Q3 Financial Results: So, Are You Saying There Is A Chance?
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Asian equities were lower on light volumes as rising Middle East tensions curbed risk sentiment after Korea reopened with a thud. There are a few points to highlight on an otherwise quiet night.
The Hong Kong-listed discount retailer Miniso gained +7.68% overnight after announcing third quarter China gross merchandise value (GMV) increased between +25% and +30% year-over-year (YoY) ahead of Q3 financial results. The stock is slightly above its 52-week and all-time lows, having fallen -66.89% from its all-time high, which occurred in September of 2023. The low bar in YoY comparisons could be a catalyst as we head into earnings season for the third quarter. Hong Kong-listed E-Commerce stocks were mostly higher, as Alibaba gained +1.12%, JD.com gained +2.75%, and Meituan gained +0.42%.
China’s Ministry of Commerce (MoC) and the European Commissioner for Trade & Economic Security agreed to an annual import quota of 350,000 hybrid and fully-electric vehicles versus 2025’s 302,000. Hong Kong and Mainland-listed automakers were lower on the news, though battery giant CATL was higher.
China’s AI supply chain was mostly lower again. Apple's iPhone production curbs and Korea’s downdraft weighed on the supply chain stocks in both Mainland China and Hong Kong. In a one-two punch for the AI supply chain, a US-led patent lawsuit was initiated against Apple suppliers Luxshare, which fell -2.08% in Hong Kong, and Foxconn, which fell -7.17% in China. The semiconductor, semiconductor equipment, electronic equipment, and communications equipment subsectors were all lower in both markets. As a consequence, the Science & Technology (STAR) Board fell -2.1%.
Mainland media broadcasted an NBA China game in Macau, showing Joe Tsai, Jack Ma, and David Beckham sitting together.
Tencent gained +0.12% and was Hong Kong’s most heavily traded stock by value. Bloomberg News reported the company is telling investors that its $5 billion bond offering will be used for AI capex. There was also chatter that both Alibaba and Tencent will launch tools similar to Meta’s Muse. Defensive plays like banks and energy were higher in both markets. The domestic equity ETFs favored by China's "National Team", i.e. investment firms associated with sovereign wealth, were below average, though they did see inflows on Friday.
There was an interesting article in Mainland China based on research from Epoch AI comparing Anthropic’s $65 billion worth of AI revenue and OpenAI’s $40 billion to a combined $4 billion in total AI revenue across ByteDance, Alibaba, Z AI, Moonshot, DeepSeek, and MiniMax. It is important to note that the China revenue total excludes cloud computing and advertising revenue. The former is the primary revenue driver for Alibaba, Baidu, and Tencent. Alibaba’s second quarter cloud revenue growth was +45% to $7.1 billion. The two US giants have an entirely different business model from their China peers, as they focus on enterprise solutions. It is a long article, so I will dig in further and report back.
Finance-related agency heads of the People's Bank of China (PBOC) and the China Securities Regulatory Commission (CSRC) will attend next week’s Financial Street Forum Annual Meeting running from October 19th to 22nd. There is no major news expected from the Forum, outside of the usual positive economic policy support releases, though last week’s allocation of consumer subsidies was a positive.
Tencent announced share buybacks after the close.
Last Night's Performance
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.69 versus 6.69 Friday
- CNY per EUR 7.48 versus 7.50 Friday
- Yield on 10-Year Government Bond 1.67% versus 1.69% Friday
- Yield on 10-Year China Development Bank Bond 1.74% versus 1.75% Friday
- Copper Price 1.06%
- Steel Price 0.49%
