"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 19 October: China to hold press conference on Q3 2026 national economic performance
• 19 October: China to report September industrial production and capacity utilisation for firms above the designated size
• 19 October: China to report September energy production
• 19 October: China to report September investments on fixed assets
• 19 October: China to report September home sales and housing prices
• 19 October: China to report September total retail sales (TRS) of consumer goods

There will be several major data releases for China markets, including September retail sales, industrial production, and third-quarter GDP growth figures.

For retail sales, we expect year-on-year growth to recover to 0.8 per cent in September from 0.4 per cent in August. The calendar shift of the Mid-Autumn Festival may have provided some support to consumption, although overall momentum likely remained subdued.

High-frequency indicators were mixed: average metro passenger traffic across 18 cities shifted to a modest 0.2 per cent growth after declining by 2.1 per cent in August. Domestic flight growth slowed to 0.3 per cent from 3.8 per cent, while international flights increased by 0.6 per cent following a 3.1 per cent decline, potentially reflecting stronger outbound travel demand around the holidays.

Meanwhile, passenger vehicle sales remained a drag, with the year-on-year decline widening to 29 per cent from 19 per cent in August. Demand for durable goods, including home appliances, also faced headwinds from earlier policy-driven purchases and a high comparison base.

For fixed assets, we expect the year-to-date contraction in urban investment to reach 7.8 per cent in September and for the month alone, the decline may widen to 11.5 per cent from August’s 10.6 per cent. The contractions in both manufacturing and infrastructure investment are expected to narrow; in contrast, the downturn in real estate development is likely to deepen, with the year-on-year decline widening to 27 per cent from 25.4 per cent. Construction indicators suggest a marginal improvement in activity as the decline in construction steel transaction volumes narrowed slightly, while the decline in commercial housing sales by floor area widened to 10.8 per cent from 6.3 per cent. The property cycle has yet to reach a clear turning point.

For industrial output, resilient exports and favourable base effects are likely to lift growth to 5.4 per cent from 5.2 per cent in August. Traditional industries, however, remained relatively weak amid cost pressures. The manufacturing PMI rose seasonally to 50.1 in September from 49.8, returning slightly above the expansion threshold but remaining below its historical seasonal average. Sectoral divergence also persisted: the PMIs for high-tech manufacturing and equipment manufacturing stood at 52.5 and 51 respectively, compared with 48 for energy-intensive industries, highlighting stronger conditions in new-growth sectors.

Chinese equities traded lower across the board in the past week. As of Thursday, 15 October, the MSCI China Index was down 2.01 per cent while the Shanghai Composite fell by 2.79 per cent. The Shenzhen Component declined by a steeper 6.53 per cent and the ChiNext Index lost 8.55 per cent. Large-cap shares outperformed small- and mid-cap peers, while value generally outperformed growth.

Geopolitical concerns have recently weighed on AI valuations and trading activity. Investor positioning nevertheless remains elevated, suggesting that a more attractive entry point may emerge as crowdedness and momentum indicators move towards the lower end of historical ranges.

The outlook for AI hardware remains constructive. Persistent supply-demand imbalances could support pricing power and shipment growth across the Asian supply chain. Beyond hardware, investor attention has also expanded towards AI-generated animated short dramas. Tencent’s launch of WeChat Short Dramas intensifies competition with ByteDance’s Hongguo platform, while rapid user growth and overseas demand suggest that AI-generated content may become an increasingly important commercialisation channel.

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.

Read more about China’s market developments in our Q3 China Quarterly Newsletter. 

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