China Market Update: Mainland Stock Market Cap Hits 10-Year High

Key News

Asian equities started the week mixed as Shenzhen and Mainland China-listed growth stocks outperformed, while South Korea, Singapore, and Thailand underperformed and Indonesia was closed for Independence Day.

The total value of Mainland China’s stock market (i.e., Shanghai and Shenzhen) exceeded RMB 100 trillion for the first time ever, as today’s volume was 190% of the 1-year average. Mainland and Hong Kong-listed brokerage stocks, not surprisingly, had a strong day. Mainland China experienced a very broad rally, led by growth stocks and small caps, as the STAR Board gained +2.14% versus the Shanghai, which gained +0.85%.

Hong Kong was slightly more mixed, though growth stocks and subsectors saw gains, including Alibaba, which gained +0.42%, JD.com, which gained +2.65%, and Trip.com, which gained +1.80%. However, Tencent fell -0.84% and Contemporary Amperex Technology (CATL) fell -0.43%.

Alibaba will announce its second quarter financial results after the close in Hong Kong on Friday, August 29^th. Friday earnings releases always make me a bit nervous, especially considering that the release will be during a three-day weekend in the US.

Hong Kong-listed value stocks had a rough day, as banks, oil, metals & mining, and REITs were all off.

A Mainland media headline announced that China’s bond market “collapsed”, which is a massive exaggeration, though local investors are clearly rebalancing an element of their savings from bonds to stocks, as China’s 10 Year Treasury price was RMB 99.32 versus the June 17^th high of RMB 100.33. The 10-year Treasury Yield is now 1.79% versus the year-to-date (YTD) low of 1.59% on January 6^th.

Over the weekend, The Economic Observer noted that the Mainland market might be entering a “structural revaluation process”, driven by the “dual recovery channel of “profit and valuation”, as consumption recovers, driving profits higher.

Today’s big news item post close was that Premier Li and the State Council held the Ninth Plenary Meeting, focused on how to “…consolidate and expand the momentum of economic recovery and improvement and strive to complete the annual economic and social development goals and tasks.” While acknowledging economic challenges, the State Council said it will “continuously stimulate consumption potential”, grow “service consumption and new consumption”, and “Take effective measures to consolidate the trend of stopping the decline and stabilizing the real estate market.” It is hard not to notice the emphasis on consumption, right?

Zhejiang province coincidentally announced the “Three-Year Action Plan to Accelerate the Development of the First Store Economy (2025-2027)” comprised of 50 store clusters with 2,000 stores of which 200 being “high-level”. Meanwhile, Hubei Province announced retail sales of consumer goods increased +6.2% year-over-year (YoY) YTD, led by sales of household appliances, which increased +72.2%, smart appliances, which increased +42.3%, and furniture, which increased +62.6%. The Chongqing Municipal Commission of Commerce announced the replacement of its auto subsidy with another RMB 300 million after buyers used up the initial RMB 300 million allocated.

Unitree won eleven medals in the World Humanoid Robot Games, followed by X-Humanoid’s ten medals.

Mainland media noted that a US trip to India to negotiate a trade deal has been cancelled.

Are you worried that you missed the China rally? US-listed China equity ETF flows are still at a net outflow of -845 million, YTD.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.18 versus 7.18 yesterday
• CNY per EUR 8.39 versus 8.41 yesterday
• Yield on 10-Year Government Bond 1.78% versus 1.75% yesterday
• Yield on 10-Year China Development Bank Bond 1.91% versus 1.86% yesterday
• Copper Price 0.08%
• Steel Price -0.31%