To The Moon

I. Performance of Global Equity Indices (in US Dollar)

Source: Bloomberg, Tiger Brokers

Key Highlights

◼ Last week, U.S. equities came under short-term pressure due to multiple disruptions, with the S&P 500 and Nasdaq posting notable pullbacks. However, the VIX only rose to around 20, while both U.S. Treasuries and gold strengthened, suggesting the absence of systemic risk. The latest tariff escalation appears to be more of a pre-APEC negotiation maneuver, with limited extreme risk. AI and rare earths have emerged as key battlegrounds, and semiconductor volatility may intensify. Despite weak macro sentiment, the U.S. AI value chain continues to demonstrate strong earnings visibility, with upstream hardware and cloud infrastructure reinforcing the long-term investment case. Overall, the U.S. market is undergoing a “valuation rebalancing” phase—short-term volatility is likely, but the structural drivers remain intact.

◼ In Greater China, the market correction extended last week, with the Hang Seng Index and Hang Seng Tech Index falling by 3.1% and 5.5%, respectively. Under our base case, we view the current U.S.-China tensions as a manageable game of negotiation, though key differences persist. Short-term volatility may continue, but systemic risk remains limited. On the policy front, the government’s commitment to “more proactive and sustained fiscal support” is being implemented, positioning domestic demand sectors to potentially take the lead. The introduction of new rare earth regulations and the acceleration of AI-related investments underscore China’s twin engines of industrial self-reliance and technological advancement. Manufacturing, computing power, and strategic resource chains continue to anchor long-term resilience.

◼ This week, investors should focus on whether key U.S. macro data will be released on schedule, as well as TSMC’s latest earnings report.

II. Key Market Themes

U.S. Equities: Short-Term Pressure Without Systemic Risk, AI Earnings Remain the Core Support

Over the past week, U.S. markets experienced significant volatility amid multiple disruptions. Renewed U.S.-China trade tensions, elevated CTA positioning, the corporate buyback blackout period, and a partial government shutdown triggered by the budget deadlock collectively fueled concentrated selling pressure. Both the S&P 500 and Nasdaq 100 saw a sharp, sentiment-driven decline last Friday. However, structurally, this correction appears to be a temporary adjustment in overvalued sectors rather than the onset of systemic risk. The VIX only rose modestly to around 20, while U.S. Treasuries and gold strengthened simultaneously—indicating that risk aversion remains orderly and market liquidity is intact.

Source: Bloomberg, Tiger Brokers

On the tariff front, the latest escalation primarily serves as a prelude to negotiations ahead of the late-October APEC summit and the expiration of the “90-day tariff pause” in November. Compared with the April round, the current phase of talks is notably milder, with market expectations already adjusted in advance—limiting the likelihood of extreme outcomes. Despite frequent tactical moves by both sides, the real points of contention are focused on two key arenas: rare earths and the AI value chain. As this tug-of-war continues, the semiconductor sector—previously driven by high expectations for AI and consumer electronics—may face heightened volatility.

Nevertheless, the earnings outlook for the U.S. AI industry remains solid. Capital collaboration between upstream hardware players and cloud infrastructure providers continues to deepen, shifting the industry dynamic from competition toward synergy and reinforcing the sustainability of the AGI era. While macro sentiment may cause short-term disturbances, as long as corporate earnings confirm ongoing profit expansion and trade negotiations avoid major setbacks, AI will remain the dominant investment theme for the next 5–10 years. The long-term upward trend remains intact.

Overall, U.S. equities may stay under near-term pressure, with roughly 10% valuation compression risk in overvalued segments. Yet from both macro and liquidity perspectives, systemic risk has not materialized. As the market enters a “valuation rebalancing” phase, earnings visibility and industrial logic will once again become the key drivers. In our view, the current pullback represents a healthy, temporary correction—rather than a structural trend reversal.

Greater China: Domestic Stimulus Drives Sector Rotation, Strategic Focus Shifts Toward Self-Sufficiency

Compared with the U.S. market, the correction in Greater China began earlier and was more pronounced. The Hang Seng Index and Hang Seng Tech Index fell by 3.1% and 5.5%, respectively, last week—and that’s before factoring in the additional downside impact from Friday’s sudden tariff announcement. Similarly, we view this round of U.S.-China trade tensions as a manageable negotiation rather than a full-scale decoupling. Both sides appear inclined to “fight without breaking,” meaning tactical escalation in the short term is likely to give way to a return to a narrow agreement framework. This implies continued short-term volatility but limited downside at the index level, with market focus gradually shifting from systemic risk toward structural allocation opportunities in the coming weeks.

On the policy front, the stance of “a more proactive and sustained fiscal approach” is taking concrete form. While external-demand-driven sectors may face pressure under tariff uncertainty, domestically oriented sectors are poised to take the lead in the next stage. As stimulus measures begin to take effect over the coming 1–2 months, we expect a rotation in market leadership—from sectors benefiting from external demand to those driven by domestic consumption, infrastructure, and policy support.

From an industrial perspective, China’s strategic confidence is increasingly evident in key areas. The rare earth export regulation announced in early October marks a proactive step toward rebalancing the global supply chain. This strategy—leveraging rare earths to counterbalance technological dependencies—will strengthen China’s pricing power and institutional influence in critical materials. Meanwhile, investment in AI continues to surge, with domestically developed large models and next-generation chip equipment making steady progress, highlighting the deep integration between manufacturing and computing power. Together, rare earths, equipment, and AI form a resilient industrial backbone that underpins China’s long-term strategy in navigating external competition.

In summary, there is no need for excessive concern over the recent escalation in trade tensions—nor should investors become complacent. Meaningful divergences between the U.S. and China remain, and maintaining a balanced stance of “neither fear nor greed” may be the most prudent approach. The core logic of the Greater China market is shifting from pricing in external risks to focusing on domestic recovery and industrial resilience. In the near term, we recommend concentrating on policy-beneficiary sectors with stable cash flow; in the medium to long term, the focus should remain on indigenous technology, resource security, and AI applications—the three pillars of sustainable growth.

Source: Bloomberg, Tiger Brokers

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