The 4 Horsemen Of The AI Supply Chain Ride Again
5 Min. Read Time
Key News
Asian equities were led higher by AI picks-and-shovels and supply chain stocks, as Japan, Taiwan, Korea, and China’s Science & Technology (STAR) Board outperformed.
Mainland China opened lower but ripped higher mid-morning as positive catalysts lifted onshore China’s AI supply chain stocks, led by the semiconductor-heavy STAR Board (up +10.73%). Subsectors that performed well included semiconductors (up +11%), communication equipment (up +8%), computer hardware (up +8%), and electronic components (up +8%).
What lifted the onshore market?
- Widespread coverage of the National Team’s reentry into the onshore stock market on Monday was further supported by five large insurance companies stating they would increase their equity allocation ratio, with an emphasis on “strategic emerging industries”. This started with Sunday’s announcements from state-owned investment firms China Chengtong Holdings and China Reform Holdings on increasing their onshore stock holdings, though we noted the pickup in Mainland-listed China equity flows started last week.
- Significant flows into STAR Board ETFs. Of the $13.14 billion worth of net inflow into Mainland-listed China ETFs today, the two largest inflows were Science & Technology (STAR) Board ETFs with $5.417B and $2.042B (yes, that’s US dollars) of net inflow. Those two ETFs in the last month are the #1 and #2 in inflows, with $7.156B and $3.812 B, respectively. We can’t say for sure that the National Team was the sole buyer, but it's hard to miss their footprint.
- The Hong Kong-listed Z.ai (formerly Knowledge Atlas, known as Zhipu) gained +36.89% after announcing a new data center will be solely powered by Chinese-made chips. The move clearly caught short sellers off guard.
- A respected Mainland mutual fund manager revealed their Q2 positions, showing a shift to technology and AI supply chain stocks from value sectors.
- There were several government meetings on the stock market from the CSRC with brokers and fund families.
The Hang Seng Tech Index gained +1.32% and was led higher by technology hardware, semiconductors,and nonferrous metals. Additionally, battery giant CATL gained +1.21%,, while banks and energy were lower, reflecting a growth bias.
Tencent fell -0.8%, despite the launch of the Hyra-1.0 AI agent and positive comments. Alibaba gained +0.17% amid chatter that Ant International raised $1.2B to expand overseas efforts following yesterday’s Qwen 3.8-Max launch. Mainland China similarly saw banks, liquor, and energy stocks lower in a mixed day.
InnoLight Technology’s Hong Kong IPO is moving along and could raise $8 billion. Innolight is a fiber optic communications leader that is currently only listed in Mainland China.
The Ministry of Transport announced that RMB 22 billion in bonds will be issued to subsidize the replacement of older, high-polluting commercial trucks with new hybrid and fully electric trucks. Interesting!
There were not many headlines about US-China talks in advance of President Xi’s September visit compared to last week’s coverage of President Trump’s China election interference. One needs to understand when a leader, in the US, China, or anywhere for that matter, is speaking to a domestic audience versus an international audience. President Trump’s comments are a non-factor in US-China relations, in my opinion, as they were directed to a domestic audience. The truth is that, in China, the domestic audience needs to be placated on occasion.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0% |
| Hang Seng Tech | HSTECH Index | 1.3% |
| Hong Kong Turnover | HKTurn Index | -5.4% |
| Hong Kong Short Sale Turnover | HKSST Index | -28% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 0.2 |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 915.37 |
| China (Shanghai) | SHCOMP Index | 1.8% |
| China (Shenzhen) | SZCOMP Index | 3.6% |
| China (STAR Board) | Star50 Index | 10.7% |
| Mainland Turnover | .chturn Index | 9.5% |
| Japan | NKY Index | 3.3% |
| India | SENSEX Index | -0.3% |
| Indonesia | JCI Index | 1.7% |
| Malaysia | FBMKLCI Index | -0.1% |
| Pakistan | KSE100 Index | 0.1% |
| Philippines | PCOMP Index | -1.3% |
| South Korea | KOSPI Index | 3.6% |
| Taiwan | TWSE Index | 4.2% |
| Thailand | SET Index | 0.4% |
| Singapore | STI Index | 0.5% |
| Australia | AS51 Index | 0% |
| Vietnam | VNINDEX Index | -0.0005 |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 104% | 121% |
| Advancing Stocks | 300 | 2664 |
| Declining Stocks | 204 | 2356 |
| Outperforming Factors | Momentum, Growth, Liquidity | Momentum, Liquidity, Growth |
| Underperforming Factors | Low Volatility | Low Volatility, Dividend Yield, Value |
| Top Sectors | Materials, Tech, Industrials | Tech, Materials, Industrials |
| Bottom Sectors | Real Estate, Energy, Communication | Staples, Financials, Energy |
| Top Subsectors | Semis, Paper/Packaging, Tech Hardware | Semis, Communication Equipment, Computer Hardware |
| Bottom Subsectors | Petroleum/Petrochemical, Banks, Coal | Oil/Gas, Banking, Coal |
| Southbound Connect Buys | Hua Hong Semi, SMIC (Very Large), KB Laminates, YOFC, Z.AI (Large), Gigadevice (Moderate), Xiaomi (Small) | N/A |
| Southbound Connect Sells | Tencent (Large) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | 0.06 |
| Communication Services | 11 | -0.84 |
| Consumer Discretionary | 28 | -0.18 |
| Consumer Staples | 13 | -0.05 |
| Energy | 6 | -1.16 |
| Financials | 25 | -0.54 |
| Health Care | 16 | 0.28 |
| Industrials | 22 | 1.85 |
| Information Technology | 12 | 3.49 |
| Materials | 14 | 4.6 |
| Real Estate | 7 | -1.65 |
| Utilities | 11 | -0.2 |
| Mainland China Listed | 386 | 3.08 |
| Communication Services | 8 | 0.8 |
| Consumer Discretionary | 26 | 0.69 |
| Consumer Staples | 19 | -1.44 |
| Energy | 12 | -0.96 |
| Financials | 64 | -1.31 |
| Health Care | 31 | -0.26 |
| Industrials | 58 | 2.06 |
| Information Technology | 95 | 9.27 |
| Materials | 52 | 2.82 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -0.8 |
| Alibaba HK | 9988 HK Equity | 0.2 |
| JD.com HK | 9618 HK Equity | 0.9 |
| NetEase HK | 9999 HK Equity | -1.2 |
| Yum China HK | 9987 HK Equity | -0.7 |
| Baozun HK | 9991 HK Equity | -5.7 |
| Baidu HK | 9888 HK Equity | -1.8 |
| Autohome HK | 2518 HK Equity | 0.1 |
| Bilibili HK | 9626 HK Equity | 0.8 |
| Trip.com HK | 9961 HK Equity | -0.7 |
| EDU HK | 9901 HK Equity | -0.6 |
| Xpeng HK | 9868 HK Equity | -2.3 |
| Weibo HK | 9898 HK Equity | 1.2 |
| Li Auto HK | 2015 HK Equity | -1 |
| Nio Auto HK | 9866 HK Equity | -0.9 |
| Zhihu HK | 2390 HK Equity | 0.7 |
| KE HK | 2423 HK Equity | -0.9 |
| Tencent Music Entertainment HK | 1698 HK Equity | 0.6 |
| Meituan HK | 3690 HK Equity | -1.3 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| Z AI CO LTD | 36.9 |
| SEMICONDUCTOR MANUFACTURI-H | 8.2 |
| ALIBABA GROUP HOLDING LTD | 0.2 |
| HUA HONG GRACE SEMICONDUCTOR | 17.9 |
| TENCENT HOLDINGS LTD | -0.8 |
| YANGTZE OPTICAL FIBRE AND-H | 0.7 |
| KINGBOARD LAMINATES HLDG LTD | 12.3 |
| GIGADEVICE SEMICONDUCTOR I-H | 15.1 |
| XIAOMI CORP-CLASS B | -1.2 |
| MEITUAN-CLASS B | -1.3 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | 13.2 |
| EOPTOLINK TECHNOLOGY INC L-A | 8.2 |
| GIGADEVICE SEMICONDUCTO-CL A | 10 |
| SUZHOU DONGSHAN PRECISION-A | 6.1 |
| CAMBRICON TECHNOLOGIES-A | 11.7 |
| JCET GROUP CO LTD-A | 10 |
| UNISPLENDOUR CORP LTD-A | 10 |
| BOE TECHNOLOGY GROUP CO LT-A | 9 |
| SHENZHEN TECHWINSEMI TECHN-A | 5.2 |
| MONTAGE TECHNOLOGY CO LTD-A | 15.6 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.76 versus 6.77 yesterday
- CNY per EUR 7.73 versus 7.73 yesterday
- Yield on 10-Year Government Bond 1.75% versus 1.75% yesterday
- Yield on 10-Year China Development Bank Bond 1.79% versus 1.79% yesterday
- Copper Price +1.03%
- Steel Price -0.64%
