Light At The End Of The Tunnel
6 Min. Read Time
Key News
Asian equities were lower on higher oil prices, as AI-centric Japan and Korea were hit by data center Elice’s -32% IPO flop. Taiwan underperformed, along with Hong Kong and Thailand, while Indonesia bounced following MSCI’s index expulsion threat, and India was closed for Dussehra.
Before delving into the carnage, there were several positives reported after the close:
- Reuters is reporting that Alibaba, Tencent, and ByteDance have placed orders worth $35 billion for Nvidia’s RTX Pro 5500 chip. This is clearly an outcome of the Trump-Xi summit #2, which raises the question of what Trump-Xi summits #3 (APEC Shenzhen) and #4 (G20 Miami) will bring.
- China bought 360,000 tons of US soybeans in September. Yet another Trump-Xi outcome.
- Roche and Hanosh Pharmaceutical gained +8.3% after they agreed to partner on cancer drugs in a deal that could be worth up to $15 billion for the Chinese biotech company. Chinese biotech and healthcare appear to be a physical AI play, driven by a strong run of joint ventures (JVs) with Western pharmaceutical companies and new drug releases. This industry is also a potential beneficiary of better US-China ties as well. Yes, Roche is a Swiss company, but, to distribute in the US, you need the FDA’s blessing.
The National Development and Reform Commission (NDRC) held its monthly press conference overnight. The NDRC stated China’s economy is “stable, new, and resilient,” with new growth drivers accounting for 40% of GDP growth and 74.8% of growth driven by domestic demand. The very first reporter question was on the recent economic data release. The NDRC stated it is working on the Expanded Domestic Demand Strategy Implementation Plan (2026–2030) by “formulating the implementation plan of expanding domestic demand strategy, and will accelerate the issuance and implementation”. One source noted they used the word “imminently”. Let’s hope so!
The domestic equity ETFs favord by China's "National Team", i.e. investment firms associated with sovereign wealth, had another day of above-average volumes, which doesn’t indicate the market’s bottom has been put in, though it means strategic long-term investors see value at these prices. Ticker 510330 had volume nearly 10X its 30-day average, as inflows into Mainland-listed ETFs increase. Five ETFs have seen $10.7 billion of inflows in the last week.
Hong Kong was hit by the regional drawdown, as MSCI China heavyweights fell, including Tencent, which fell-1.77%, Alibaba, which fell -3.58%, and CATL, which fell -6.58% Meanwhile, Lenovo fell by -9.98% on analysts' downgrade.
CATL reported Q3 results after the Hong Kong close. The battery maker missed analysts' estimates on both revenue and net income. Brokers and insurance stocks were lower, as offshore trusts’ holdings tax is due on Thursday. It is conceivable that an element of Hong Kong’s downdraft is driven by selling to pay tax, though it is impossible to quantify. Mainland investors were net sellers of Hong Kong stocks via Southbound Stock Connect.
Mainland China held up better as the Science & Technology (STAR) Board rebounded by +1%, led by semiconductor equipment stocks, though semiconductor companies such as CXMT fell by -2.89% overall, as Cambricon fell by -0.81%.
China's currency, the renminbi (CNY) appreciated to 6.67 per US dollar. 1 & 5 Year Loan Prime Rates remained unchanged, as expected, at 3.0% and 3.5%, respectively
KE Holdings bought back 416,853 shares overnight, according to an after-the-close press release.
Last Night's Performance
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.68 versus 6.68 yesterday
- CNY per EUR 7.50 versus 7.50 yesterday
- Yield on 10-Year Government Bond 1.65% versus 1.65% yesterday
- Yield on 10-Year China Development Bank Bond 1.67% versus 1.67% yesterday
- Copper Price 0.37%
- Steel Price 0.26%
