AI Optical Stocks Shine
6 Min. Read Time
Key News
Asian equities were led higher by AI-heavy markets, including Korea, Japan, Taiwan, and China’s Science & Technology (STAR) Board.
It was a fairly quiet night, with chatter about the US tightening semiconductor exports to China following the fallout from Jensen Huang’s affair, though that should only benefit local companies. I wonder if Huang and the “alleged spy” allegations fade just as the Chinese “spy balloon” kicked up a hornet's nest for a week or so. It is hard to imagine it makes sense to implode the CEO of the most important AI company globally.
The Hang Seng and HS Tech indices remain above their gap-up levels from last week as Mainland indices grinded higher. A Mainland media source reported that a global bank said allocations to Mainland China and Hong Kong equities are at a 10-year low. I was not surprised to hear that, since Alibaba fell by -0.98% despite the upcoming release of its Qwen4 AI model and yesterday’s after-the-close announcement about spinning off its AI chip unit, T-Head. I am shocked the stock was down. A source quoted T-Head’s spin-off at a $2 billion to $3 billion valuation, which is wrong, as that is the amount they will raise. The valuation is subjective, with the low estimates at $25 billion versus high estimates at $80 billion. That’s $7 to $22 of Alibaba’s share price.
Anyone remember that today is Singles Day (11/11), China’s Super Bowl of shopping? Starting sales a month ago takes the shine off the formerly 1-day event, though I find it amazing that there is zero coverage. Tencent fell by -1.96% on no news, which weighed on indices given its large weight. Internet and auto stocks were lower as Meituan fell by -3.51%, JD.com fell by -0.89%, Baidu fell by -1.38%, and NetEase fell by -3.39%.
There were reports that Microsoft is lobbying for China-made optical components to be allowed in US data centers, sending Hong Kong and Mainland Chinese optical companies like Eoptolink up +16.97% in Mainland China, YOFC up +13.49% in Hong Kong and up +10% in Mainland China, and Innolight up +13.72% in Hong Kong and +15.07% in Mainland China.
China’s AI supply chain stocks had a strong day, with semiconductor company CXMT up +4%, Cambricon up +7.4%, and electronic equipment maker Foxconn up +5.51%. Aside from AI supply chain stocks, oil and gas rebounded, while mega- and large-cap banks, insurance, liquor, and telecommunications stocks lagged in both markets. CATL fell by -1.33% in Mainland China and gained +2.49% in Hong Kong after announcing it bought back 121,400 shares costing RMB 29 million today.
The ETFs favored by China's "National Team", i.e., investment firms associated with sovereign wealth, once again diverged, with mega- and large-cap ETFs seeing below-average volumes while mid-, small-, Shenzhen-, and STAR Board-focused ETFs had above-average volumes. A Shenzhen-focused ETF saw its trading value exceed RMB 10 billion, with a STAR Board ETF closing at RMB 9.275 billion and a mid-cap ETF at RMB 7 billion. Inflows yesterday were light, with several favored ETFs seeing small outflows and inflows.
A Mainland media source quoted Russian officials who said that, as a result of US, Ukraine, and Russia talks, there will be a big prisoner exchange. I assume Trump and Putin would want to announce this next week at APEC in Shenzhen.
Real estate platform KE Holdings bought back 248,565 shares.
Thank you to all who served, as today is Veterans Day!
Last Night's Performance
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.67 versus 6.66 yesterday
- CNY per EUR 7.42 versus 7.48 yesterday
- Yield on 10-Year Government Bond 1.60% versus 1.60% yesterday
- Yield on 10-Year China Development Bank Bond 1.66% versus 1.65% yesterday
- Copper Price -0.61%
- Steel Price +0.20%
