Tech Diffusion
Chart of the Week:
Uncertainty Rises Ahead of Xi–Trump Meeting; Earnings and Valuation Drive U.S. Stocks
China tightened export controls on rare earth products, while President Trump retaliated by imposing additional tariffs on Chinese goods and considering new curbs on U.S. software exports to China. Both sides appear to be raising their bargaining leverage ahead of the Xi–Trump meeting. Although rising domestic inflation pressures Trump, the U.S.–China standoff is expected to remain tense but contained.
Market Recap 1:
Earnings and Outlook in Focus as U.S.–China Standoff Keeps Equities Volatile
Budget negotiations between Democrats and Republicans remain stalled, while markets await September CPI data to gauge the Fed’s policy direction later this month. A series of loan defaults among U.S. regional banks has heightened concerns over private credit risks. Although large banks maintain solid capital and strong risk buffers, high leverage among non-bank financials and weaker SMEs could pose systemic risk.
Market Recap 2:
U.S. Govt Shutdown and Credit Stress Spur Safe-Haven Demand; Treasury Yields Ease, Gold Slumps
U.S. subprime auto lender Tricolor and parts maker FirstBrands recently filed for bankruptcy protection, while Jefferies, Zions Bank, and Western Alliance disclosed credit losses, triggering market panic. Fed Chair Powell noted signs of tightening liquidity and a weakening labor market, suggesting the Fed may consider halting balance sheet reduction.
What’s Trending:
China GDP Growth Slows; Consumption Drives Expansion, Easing Policies Support A/H Shares
China’s 3Q real GDP grew 4.8% YoY, down 0.4 ppts from 2Q and largely in line with expectations, bringing 9M GDP growth to 5.2%. Domestic consumption contributed nearly 60% of GDP growth, while net exports and capital investment made up roughly the remaining half. Last year in 3Q, net exports accounted for about 45% of GDP growth, highlighting a sharp drop this year. With net exports now under 5% of GDP, China’s economy remains heavily reliant on domestic circulation.
In Focus 1:
Fed Rate Cuts and Capital Inflows Lift Asian Tech; DRAM Shortage Fuels Korean Rally
The Fed has resumed its rate-cut cycle, pushing U.S. Treasury yields lower and weakening the dollar, leading to capital inflows into emerging markets. Supported by ongoing strength in AI and tech stocks, Asian tech markets have surged YTD (as of Oct 21): Taiwan +23.5%, Hong Kong tech +30.1%, and Korea +61.4%. Despite the sharp gains, Korean equities remain attractively valued versus regional and U.S. peers, given a low base and strong earnings momentum. Kospi’s 2026E EPS growth stands at 26.3%, with compelling valuations across key sectors such as industrials, electronics, and financials.
In Focus 2:
U.S.–Korea Tariff Agreement and Lower Political Risk Support Corporate Reform and Defense Themes
Foreign investors estimate that new memory chip capacity will take four to six quarters to catch up with demand, keeping supply tight and prompting clients to continue early inventory buildup, sustaining price momentum. Beyond the semiconductor “supercycle,” Korea’s new president, Lee Jae-myung, has enacted a corporate governance reform bill requiring directors to act in shareholders’ best interests, limiting major shareholders’ voting rights in appointing audit committee members, mandating hybrid virtual shareholder meetings for large listed firms, and increasing the share of independent directors on boards.
