"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 3 November: China to report October Consumer Price Index (CPI)
• 3 November: China to report October Producer Price Index (PPI)
• 3 November: RatingDog to report October Manufacturing Purchasing Managers’ Index (PMI)
• 5 November: RatingDog to report October Services PMI
• 7 November: China to report October level of foreign exchange reserves
• 7 November: China to report October external trade data

As November approaches, market attention turns to inflation data for Mainland China.

For consumer prices, we expect October CPI to remain under pressure given mixed signals from high-frequency indicators. Pork prices continue to dominate the narrative, with wholesale prices declining by 26.9 per cent year-on-year. Fruit prices recovered mildly while vegetable prices held relatively firm for the month.

Concerning producer prices, we anticipate October PPI to turn negative on a month-on-month basis at -0.2 per cent (previous: 0.0 per cent), while the year-on-year change is expected at -2.3 per cent. The price transmission effect from anti-involution measures has yet to fully materialize, leaving some industrial prices prone to volatility. Current policy efforts focus on three areas: curbing disorderly corporate competition, managing operation capacity in key sectors, and standardizing local investment practices. The pace of PPI recovery will depend on demand-side absorption capacity. While recent interventions seek to boost confidence, meaningful improvement in end-user demand and the narrowing of supply-demand gaps still require observation. In the near term, emphasis remains on controlling incremental supply and optimizing existing inventory as the central government’s anti-involution stance helps to stabilise expectations.

Chinese stocks gained over the past week buoyed by optimism on improving US-China trade ties. As of Thursday, 30 October, the MSCI China Index rose 0.55 per cent week-on-week. The Shanghai Composite gained 0.93 per cent, the Shenzhen Component advanced 1.83 per cent, and the ChiNext Index climbed 2.88 per cent. Mid-cap stocks slightly outperformed both small- and large-cap peers, while growth stocks maintained a marginal edge over value counterparts.

The recommendations under China’s “15th Five-Year Plan” underscored priorities such as building a modern industrial system, fostering technological innovation and new productive forces. Policy expectations around domestic substitution to reduce reliance on foreign supplies, the expansion of domestic demand, and national security have risen, potentially acting as catalysts for stock indices to shift away from consolidation to an upward trajectory. Looking ahead, strategic emerging industries under the new economic plan are expected to focus on sectors undergoing significant structural changes, including the AI industry chain and innovative pharmaceuticals. Thematic opportunities highlighted in the communiqué include quantum technology, hydrogen energy, nuclear fusion, brain-computer interfaces, and embodied intelligence.

This piece has been co-produced with Yiyi Capital Limited in Hong Kong, a China specialist and a part of a global financial services group.

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