Investors Take Profits Before Post-Close AI Announcement From State Council

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Asian equities were universally lower yesterday on heavy volumes, partially driven by MSCI’s Semi-Annual Index Review.

Index fund and exchange-traded fund (ETF) managers globally traded portfolios at the market close to reflect refreshed indices. The influence of passive investing was evident as the Hong Kong-listed Meituan (1357 HK) gained 8.06% on a volume surge of 307% compared to the prior day (415,000 shares versus 101,000 yesterday, with a 93,000 average over the last year) due to its addition to both the MSCI China and MSCI Emerging Market indexes.

Hong Kong and Mainland China experienced profit-taking, despite the Wall Street Journal reporting that Li Chenggang, He Lifeng’s chief aide, would visit Washington, DC this week to meet US Trade Representative Jamieson Greer and US Treasury Department officials. President Trump stated that he would visit China this year or early next year, indicating a trade deal may be forthcoming.

The announcement follows President Trump’s decision to allow 600,00 Chinese students and their parents’ wallets into US colleges and universities. Is this an admission that the US doesn’t manufacture anything China needs besides agricultural products and Boeing airplanes? If that’s the case, wouldn’t allowing Chinese companies to manufacture in the US be the next step? Why not have China’s firms create joint ventures like GM had to do with SAIC in China? That would make sense to me.

Hong Kong and Mainland China sold off in the afternoon as profit-taking dominated, affecting leading growth stocks and subsectors. Mainland China stocks did not decline as much as Hong Kong-listed stocks, although recent Mainland outperformers, including semiconductor stocks like Cambricon (-4.04%), Hygon (-6.13%), SMIC (-2.17%), and Foxconn (-5.25%), fell.

Hong Kong was broadly negative except for auto stocks, as BYD was up 1.55% and CATL was up 0.39%. Internet, growth stocks, banks, insurance, pharmaceuticals, and REITs declined sharply. Mainland investors bought the dip in Hong Kong via Southbound Stock Connect, making large purchases of the Hong Kong Tracker ETFs and Alibaba. I am keeping this section short to focus on post-close developments.

After the close, the State Council released its “Opinions on Deepening the Implementation of Artificial Intelligence Plus (AI+).” The extensive document outlines six key actions for integrating artificial intelligence (AI) across industries, emphasizing science and technology. The guidelines call for accelerating scientific discovery, driving innovation in research and development, improving efficiency, and innovating social science research methods. The document details eight fundamental support capabilities, including enhancing model foundation capacity, improving data supply innovation, coordinating smart computing power, fostering open-source ecosystems, building talent teams, strengthening regulatory guarantees, and improving security.

The State Council set goalposts for achieving deep integration of AI in six key areas, including accelerating scientific research paradigms, promoting infrastructure upgrades, and developing new AI industries. Another highlight is the expansion of AI-driven scenarios in service consumption, from E-Commerce and entertainment to automotive, computer, and mobile phone sectors. The document stresses that the fruits of AI should benefit mankind globally and advocates for a governance system coordinated through the United Nations. The initiative will require stronger coordination of intelligent computing power, support for AI chip innovation, and enabling software.

This development represents a powerful catalyst for growth stocks and related subsectors. I mentioned missing the significance of the DeepSeek model upgrade announced after the close; this policy release feels equally impactful. Although trading desks did not mention it in post-market notes since markets were closed, the National Development and Reform Commission (NDRC) quickly held a Q&A with reporters to reiterate commitment to the AI+ plan.

Separately, Premier Li and the State Council convened a meeting on “accelerating the innovation and development of service trade and actively cultivating new momentum for foreign trade development.” The focus was on promoting high-quality development of service trade to support China’s goal of becoming a powerful trading nation and building a higher-level open economic system.

Premier Li stated, “We should actively expand the import of high-quality services and promote the high-quality development of China’s service industry with high-level opening up.” Efforts will include promoting institutional opening of service trade, aligning with international high standards, reducing the negative list for cross-border service trade, and relaxing market access in the service field.

The 14th Session of the Standing Committee of the National People’s Congress (NPC) will be held in Beijing from September 8th to 12th.

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