The US and China will hold talks in Madrid, Spain from September 14 to 17, where they will discuss US unilateral tariff measures, abuse of import controls, and economic and trade issues such as TikTok. Preliminary reports may emerge tomorrow morning.
In Stockholm, the US and China reached a vague consensus to extend the provisional tariff period by 90 days. On August 12, both parties confirmed the 90-day extension.
After confirming the talks on September 14, the US began to issue sanctions. The US Department of Commerce’s Bureau of Industry and Security announced that 23 Chinese entities would be added to the Entity List due to actions that “contradict US national security or foreign policy interests.” Among them, 13 are related to semiconductor and integrated circuit institutions, and 3 are from the biotechnology and life sciences sector.
We are accustomed to such arbitrary sanctions. The Department of Commerce decided to initiate an anti-dumping investigation on imported analog chips originating from the US starting September 13, 2025. The investigation period for dumping is set from January 1, 2024, to December 31, 2024, while the period for industry damage investigation is from January 1, 2022, to December 31, 2024.
Additionally, as mentioned in our article “Old Deng and Young Deng Adjust Assets, One Sector in Hong Kong Stands Out,” the price increase of memory chips suggests that the chip sector will be quite lively next week.
Our current holdings in the A-share market mainly focus on broad-based indices (ChiNext, A500, CSI 300 Enhanced), batteries, consumer goods, medical devices, and dividends. We will continue to monitor trading volume in the A-share market next week. This week, the peak trading volume was only around 2.5 trillion, which is still insufficient. We will see if next week can see an increase in volume; if not, considering that the market has already factored in some expectations of a Federal Reserve rate cut, we will remain cautious. Currently, our total position is over 70%.
Let’s take a look at some relevant information.
1. CPO
The news regarding CPO can also be tracked, as it relates to our ChiNext ETF. For a detailed analysis of CPO, see “Should We Reduce Holdings as ChiNext Breaks 3000 Points?” We will only track some information.
At the 26th China International Optoelectronic Exposition, companies such as NewEase, Guangxun Technology, Cambridge Technology, Shijia Photonics, Changfei Fiber, Hengtong Optics, Fenghuo Communication, Lingyun Optics, Canqin Technology, Sanhuan Group, Ruijie Networks, Tefa Information, Zhaolong Interconnect, and Jingwang Electronics showcased their products. At this expo, several manufacturers displayed 1.6T samples, and it is reported that some leading manufacturers have already begun shipping their 1.6T products. This highlights the increasing competition and expansion issues in the CPO industry mentioned in the previous article.
2. Baijiu
According to data from “Today’s Liquor Prices,” on September 14, the wholesale reference price for 25-year Feitian Moutai (53 degrees/500ml) is reported at 1770 yuan per bottle, down 10 yuan from the previous day, setting a new low since its listing; this is a 20.27% drop from the 2220 yuan per bottle price when the platform launched. The original box is reported at 1790 yuan per bottle, unchanged from the previous day, but this price is also a new low since its listing, down over 20% from the 2255 yuan per bottle price at launch.
The performance of baijiu has been decent recently. We reduced some positions earlier, hoping for a significant adjustment.
Our holdings in Hong Kong stocks mainly include Hang Seng Internet/Hang Seng Technology, non-bank financials, Hong Kong dividends, and a public fund.
The Hang Seng Internet index rose 8% this week, providing good returns for those who held on. The China Concept Internet ETF recently broke the high from March 7, and the Hang Seng Internet ETF also surpassed the March 7 high during Friday’s trading.
We bought back into the Hang Seng Internet index in mid-July rather than the Hang Seng Technology index, mainly because we felt that the components of the Hang Seng Technology index are too mixed, with too high a proportion of new energy vehicles and chips, which has inflated the index’s valuation. The new energy vehicle sector has been too competitive recently. The performance of the Hang Seng Internet index has indeed outperformed the Hang Seng Technology index. However, if this trend continues, the Hang Seng Technology index should also be able to break the new high from March 7.
The performance of non-bank financials in Hong Kong has been average recently, but it has risen 47% this year. Although we did not allocate from the beginning of the year, we have captured most of the gains and are quite satisfied, occasionally making some trades with our base position.
As for Hong Kong dividends, with a decent dividend yield (currently around 5.8%), we will continue to invest regularly, treating it as a base position in our overall allocation, focusing on generating income.
This week, net inflows from southbound funds into Hong Kong stocks reached 60.82 billion HKD, compared to 33.06 billion HKD in net inflows last week. On the individual stock level, the most net purchases were made for Alibaba, SMIC, Horizon Robotics, and Innovent Biologics, while the most sold were Xiaomi, Meituan, and Pop Mart.
Next, let’s look at the foreign capital flow situation. According to EPFR data, as of Wednesday:
Active foreign capital has seen net inflows into A-shares for the fourth consecutive week, but the scale continues to shrink to 1.521 million USD (down from 1.764 million USD last week). In the past four weeks, the cumulative net inflow into A-shares is 144 million USD, but this is still less than the 370 million USD net inflow seen in the first two weeks of October last year. After a five-week hiatus, Hong Kong stocks and ADRs saw a net inflow of 64.02 million USD (compared to a net outflow of 110 million USD last week).
Passive foreign capital has turned to net outflows, with 570 million USD flowing out of Hong Kong stocks and ADRs (compared to a net inflow of 900 million USD last week) and 760 million USD flowing out of A-shares (compared to a net inflow of 330 million USD last week).
Next week will be quite a crazy week, as the Federal Reserve, the Bank of Japan, and the Bank of Canada will announce their interest rate decisions. The market generally expects the Federal Reserve to cut rates by at least 25 basis points next week, and the US retail sales data to be released on Tuesday will be the last important reference.
Since the market has expected the Federal Reserve’s rate cut in September to be a done deal, the performance of the US stock market has been lackluster. If the rate cut actually happens next week, will the US market weaken further?
Next week, Trump will also lead a delegation to visit the UK, where Jensen Huang of NVIDIA and Sam Altman of OpenAI will accompany him. It is reported that the UK and the US will sign a groundbreaking technology agreement next week, including AI and quantum computing, and lobbying for “blockchain” in the cryptocurrency sector should also be included. We will see if this can lead to better performance for the US stock market, otherwise, what will happen to the US market?
Oracle fell another 5% on Friday. Currently, we refer to AI in the US stock market as being in a “intent order bull market.” Whether these orders can be sustained remains to be seen.
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