To The Moon

The Hong Kong market continued to tumble this week, with the $HSI(HSI)$ dropping for four consecutive trading days, down 3.13% for the week.

U.S. Political Gridlock Triggers Gold Rush

The ongoing U.S. government shutdown crisis remains unresolved as lawmakers fail to agree on a budget. The uncertainty drove international gold prices above $4,000 per ounce, hitting a record high and boosting metal and mining stocks.

However, the AI sector lost momentum. After a strong rally, $BABA-W(09988)$ plunged more than 10% this week, dragging down $TENCENT(00700)$ $KUAISHOU-W(01024)$ and other major internet names.

Semiconductors Reverse After Record Highs

The semiconductor sector also suffered a sharp reversal. $SMIC(00981)$ and $HUA HONG SEMI(01347)$ both reached record highs earlier in the week after Goldman Sachs raised their target prices, citing the growth of China’s AI ecosystem.

But concerns about valuations quickly took over. With SMIC’s P/E ratio exceeding 300 times, brokers cut its margin financing ratio from 70% to zero, sparking a wave of selling. SMIC plunged over 14% this week, dragging down the entire chip sector and denting investor confidence.

Adding to the pressure, China’s Ministry of Commerce and Customs Administration announced new export controls on lithium batteries and graphite anode materials, leading to a steep selloff in the battery sector.

Biotech Stocks Hit by U.S. Restrictions

The biotech sector came under heavy pressure after the U.S. Senate advanced a proposal to ban certain Chinese biotech companies from receiving federal funding. The move triggered a sharp decline in innovation drugmakers.

By Friday, the ChiNext Index slumped more than 4.5%, while the Hang Seng Index lost 1.7%.

Sector Performance and Southbound Flows

Among sectors, healthcare and information technology led the decline this week.

Because of the Golden Week holiday in mainland China, Stock Connect was open for only two trading days. Southbound funds inflows totaled just HK$2.64 billion, a sign of weak participation and light liquidity.

Major Events in Hong Kong Stocks This Week

1.Goldman Sachs raised target prices for $SMIC(00981)$ and $HUA HONG SEMI(01347)$ , citing opportunities from China’s expanding AI ecosystem.

2.The U.S. government shutdown crisis deepened, sending gold prices above $4,000 for the first time ever.

3.Reports surfaced that $Oracle(ORCL)$ ’s $NVIDIA(NVDA)$ -powered servers deliver only 14% profit margins, far below investor expectations.

4.HSBC proposed to privatize Hang Seng Bank at a 33% premium.

5. $Golden Leaf International Group(08549)$ became the most oversubscribed IPO in Hong Kong history—over 9,030 times—and surged 900% in grey-market trading.

6.China announced export controls on rare earth equipment, high-end lithium batteries, graphite anodes, and related materials.

7.Due to its extremely high valuation, $SMIC(00981)$ ’s margin financing ratio was cut to zero by brokers.

Three Stocks Worth Attention Among Top Trading HK Stocks This Week

Top 2: $SMIC(00981)$ . Goldman Sachs raised its target price from HK$95 to HK$117, expecting long-term benefits from domestic AI development. Shares hit an all-time high before collapsing after the financing restriction, ending the week deep in the red.

Top 3: $ZIJIN GOLD INTL(02259)$ . As investors sought safety amid the U.S. shutdown, gold surged past $4,000, driving Zijin Mining to record highs.

Top 9: $GANFENGLITHIUM(01772)$ . China’s Ministry of Commerce announced export controls on high-end lithium batteries and key production equipment, effective November 8. The move sparked fears about the industry’s outlook, and Ganfeng’s stock plunged on Friday.

Next Week's Hong Kong Stock Market Events

1. Next Monday, China will release September export data.

2. Next Tuesday: China will announce M2, social financing, and new loan data.

3. Next Wednesday: China will lunch CPI and PPI reports, markets will watch whether deflationary pressure eases under new “anti-involution” policies.

4. Next Wednesday (U.S.): The September CPI report (expected 3.1%, vs. 2.9% previously).

Throughout the week, the U.S. earnings season begins, with results from major banks, $ASML Holding NV(ASML)$ and $Taiwan Semiconductor Manufacturing(TSM)$ likely to set the tone for markets worldwide.