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Key News Asian equities rebounded today following last week’s AI bubble kerfuffle, as South Korea and Hong Kong outperformed. Yes, the US government shutdown is a positive for the global economy and today marks the implementation of the Trump-Xi trade truce. Several Chinese government agencies announced implementation of the deal, including eliminating fees on US ships. Reuters is reporting that FBI Director Kash Patel was in China last week to discuss fentanyl precursors, while the New York Times is reporting that 13 chemicals that can be used in making the drug will require export licenses. The big catalyst today was the “unexpected” increase in the consumer price index (CPI) in October: +0.2% year-over-year (YoY) versus September's -0.3% and expectations of -0.1%, based on 31 estimates submitted. The headline figure was driven higher by clothing prices, which increased +1.7% and medical care costs, which increased +1.4%, offsetting weakness in food, which declined -1.6%. We have discussed previously that the July announcement of anti-involution efforts on stopping excess supply and unproductive competition could snap China out of its deflationary spiral. It is far too early for a victory lap, but a small step in the right direction, as Consumer Staples and Consumer Discretionary stocks outperformed in both Hong Kong and Mainland China. A strong day from China Tourism Group, which increased +15.34% on supportive policies toward Hainan Island. Another consumption tailwind came in the form of southwestern city Chongqing announcing 18 measures to support consumption, including auto sales. Unfortunately, there was no chatter about Singles Day on November 11th, though internet stocks had a strong day. Hong Kong had a strong day, as every sector was positive, though volumes were a touch light. The producer price index (PPI) declined -2.1% versus September’s decline of -2.3% and expectations of -2.2%, based on 27 submissions from economists. This represented a broad decline across producer goods, as mining slumped -7.8%. MORE FOR YOU Mainland China had a strong day as well on firmer volumes. It was interesting that amongst the few laggards were semiconductors and technology hardware. The Ministry of Industry and Information Technology (MIIT) held a press conference outlining efforts to “accelerate the cultivation of application scenarios in five key areas”. Those key areas are 5G, the “AI Plus” initiative, robots, industrial internet, and BeiDou, which is the China National Space Administration’s satellite-based navigation system. After the Mainland close, the National Development & Reform Commission (NDRC) and the National Energy Administration both announced “Guiding Opinions on Promoting the Consumption and Regulation of New Energy”, outlining efforts to increase new energy output by 200 million kilowatts. The General Office of the State Council announced 13 policy initiatives focused on promoting private investment in industries including railway, the low-altitude economy (drones), and nuclear power. Before the US market opened, online real estate company KE Holdings reported better-than-expected third quarter financial results. It is amazing that the company could grow its top-line revenue, considering how poorly Mainland real estate has been performing. Revenue increased +2.1% year-over-year (YoY) to RMB 23.1 billion ($3.2 billion) from RMB 22.6 billon, versus an analyst estimate of RMB 23.0 billion. Adjusted Net Income declined -27.8% to RMB 1.3 billion ($181 million) from RMB 1.8 billion, versus an analyst estimate of RMB 1.2 billion. Adjusted Earnings per Share (EPS) fell to RMB 1.1 from RMB 1.5, versus an analyst estimate of RMB 1.1 The company purchased 145.1 million American Depositary Receipts (ADRs) for $2.3 billion through Q3, out of an approved $5 billion buyback The company has $7.8 billion worth of cash on the books Live Webinar Join us Wednesday, November 12th at 10 am EST for: China Q3 Update: Tech Leads Bull Market, Trade Deal Updates, & New Goals Set In 15th Five-Year Plan Please click here to register New Content Read our latest article: Labubu & Gen Z Spending: What China’s Designer Toy Craze Tells Us About the New Consumption Wave Please click here to read Last Night’s Performance Last Night’s Exchange Rates, Prices, & Yields CNY per USD 7.12 versus 7.12 yesterday CNY per EUR 8.23 versus 8.24 yesterday Yield on 10-Year Government Bond 1.81% versus 1.81% yesterday Yield on 10-Year China Development Bank Bond 1.88% versus 1.88% yesterday Copper Price 0.44% Steel Price -0.03%
