Lesson Learned As China’s “National Team” Buys Early & Often
7 Min. Read Time
Key News
Asian equities rebounded, led by AI supply chain stocks following SK Hynix earnings, and ahead of the US Fed decision and results from US hyperscalers Google and Microsoft after the US market closes today. Asian markets were led by Korea, Japan, Taiwan, China’s Science & Technology (STAR) Board, and Hong Kong-listed technology stocks.
Samsung reports tomorrow in Korea.
STAR Board-listed robotics giant Unitree gained +8.74% in advance of Q3 financial results reported after the market’s close. Unitree's Q3 revenue was up +69.9% to RMB 665 million ($99.7 million), and net income was down -17.4% to RMB 112 million ($16.8 million). Year-to-date (YTD) revenue reached RMB 1.817 billion ($272 million), an increase of +55.71% year-on-year (YoY). Interestingly, I don’t see that they stated how many robots were made in the results release.
Index heavyweight Ping An Insurance reported after the close, with Q3 results lower YoY, though YTD results are still ahead of last year’s.
Hong Kong and Mainland China’s AI supply chain sub-sectors (semis, semiconductor equipment, electronic equipment, and communications equipment) all rebounded, along with the recently beaten-up but YTD outperforming pharmaceutical and non-ferrous metals stocks. Healthcare was helped by Hengrui Pharmaceuticals, which gained +6.17% in Mainland China and +10.82% in Hong Kong, beating analyst expectations with revenue up +21% YoY and net income up +89% YoY. The company also received clinical trial approval in China for a treatment for malignant tumors.
Contributing to the AI trade, CXMT gained +3.16% after being added to both the Shanghai Stock Exchange Composite and STAR 50 Indices. Optical networking leaders Innolight (+10.28%) and Eoptolink (+8.08%) performed well in Mainland China.
The domestic equity ETFs favored by China's "National Team", i.e., investment firms associated with sovereign wealth, had above-average volumes, following yesterday’s no-show. All the major Chinese indices are at big round numbers, which suggests inflows and anticipation of further support, with Shanghai Comp at 3,650, Shenzhen Comp at 2,150, Hang Seng at 23,000, and Hang Seng Tech at 3,800. Tencent gained +0.62% and was Hong Kong’s most heavily traded by value, followed by Alibaba, which gained +1.96% as internet stocks had a good day as well. Z.AI gained +3.81%, and MiniMax gained +4.65% following Anthropic’s S-1 filing as a look through on stand-alone LLM providers. Mainland investors sold -$102 million in Hong Kong stocks today, extending the streak to 11 consecutive days of net selling, bringing the total to -$3.88 billion. This reduces the YTD net inflow total to +$52.93 billion.
The Ministry of Commerce had a busy day with head Wang Wentao meeting with the European Parliament's Committee on International Trade Chair Bernd Lange. There was also a press conference on China’s trade subsidy program.
Reuters had an article yesterday on the STAR Board’s significant decline from the June highs. The article highlighted the plight of Mainland retail investors who read and then followed the government’s pro-STAR Board/technology self-reliance policy positioning in the 15th Five-Year Plan. The article notes retail investors' frustration surrounding “an investment theme backed by Beijig" that has become so volatile.
It is true that the STAR Board has had very strong returns since September 2024, though the throttling being done by the government and National Team is not working yet. This likely explains why the National Team’s list of favored ETFs now includes two STAR 50 ETFs out of the 11 ETFs receiving inflows. Once they have a position, they throttle up and down as they see fit. Regardless, the National Team has $250 billion of dry powder they can theoretically use to buy.
A Mainland media source reported on the White House’s efforts to resolve the war in Ukraine through negotiations with Russia prior to the US mid-term elections. The article notes significant economic and business cooperation as a carrot to resolve the war in an effort to bolster GOP candidates.
TAL Education reports before the US market opens tomorrow.
NetEase bought back 43,420 shares and KE Holdings (US Ticker: BEKE) bought back 428,472 shares, according to releases from after the close.
Last Night's Performance
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.66 versus 6.66 yesterday
- CNY per EUR 7.41 versus 7.42 yesterday
- Yield on 10-Year Government Bond 1.63% versus 1.63% yesterday
- Yield on 10-Year China Development Bank Bond 1.67% versus 1.67% yesterday
- Copper Price +0.52%
- Steel Price +0.50%
