The State Administration for Market Regulation (SAMR) addressed the escalating “race to the bottom” in food delivery subsidies, urging companies to “resist vicious subsidies” and “end unfair competition.”
Asian equities had a strong week higher, except for Mainland China, which was off slightly as the market consolidates after its recent strong sprint higher.
After enduring a bear market from 2021 through 2023, ending with the capitulation bottom in January 2024, Chinese equity investors finally saw a strong week, highlighted by Hong Kong breaking above recent resistance. The rally in Chinese stocks has been ongoing but largely overlooked by global investors. U.S.-listed China ETFs have seen a “whopping” $232 million of net inflow year-to-date (YTD), which tells you everything you need to know about investor positioning and participation in the rally.
Hong Kong growth stocks led gains, with Alibaba Group Holding Limited (Alibaba) rising +5.44% and Baidu Inc. (Baidu) climbing +8.08% after Western media reported both companies are developing proprietary semiconductor chips, potentially at Nvidia’s expense. While this news circulated in China, today’s coverage of Alibaba in Mainland media focused primarily on the release of Qwen3-Next and Qwen3-Next-80B-A3B, which offer significant improvements in speed and power at a lower cost.
Mainland investors continued to purchase Alibaba shares in Hong Kong via Southbound Stock Connect. Baidu’s rally appears driven in part by short covering. Alongside internet stocks like Tencent (+2.22%), insurance and non-ferrous metal sectors, including metals, mining, and precious metals, also had a strong day.
Mainland China stocks closed lower, led down by banks, insurance, and household appliance sectors. Technology hardware was mostly weaker, except for Foxconn Technology Group (Foxconn), which gained +4.84%. Semiconductor stocks were mixed; Cambricon Technologies posted a gain of +7.28% while Semiconductor Manufacturing International Corporation (SMIC) fell -1.69%.
Chinese healthcare stocks rebounded in response to concerns about possible United States government tariffs on imported healthcare drugs and equipment, and the promotion of generic drug production in the US. The healthcare sector has outperformed YTD, prompting some profit-taking, although the United States policy aims to address COVID-19 shortages as ports closed. Recent positive developments in Chinese biotech overshadow these concerns.
Zijin Mining Group Company Limited (Zijin Gold), a Mainland-listed and non-ferrous metals all-star, declined -0.23% ahead of its planned relisting in Hong Kong. The Chinese government announced the “Special Action Plan for the Large-scale Construction of New Energy Storage (2025-2027)” and the “Program for Stabilizing Growth in the Power Equipment Industry (2025-2026).” Contemporary Amperex Technology Co., Limited (CATL) rose +0.76% on electrical equipment prospects, though Sungrow Power Supply dropped -2.49% and Inovance Technology fell -1.26%. Ant Group, the Alipay mobile payment company one-third owned by Alibaba, announced an upgrade to its Ant Wealth platform. Whether this signals an initial public offering (IPO) remains uncertain.
While headlines have focused on United States saber-rattling over proposed tariffs targeting both India and China for the countries’ purchases of Russian oil, it is worth noting that United States Treasury Secretary Scott Bessent is scheduled to meet Vice Premier He Lifeng next week in Madrid to discuss trade, economic, and national security issues. This pick-up in United States-China diplomatic activity is a positive sign.
Meanwhile, the Ministry of Finance’s Lan Fuan reviewed the “fiscal reform and development” during the 14th Five-Year Plan, clarifying that the government budget deficit increased to 4% this year, up from 2.7% as special government bond issuance climbed to RMB 1.94 trillion and tax cuts and refunds “will exceed CNY 10 trillion.” Although real estate was not mentioned, the support for local governments to convert existing commercial housing to affordable housing and sufficient fiscal policy space suggest continued economic policy support as planning begins for the 15th Five-Year Plan.
If yesterday’s update was missed, readers are encouraged to watch the interview with Louis Gave of GaveKal Research. Excluding the introduction, Louis shared valuable insights into Chinese stocks and new government policies, supported by comprehensive charts and data. His perspectives remain rare in American investment circles, especially given the sixteen-year US equity bull market that has left non-US equities out of sight, out of mind.
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Yield on 10-Year China Development Bank Bond 1.94% versus 1.96% yesterday
