Asian equities displayed mixed performance this week, reflecting a blend of modest gains and losses across various markets. Mainland China and Hong Kong excelled, primarily driven by China’s decision to reduce key loan prime rates (LPRs), which are pivotal in shaping mortgage rates and boosting economic activity. In contrast, markets in India and Japan fell short, affected by a broader regional downturn. TAL Education made waves in the tech sector by announcing impressive third-quarter earnings, surpassing both revenue and profit expectations. Meanwhile, excitement around upcoming Hong Kong IPOs, including companies like Horizon Robotics and Jiangsu Hengrui Pharmaceuticals, has contributed to optimism among investors. Alibaba kicked off presales for its Singles Day sales event, with consumer demand evident in the popularity of iPhones and household furnishings.
The week ended with Mainland China’s markets showing resilience, as they closed higher against a backdrop of mixed regional performance. While Hong Kong’s declines were more moderate, they still reflected broader trends, with a noteworthy drop of around 3% across the region. The Chinese National People’s Congress scheduled a meeting for early November, with expectations that economic policy support might be on the agenda. However, initial communication focused on educational reforms rather than economic stimulus, leading to speculation about the timing and potential effectiveness of any proposed measures. Simultaneously, Prime Minister Li Qiang noted a meeting with the State Council to assess the economic landscape, suggesting possible incremental policy adjustments on the horizon.
Notably, the financial sector showed signs of increased lending activity following the unchanged 1-year medium-term lending facility (MLF) rate, which remains at 2%. The volume of lending surged from RMB 300 billion in September to RMB 700 billion in October, exceeding prior expectations and highlighting a potential shift towards greater financial support for economic recovery. There were also signs of thawing relations between India and China, marked by high-level discussions and calls for enhanced cooperation. Throughout the week, growth and technology stocks in both Mainland China and Hong Kong rallied, buoyed by sectors including internet services, automotive, healthcare, and clean technology—a development positively impacted by Tesla’s robust performance.
Investor enthusiasm manifested in strong foreign buying of Hong Kong-listed stocks, with Mainland investors net purchasing approximately $4.69 billion worth of equities via the Southbound Stock Connect mechanism this week. The Hang Seng and Hang Seng Tech indices showcased gains of 0.49% and 1.21%, respectively, reflecting robust sector performances, especially in technology and healthcare. Semiconductors, autos, and pharmaceuticals emerged as the strongest subsectors, while consumer plays encountered challenges, as evidenced by Pop Mart’s decline following a major shareholder’s divestiture. Volatility in trading volumes also indicated investor caution, with foreign skepticism surrounding the rally amid geopolitical uncertainties.
Markets in Shanghai, Shenzhen, and STAR Board exhibited notable gains, with volume surging to 205% of the 1-year average. Overall, a majority of stocks traded in these markets advanced, reflecting positive investor sentiment in technology, industrials, and communication services while traditional sectors like utilities and financials faced challenges. Additionally, Northbound Stock Connect volumes were elevated, as investors from Hong Kong displayed greater interest in acquiring stocks from Mainland China. The week concluded with further movements in currency and commodity markets, as the Chinese yuan weakened slightly against the US dollar, while steel prices enjoyed a noteworthy uptick.
In summary, while mixed performance defined Asian equities, the positive developments in China’s economic policy and key corporate earnings results showcased significant potential for recovery in growth-oriented sectors. With significant events on the horizon, including the National People’s Congress meeting and Alibaba’s Singles Day sales, investor sentiment appears cautiously optimistic. The interplay between domestic economic policy, investor behavior, and external geopolitical dynamics will likely shape market trends in the coming weeks. For interested parties, upcoming webinars and new content from KraneShares aim to provide deeper insights into private equity and potential investment strategies, positioning investors to navigate the evolving landscape strategically.
