	Momentum, EPS Revision, Liquidity	Momentum, Liquidity, EPS Revision
Underperforming Factors		Short Interest, Dividend Yield, Low Volatility
Top Sectors	Materials, Discretionary, Communication	Tech, Industrials, Materials
Bottom Sectors	Real Estate, Utilities, Staples	Staples, Energy, Utilities
Top Subsectors	Semis, Electrical Equipment, Non Ferrous Metal	Electronic Components, Semiconductors, Computer Hardware
Bottom Subsectors	Environmental Protection, Consumer Durables, Utilities	Energy Equipment, Gas, Liquor
Southbound Connect Buys	CNOOC, Meituan, SMIC (Moderate), Alibaba, Tencent, Xiaomi (Small), Hua Hong (Tiny)	N/A
Southbound Connect Sells	Pop Mart (Moderate)	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	151	0.85
Communication Services	9	0.89
Consumer Discretionary	28	1.35
Consumer Staples	13	-0.02
Energy	7	0.11
Financials	23	0.38
Health Care	13	0.69
Industrials	20	0.64
Information Technology	10	0.21
Materials	10	2.85
Real Estate	6	-0.62
Utilities	12	-0.56
Mainland China Listed	404	1.17
Communication Services	6	-0.17
Consumer Discretionary	31	0.49
Consumer Staples	24	-1.12
Energy	13	-0.7
Financials	64	0.16
Health Care	31	0.13
Industrials	64	1.23
Information Technology	91	4.51
Materials	58	0.83
Real Estate	6	-0.52
Utilities	16	-0.57

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	0.7
Alibaba HK	9988 HK Equity	2.2
JD.com HK	9618 HK Equity	0.1
NetEase HK	9999 HK Equity	1.1
Yum China HK	9987 HK Equity	-0.1
Baozun HK	9991 HK Equity	0.8
Baidu HK	9888 HK Equity	1.1
Autohome HK	2518 HK Equity	-1.4
Bilibili HK	9626 HK Equity	3.2
Trip.com HK	9961 HK Equity	3.1
EDU HK	9901 HK Equity	-0.1
Xpeng HK	9868 HK Equity	1.2
Weibo HK	9898 HK Equity	2.5
Li Auto HK	2015 HK Equity	-2.1
Nio Auto HK	9866 HK Equity	-3.2
Zhihu HK	2390 HK Equity	2.1
KE HK	2423 HK Equity	-1.5
Tencent Music Entertainment HK	1698 HK Equity	1.6
Meituan HK	3690 HK Equity	0.6

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
ALIBABA GROUP HOLDING LTD	2.2
SEMICONDUCTOR MANUFACTURI-H	8
XIAOMI CORP-CLASS B	-1.8
POP MART INTERNATIONAL GROUP	-0.9
TENCENT HOLDINGS LTD	0.7
HUA HONG SEMICONDUCTOR LTD-H	13.7
MEITUAN-CLASS B	0.6
CSPC PHARMACEUTICAL GROUP LT	-3.9
LI AUTO INC-CLASS A	-2.1
HORIZON ROBOTICS INC	6.3

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
CAMBRICON TECHNOLOGIES-A	9
ZHONGJI INNOLIGHT CO LTD-A	12
EOPTOLINK TECHNOLOGY INC L-A	7.2
VICTORY GIANT TECHNOLOGY -A	8
SUNGROW POWER SUPPLY CO LT-A	7.5
LUXSHARE PRECISION INDUSTR-A	6.3
SEMICONDUCTOR MANUFACTURIN-A	4.5
ZHEJIANG SANHUA INTELLIGEN-A	1.4
CONTEMPORARY AMPEREX TECHN-A	2.5
FOXCONN INDUSTRIAL INTERNE-A	5.1

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.12 versus 7.12 yesterday
• CNY per EUR 8.29 versus 8.27 yesterday
• Yield on 10-Year Government Bond 1.85% versus 1.84% yesterday
• Yield on 10-Year China Development Bank Bond 1.92% versus 1.91% yesterday
• Copper Price 1.51%
• Steel Price -0.52%