HK & China Equities Off Earlier Lows, Tech & Small Caps Lag

China & Hong Kong equities are mixed today. China equities are off earlier lows although concerns remain over regulatory tightening and economic recovery, AI stocks dropped after a report that the nation’s cyberspace regulator has asked for mandatory reviews of such models, while there are also concerns about the possibility of more severe US trade restrictions, particularly on the technology sector. These factors, combined with a lack of updates or headlines out of the Third Plenum have left investors cautious.

• Hong Kong equities are mixed with the HSTech Index is 0.65% lower while property is performing better with the Mainland Property Index is 0.60% higher, the HS Property Index is 0.20% higher while the HSI has pared already losses to trade 0.20% higher.
• China equity markets are also mixed today, small-cap indices are the worst performing with the CSI 1000 down 0.80%, the CSI 2000 down 1.50%, while the Beijing Stock Exchange Index is down 3.30% after a large rally on Wednesday while the large-cap CSI 300 is 0.12% higher.
• JD Vance, Donald Trump's running mate, has articulated a range of policy views, particularly critical of China. Vance has emphasized the need for the US to focus its military resources on China, arguing that the country poses a significant threat, especially regarding a potential invasion of Taiwan, which he believes would be catastrophic for the US economy due to Taiwan's crucial role in semiconductor manufacturing, per bbg.
• Xi Jinping is set to unveil his long-term economic vision, focusing on technology-driven "high-quality growth" and "Chinese-style modernization" at the conclusion of the Third Plenum. This meeting comes amid weak economic growth, a prolonged real estate crisis, and deflationary pressures. While specifics remain unclear, expected reforms include overhauling the consumption tax, reforming the hukou system, and boosting artificial intelligence. Measures to support the electric car and green energy sectors are also anticipated.
• Looking ahead, focus will again be on any headlines from the Third Plenum