Did The “National Team” Ride To The Rescue?
9 Min. Read Time
Week in Review
- Asian equities were mixed for the week as Taiwan and the Philippines outperformed, while Mainland China's STAR (Science & Technology) Market and Shenzhen Component both underperformed in a shortened week due to the National Holiday.
- Mainland China's National Holiday led to a strong consumption data release this week, with robust service spending, household appliance outperformance, and rail travel up over 13% year-over-year (YoY).
- Kuaishou began engaging investment banks to assist in the spin-off of its Kling AI video generation unit via a potential Hong Kong IPO next year.
- The software-focused Hang Seng Tech Index outperformed the hardware-focused STAR Market, which was sharply lower this week, as Alibaba's pre-earnings call mentioned stronger-than-expected cloud revenue growth of +50% YoY in the third quarter.
- In our latest video, Cultural Analyst Xiabing Su explores the city of Chongqing and discusses how the iconic city turned its geographical challenges into an advantage.
Friday's Key News
Asian equities ended the week on a strong note, as Hong Kong, India, and the Philippines outperformed, though Korea and Taiwan missed out due to Hangul Day, a national holiday celebrating the Korean alphabet, and Double Tenth Day, celebrating the Wuchang Uprising on October 10, 1911, respectively. CNY appreciated versus the US dollar to close at 6.90 CNY per USD.
While Hong Kong grinded higher all day, moving from the lower left to upper right, led by internet stocks, Mainland China saw a massive reversal from significant losses in the morning to small gains by the end of the session. The Shanghai Composite reversed from a -1.52% loss to close at a +0.05% gain. Meanwhile, the Shenzhen Component reversed from a starting loss of -2.89% to close with a slight gain of +0.18% and the STAR (Science & Technology) Market reversed from an initial -4.55% to close nearly flat at +0.06%.
We speculated yesterday that when the "National Team", i.e. "the cavalry" (investment firms associated with China's sovereign wealth) mount up, the results can be impactful. The National Team’s favored ETFs had slightly above-average volumes overnight, though we cannot say for sure whether there was a meaningful intervention last night. Another factor might have been the numerous policy support messages that were delivered, which we outline below. Also, multiple indexes reached their technical support levels yesterday.
Hong Kong’s resilience was not driven by Mainland inflows via Southbound Stock Connect, as net flow through the channel amounted to a paltry $37 million. This begs the question of who exactly was buying overnight? Could foreign investors finally be seeing signs of life in Hong Kong-listed companies’ expected earnings per share (EPS) growth, thus drawing them in?
The South China Morning Post noted that Treasury Secretary Bessent might skip the minister conference during the Asia-Pacific Economic Cooperation (APEC) summit to focus on teeing up Trump’s next visit with Xi.
Volumes improved, but were still a touch light, as some likely remain on holiday in Mainland China. By Monday, it can be assumed that everyone will be back from the holiday, making Monday's session particularly important to watch. Tencent gained +3.26% and was Hong Kong’s most heavily traded stock by value. There was chatter that Tencent will issue $5 billion worth of bonds to fund AI capital expenditure. I would like to thank the company's management for not issuing stock, as the company continues to buy back stock daily and issuing stock would simply reverse the impact of buybacks.
Alibaba gained +2.59% as investors cheered the company’s call with analysts in advance of their November financial results. During the call, the company mentioned that cloud revenue growth was +50% YoY in the second quarter, cloud margins increased to 15% from 12%, and that results in China E-Commerce continue to improve.
Xiaomi gained +9.72%, as shorts were run over by the launch of the Sky Nomad SUV. The new vehicle logged more than 70,000 pre-orders. Kuaishou gained +5.47% on continued chatter about the spin-off of its Kling AI video generation unit, potentially as soon as the first quarter of 2027.
Pharmaceuticals and biotech were mixed, though it feels like investor sentiment overall, and my colleague Henry’s enthusiasm for the space, are both increasing.
Hong Kong's AI supply chain stocks were mixed. Communications equipment, semiconductors, and electronic equipment were all weak. The weakness may have been driven by chatter that Apple’s iPhone price hike could weigh on demand. Semiconductors were similarly mixed in Mainland China, though electronic equipment and communications equipment were decidedly weak. Precious metals also had a good day in both markets. Let’s see what volumes look like on Monday and if we can get some follow through!
A Mainland media source noted that new home sales increased +33.8% YoY during the National Day holiday, driven by 1st tier cities, which include Beijing and Shanghai. However, lower-tier cities' activity increases appear to be limited to the price ranges on which subsidies are focused: homes selling for under RMB 1.5 million. Meanwhile, a sell-side analyst upgraded real estate platform, the "Zillow of China", KE Holdings in advance of their Q3 financial results, noting that the company could be a beneficiary of increasing real estate transaction volumes. The real hope is that home prices can stabilize or at least stop going down. Real estate is clearly front-and-center for the government at this point.
The meetings between China’s Ministry of Commerce and the European Commission for Trade and Economic kicked off in Beijing.
The Ministry of Finance (MoF) stated that RMB 550 billion worth of unused local government bond quota will be reallocated, sending RMB 300 billion to local government budgets and RMB 250 billion to project finance. The MoF also released the “Report on the Implementation of China's Fiscal Policy for the First Half of 2026”, which outlined six fiscal policy priorities: implementing a more proactive fiscal policy, the expansion of domestic demand, driving technological innovation and industrial upgrading, improve people’s livelihoods, strengthening risk prevention, and deepening the reform of fiscal management. The report states these efforts will be continued in the 2nd half of 2026.
A Mainland media source noted that the State Council approved several consumption support policies and reported that many have already been implemented, following a key meeting last week. The article also expressed optimism that more supportive policies are coming down the pipeline. We can assume that the new housing mortgage subsidy policy came from this meeting and we are excited to hear more about the “incremental policies” coming in the fourth quarter.
A press release titled “Opinions of the Central Committee and the State Council on developing New Quality Productivity" came out before market open last night. However, it does not appear to have been a significant catalyst. The key points from the release were as follows:
- Vigorously promote scientific and technological innovation
- Promote the deep integration of scientific and technological innovation and industrial innovation
- Focus on innovation in development
- Deepen the pool of innovative talent
- Strengthen the implementation of these goals and priorities
After the close, Tencent announced it had bought back 239,000 shares and KE Holdings (US Ticker: BEKE) announced that it had bought back 588,903 shares.
Last Night's Performance
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.69 versus 6.70 yesterday
- CNY per EUR 7.50 versus 7.51 yesterday
- Yield on 10-Year Government Bond 1.69% versus 1.69% yesterday
- Yield on 10-Year China Development Bank Bond 1.75% versus 1.76% yesterday
- Copper Price -1.02%
- Steel Price 0.00%
