Suddenly, Tencent & Alibaba Are AI Stocks!

Key News

Asian equities were higher on light volume amid chatter about US-Iran negotiations ahead of the Trump-Xi summit.

It is worth noting that there have been negative Western media headlines and low expectations for the summit, despite several positive developments. Against the backdrop of light China equity ownership and positioning, a better-than-expected summit on Thursday could be a catalyst, in my opinion.

Hong Kong and Mainland China faded off morning highs, but closed in the green, despite poor breadth. Hong Kong would have been negative if it were not for MSCI China Index heavyweights Tencent and Alibaba, which have suddenly become recognized as AI stocks! Remember, these two companies represent almost 24% of the MSCI China Index. 

Tencent gained +5.02% on MASSIVE volume after releasing an updated version of its AI image generation model, which seemed to ride the enthusiasm from the release of Meta’s Muse AI agent and raised the potential of a similar type of agent to be embedded in WeChat. Tencent traded 70.7 million shares today versus yesterday’s volume of only 19.7 million shares and the 1-year average of 25 million shares. The value traded was $4.1 billion versus yesterday’s $1.0 billion and the 1-year average of only $1.6 billion.

Alibaba gained +1.95% on high volume as CEO Eddie Wu spoke at the Yunqi (Cloud) Conference. He announced that Alibaba Cloud will target data center capacity of 20 gigawatts (GW) by 2032. Alibaba traded 123 million shares today versus yesterday’s 54 million shares and the 1-year average of 94 million shares. The value traded was $1.8 billion versus yesterday’s $779 million and the 1-year average of $1.7 billion. Alibaba’s AI chip unit, T-Head, launched the Zhenwu V900 AI chip with 3X the compute power of its predecessor, the Zhenwu M890. Unfortunately, there was no T-Head spin-off announcement, though the conference is not over! AI office assistant QwenNote A2 launched following the success of its predecessor DingTalk AI, which sold more than 1 million subscriptions. Mainland investors bought $111 million worth of Alibaba via Southbound Stock Connect, marking the second day of strong net inflows.

Delivery giant ZTO fell by -5.12% after Alibaba sold 25 million shares worth $500 million, though those proceeds may be used for AI capex. Baidu gained +0.56%, attracting much-needed AI "TLC" overnight. Adding some tailwind to Tencent and Alibaba was the release of the 2026 China AI Computing Development Assessment Report. There was a bit of a downdraft outside a few pockets of strength such as CATL, which gained +0.60%, Lenovo, which gained +2.8%, and Montage, which gained +8.1%. Mainland China held up a bit better, as the semiconductor, insurance, and consumer staples sectors outperformed. The AI supply chain was mixed, as the Science & Technology (STAR) Board gained +0.46%. The Mainland-listed China equity ETFs favored by China's "National Team", i.e. investment firms associated with China's sovereign wealth, saw slightly higher volumes, as inflows have been picking up. It is hard to know if the National Team is buying, but there appears to be some smoke!

CNBC is reporting the following US CEOs will attend the Trump-Xi dinner: Nvidia’s Jensen Huang, OpenAI’s Sam Altman, Google’s Sundar Pichai, Tesla and SpaceX’s Elon Musk, Citigroup’s Jane Fraser, Amazon’s Jeff Bezos, Apple’s Tim Cook, and Dell’s Michael Dell. Thus far, we d not have confirmation of the China executives that will be present.

The Washington Post wrote an article titled “Why China’s economy may be headed for its worst year since 1991”. Wow! Scary. The article isn’t quite as dire as the headline; it focuses on China’s K-shaped economy without commenting on why domestic consumption has been weak: housing! It also focuses on “overcapacity” in the auto and electric-vehicle sectors but doesn’t address demand for high-quality, inexpensive cars. While the article notes China’s debt-to-GDP is 300%, it fails to note that debt is actually starting to decline!  Let’s look at China by the numbers:

• 1^st half GDP Growth +4.7%
• September CPI +0.8%, Core CPI +1%
• Yield on 10-Year Chinese Treasury 1.68%
• Renminbi +4.13% versus the US $

I’m not arguing China’s economy is unicorns and rainbows, but it’s not all that bad either. In fact, the Chinese government has stated that lower “healthy” GDP growth without rising debt is preferable to high growth that increases debt.

Hong Kong buybacks announced after the close: Tencent bought back 223,000 shares, and Baidu bought back 552,450 shares.

Last Night's Performance

Country / Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	0.2%
Hang Seng Tech	HSTECH Index	0.3%
Hong Kong Turnover	HKTurn Index	22.9%
Hong Kong Short Sale Turnover	HKSST Index	34.9%
Short Turnover as a % of Hong Kong Turnover	N/A	0.2
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	1620.77
China (Shanghai)	SHCOMP Index	0.1%
China (Shenzhen)	SZCOMP Index	0%
China (STAR Board)	Star50 Index	0.5%
Mainland Turnover	.chturn Index	5.3%
Japan	NKY Index	1.4%
India	SENSEX Index	-0.4%
Indonesia	JCI Index	-1.7%
Malaysia	FBMKLCI Index	1%
Pakistan	KSE100 Index	0.1%
Philippines	PCOMP Index	-0.5%
South Korea	KOSPI Index	0.1%
Taiwan	TWSE Index	0.2%
Thailand	SET Index	0.4%
Singapore	STI Index	0.9%
Australia	AS51 Index	0.3%
Vietnam	VNINDEX Index	1%

Indicator	Hong Kong	Mainland China
Today's Volume % of 1-Year Average	93%	87%
Advancing Stocks	164	2214
Declining Stocks	395	2775
Outperforming Factors	None	Liquidity, Large Caps, Dividend Yield
Underperforming Factors	Momentum, Growth, Value	Momentum, Low Volatility
Top Sectors	Communication, Discretionary	Communication, Discretionary, Industrials
Bottom Sectors	Materials, Industrials, Staples	Energy, Healthcare, Materials
Top Subsectors	Software, Media/Entertainment, Consumer Discretionary Distribution	Office Supplies, Internet, Cultural Media
Bottom Subsectors	Construction Materials, Paper/Packaging, Household/Personal Products	Marine, Energy Equipment, Catering/Tourism
Southbound Connect Buys	HK Tracker ETF (Very Large), Alibaba, Z AI (Large), KB Laminates (Small)	N/A
Southbound Connect Sells	SMIC, Tencent, YOFC (Small)	N/A

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	165	0.83
Communication Services	11	4.07
Consumer Discretionary	28	0.79
Consumer Staples	13	-0.99
Energy	6	-0.73
Financials	25	-0.05
Health Care	16	-0.36
Industrials	22	-1.25
Information Technology	12	-0.56
Materials	14	-1.31
Real Estate	7	-0.67
Utilities	11	-0.6
Mainland China Listed	386	-0.01
Communication Services	8	0.85
Consumer Discretionary	26	0.74
Consumer Staples	19	0.06
Energy	12	-0.61
Financials	64	0.05
Health Care	31	-0.56
Industrials	58	0.1
Information Technology	95	0.06
Materials	52	-0.37

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	5
Alibaba HK	9988 HK Equity	2
JD.com HK	9618 HK Equity	1
NetEase HK	9999 HK Equity	-0.1
Yum China HK	9987 HK Equity	-0.7
Baozun HK	9991 HK Equity	2.7
Baidu HK	9888 HK Equity	0.6
Autohome HK	2518 HK Equity	-0.8
Bilibili HK	9626 HK Equity	0.4
Trip.com HK	9961 HK Equity	0
EDU HK	9901 HK Equity	-1.6
Xpeng HK	9868 HK Equity	0.6
Weibo HK	9898 HK Equity	1.3
Li Auto HK	2015 HK Equity	-0.9
Nio Auto HK	9866 HK Equity	0.2
Zhihu HK	2390 HK Equity	7.2
KE HK	2423 HK Equity	-1.3
Tencent Music Entertainment HK	1698 HK Equity	5.6
Meituan HK	3690 HK Equity	-1.1

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
TENCENT HOLDINGS LTD	5
ALIBABA GROUP HOLDING LTD	2
YANGTZE OPTICAL FIBRE AND-H	2.7
Z AI CO LTD	-6.5
KINGBOARD LAMINATES HLDG LTD	-5.3
SEMICONDUCTOR MANUFACTURI-H	-2
XIAOMI CORP-CLASS B	-1.4
HUA HONG GRACE SEMICONDUCTOR	-1.5
MINIMAX GROUP INC	-3.9
ZHONGJI INNOLIGHT CO LTD-H	-2.5

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
ZHONGJI INNOLIGHT CO LTD-A	-1.4
GIGADEVICE SEMICONDUCTO-CL A	2.7
MONTAGE TECHNOLOGY CO LTD-A	5.6
CXMT CORP-A	1.7
SUZHOU DONGSHAN PRECISION-A	1.6
EOPTOLINK TECHNOLOGY INC L-A	-0.4
HENGTONG OPTIC-ELECTRIC CO-A	1.7
CONTEMPORARY AMPEREX TECHN-A	2.5
VICTORY GIANT TECHNOLOGY -A	-2.4
HYGON INFORMATION TECHNOLO-A	3.9

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 6.69 versus 6.70 yesterday
• CNY per EUR 7.68 versus 7.69 yesterday
• Yield on 10-Year Government Bond 1.68% versus 1.68% yesterday
• Yield on 10-Year China Development Bank Bond 1.75% versus 1.76% yesterday
• Copper Price +1.15%
• Steel Price +0.42%