Update on China's Market: Alibaba and Baidu Finally Gain AI Recognition, Ending the "No Respect" Saga Similar to Rodney Dangerfield
In the world of finance and technology, China continues to make significant strides. Here's a roundup of the latest developments:
The Chinese government's focus on science and technology for the 15 Five Year Plan is already influencing behaviour, with sectors such as pharmaceuticals and biotech showing strong growth. Notably, the yield on the 10-Year China Development Bank Bond has risen to 1.91%, up from 1.88% on Friday, indicating investor confidence in the nation's economic prospects. Similarly, the yield on the 10-Year Government Bond has increased to 1.85%, up from 1.83% on Friday.
In the stock market, there have been mixed results. Labubu doll maker Pop Mart fell -7.11%, accounting for a decline of -26 index points in the Hang Seng Index, due to potential slack in demand. However, biotech company Akeso saw a drop of -7.89% on concerns that its lung cancer drug trials might have stalled.
On a positive note, the Chinese currency, the CNY, remained stable against both the USD and EUR, with CNY per USD at 7.13 (unchanged from yesterday) and CNY per EUR at 8.36 (also unchanged).
Asian equities, excluding Indonesia and Vietnam, were largely higher on a weaker US dollar. Internet stocks led the way, with Tencent (+1.98%), NetEase (+4.38%), and Baidu (+9.48%) all posting significant gains.
Alibaba also saw a significant boost, gaining +4.17%, after announcing an update to its Qwen AI model and an investment in a robotics company, X Square Robot. There is a rumour that the listing for this investment could potentially take place on the Mainland STAR Market, which is focused on pre-profit technology and healthcare startups.
In other news, Mainland investors bought a net $2.14 billion worth of Hong Kong-listed stocks via Southbound Stock Connect, including a large net buy of Alibaba. This suggests continued interest in Chinese tech companies from Mainland investors.
China Unicom gained +4.82% after the Ministry of Industry & Information Technology (MIIT) granted it a commercial satellite license, further bolstering the company's position in the telecommunications sector.
In the bond market, Mainland asset managers are launching a dozen technology-focused bond funds, which could potentially deter companies from diluting stock. This move could have long-term implications for the Chinese economy, as it encourages companies to focus on growth and innovation rather than short-term gains.
Lastly, Unitree's 4th quarter IPO could value the company at $7 billion (RMB 50 billion), though the listing exchange has not been disclosed. This potential IPO underscores the growing interest in technology and innovation in China.
Foreign reserves also saw a boost, with August Foreign Reserves increasing to $3.32 trillion from July's $3.29 trillion, indicating a strong position for the Chinese economy on the global stage.
Linklaters advised Alibaba and other managers in supporting Mainland-China-asset managers to launch about a dozen technology-focused bond funds last night. This move is expected to further bolster the technology sector in China and contribute to its ongoing economic growth.
In the commodities market, steel and copper prices have seen a slight dip, with steel price -0.10% lower and copper price -0.26% lower. Despite this, growth subsectors continue to outperform, indicating a resilient and dynamic economy.
In conclusion, China's financial and tech landscape continues to show promising growth, with investor confidence high and significant developments in various sectors. The focus on science and technology, as well as the launch of technology-focused bond funds, are expected to further bolster the economy and contribute to its ongoing growth.
