GPU Maker Enflame Will IPO Tomorrow On The STAR Board
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Key News
Asian equities were a sea of red, except for Japan and India, on light volumes, as Middle East tensions continued to weigh on risk sentiment. Oil prices rising above $100 per barrel did not help, and neither did the US bond market giving Treasury Secretary Bessent a harsh reminder of James Carville's famous quote: "I would like to come back as the bond market. You can intimidate everybody." Investors are also waiting for tomorrow's US consumer price index (CPI) print, which will likely determine whether a US rate hike is in the cards.
With buyers on the sidelines, Hong Kong-listed stocks experienced a nasty sell-off. This sent the Hang Seng Index down below the 25,000 level and led the Hang Seng Tech gap lower. Even good news stories, including the release of Apple's first foldable smartphone, could not stem the market decline, as Apple supply chain stocks were largely lower. Reuters reported that China-based chip makers are raising prices due to demand, but semiconductors and technology hardware still managed to close lower. Similarly, auto stocks were lower despite rumors that Trump would allow China's automakers to sell in the US.
Yesterday, Deepseek released a new version of its AI large language model (LLM) that is even more efficient than the previous model. Efficiency gains such as this one could reduce demand for technology hardware, which may have been a factor in today's trading. The new Deepseek model's inexpensive pricing crushed Z.ai, which fell -10.34%, and Minimax, which fell -8.98%. Meanwhile, an analyst's comments on an AI LLM price war were also a factor. Mainland China was lower, except for banks and insurance companies, as they are high-dividend safety plays.
One factor in onshore technology and semiconductor weakness may have been investors raising funds to participate in AI chip maker Enflame's Science and Technology (STAR) Board IPO, which is scheduled for tomorrow. The company is set to raise RMB 6.12 billion ($98 million) and the IPO has been oversubscribed by 6,109 times. Because Enflame is only selling 4% of its float, shares are going to be hot! Tencent fell -1.94% despite owning 20% of the company. The company is known as one of China's "four little GPU dragons", alongside Moore Threads, MetaX, and Biren.
There was, unfortunately, no sign of China's "National Team,", investment firms associated with China's sovereign wealth, buying the dip in China, as their favored ETFs had light volumes. Mainland investors bought $580 million worth of Hong Kong-listed stocks and ETFs via Southbound Stock Connect, though they sold a net $52 million (HKD 411 million) in Alibaba stock. Where's my bugle? We need the cavalry! With that being said, it was really a buyer's strike today, which allowed selling to dictate the narrative, in my opinion.
I don't see the positive developments in US-China relations being published anywhere in Western media. These included the rumors that the Trump administration is considering permitting US sales by China-based auto manufacturers, and also the below:
- The National Development and Reform Commission (NDRC) released the Notice on Matters Concerning Cost Accounting for Low-Price and Disordered Competition of Important Industrial Goods, stating that the agency and State Administration of Market Regulation (SAMR) will look at industrial sectors plagued by "low-price disorderly competition." This follows a recent move by the CSRC to limit humanoid robotics companies from going public. Why is this worth mentioning? Because the US and EU are sticking to China over "overcapacity, i.e., subsidized cheap exports.
- The NDRC also met with 60 US companies, including Dell, Nvidia, Amazon Web Services, and Honeywell, on taking advantage of new foreign investment policies in an event titled "Embracing the 15th Five-Year Plan, Seeking Common New Development". The NDRC did not mention the US companies, though local media did, which is interesting.
- The South China Morning Post is reporting that a senior Pentagon official will attend the Xiangshan Forum, an international defense conference, in Beijing.
- China's President Xi Jinping is scheduled to visit Washington, D.C. on September 24, 2026, for a summit with President Donald Trump.
The current downdraft feels eerily similar to market conditions before the September 2024 policy bazooka and subsequent rally. Positioning in Chinese stocks remains absurdly light. Could a positive Trump-Xi meeting have a similar impact? Or, could the Politburo meeting announce a real stimulus following the Trump-Xi meeting? If this weekend's August data comes in weak, it raises the possibility.
The PBOC, SAFE, and CSRC held a joint press conference on "Getting Off to a Good Start for the 15th Five-Year Plan Period." As we suspected, it was all talk and no numbers.
It was confirmed that President Xi will attend this weekend's BRICS conference in India.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -1.3% |
| Hang Seng Tech | HSTECH Index | -2% |
| Hong Kong Turnover | HKTurn Index | -3% |
| Hong Kong Short Sale Turnover | HKSST Index | 2% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 20% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 581.21 |
| China (Shanghai) | SHCOMP Index | -0.4% |
| China (Shenzhen) | SZCOMP Index | -1% |
| China (STAR Board) | Star50 Index | -0.7% |
| Mainland Turnover | .chturn Index | -11.2% |
| Japan | NKY Index | 0.2% |
| India | SENSEX Index | 0.2% |
| Indonesia | JCI Index | -1.3% |
| Malaysia | FBMKLCI Index | -0.5% |
| Pakistan | KSE100 Index | -1.8% |
| Philippines | PCOMP Index | -0.3% |
| South Korea | KOSPI Index | -0.3% |
| Taiwan | TWSE Index | -0.5% |
| Thailand | SET Index | -0.2% |
| Singapore | STI Index | -0.7% |
| Australia | AS51 Index | -1% |
| Vietnam | VNINDEX Index | 0.1% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 73% | 67% |
| Advancing Stocks | 118 | 973 |
| Declining Stocks | 443 | 4,076 |
| Outperforming Factors | None | Value, Low Volatility, Dividend Yield |
| Underperforming Factors | Growth, Liquidity, EPS Revision | ESG Score, Liquidity, Growth |
| Top Sectors | Financials | Financials, Utilities |
| Bottom Sectors | Consumer Discretionary, Healthcare, Communication | Consumer Discretionary, Energy, Consumer Staples |
| Top Subsectors | Banks, Paper/Packaging, Building | Banking, Securities, Diversified Financial |
| Bottom Subsectors | Machinery, Tech Hardware, Pharmaceuticals | Agricultural, Forest, Fertilizer/Pesticide |
| Southbound Connect Buys | Tencent (Large), YOFC (Moderate), CIG (Small) | N/A |
| Southbound Connect Sells | SMIC, Z AI (Large), Alibaba, Minimax (Moderate) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -1.32 |
| Communication Services | 11 | -1.81 |
| Consumer Discretionary | 28 | -2.52 |
| Consumer Staples | 13 | -1.43 |
| Energy | 6 | -0.81 |
| Financials | 25 | 0.97 |
| Health Care | 16 | -2.48 |
| Industrials | 22 | -1.76 |
| Information Technology | 12 | -1.47 |
| Materials | 14 | -1.55 |
| Real Estate | 7 | -1.06 |
| Utilities | 11 | 0.32 |
| Mainland China Listed | 386 | -0.39 |
| Communication Services | 8 | -0.89 |
| Consumer Discretionary | 26 | -1.43 |
| Consumer Staples | 19 | -1.1 |
| Energy | 12 | -1.3 |
| Financials | 64 | 1.15 |
| Health Care | 31 | -1.08 |
| Industrials | 58 | -0.32 |
| Information Technology | 95 | -0.63 |
| Materials | 52 | -1.07 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -1.9 |
| Alibaba HK | 9988 HK Equity | -2.6 |
| JD.com HK | 9618 HK Equity | -0.8 |
| NetEase HK | 9999 HK Equity | -0.1 |
| Yum China HK | 9987 HK Equity | -2.5 |
| Baozun HK | 9991 HK Equity | -0.8 |
| Baidu HK | 9888 HK Equity | -3.3 |
| Autohome HK | 2518 HK Equity | -1.1 |
| Bilibili HK | 9626 HK Equity | -2.6 |
| Trip.com HK | 9961 HK Equity | -2.5 |
| EDU HK | 9901 HK Equity | -2.2 |
| Xpeng HK | 9868 HK Equity | -1.7 |
| Weibo HK | 9898 HK Equity | -0.8 |
| Li Auto HK | 2015 HK Equity | -2.4 |
| Nio Auto HK | 9866 HK Equity | -4.5 |
| Zhihu HK | 2390 HK Equity | -1.6 |
| KE HK | 2423 HK Equity | -1.9 |
| Tencent Music Entertainment HK | 1698 HK Equity | -1 |
| Meituan HK | 3690 HK Equity | -3.9 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| TENCENT HOLDINGS LTD | -1.9 |
| ALIBABA GROUP HOLDING LTD | -2.6 |
| Z AI CO LTD | -10.3 |
| MINIMAX GROUP INC | -9 |
| XIAOMI CORP-CLASS B | -1.7 |
| MEITUAN-CLASS B | -3.9 |
| SEMICONDUCTOR MANUFACTURI-H | -2.4 |
| KINGBOARD LAMINATES HLDG LTD | 1.3 |
| CHINA CONSTRUCTION BANK-H | 1.6 |
| AIA GROUP LTD | -2.1 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -2.1 |
| SUZHOU TFC OPTICAL COMMUNI-A | 4.3 |
| SUZHOU DONGSHAN PRECISION-A | -1.2 |
| FAR EAST SMARTER ENERGY CO-A | -3.3 |
| CONTEMPORARY AMPEREX TECHN-A | 0.4 |
| HENGTONG OPTIC-ELECTRIC CO-A | -4.1 |
| CXMT CORP-A | 0.6 |
| EOPTOLINK TECHNOLOGY INC L-A | -0.9 |
| HGTECH CO LTD-A | -2.7 |
| SHENGYI TECHNOLOGY CO LTD -A | -0.8 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.70 versus 6.70 yesterday
- CNY per EUR 7.79 versus 7.79 yesterday
- Yield on 10-Year Government Bond 1.68% versuss 1.68% yesterday
- Yield on 10-Year China Development Bank Bond 1.77% versus 1.76% yesterday
- Copper Price +0.55%
- Steel Price -0.54%
