*On April 1, we officially launched Baiguan Pro, our professional-tier subscription designed for investors seeking deeper, more specific coverage of Chinese equities. Baiguan Pro delivers the Baiguan team’s monthly view on overall Chinese equity assets, our focus on themes and sectors, richer company-level analysis, and data follow-ups on the ideas and companies previously presented in the newsletter.*
Before today’s post — applications are still open for the 2026 Autumn Baiguan China Tour:
Robotics & AI Executive Tour in Beijing from Oct 19-23
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Market commentary: the September tape
September was the month the rest of the world bounced, and China did not. Nearly every major market recovered some ground this month, but Chinese assets kept sliding. CSI 300 is down ~6% over the month and ~12% over three months.
The CSI 300 index level hides the market breadth problem. The share of CSI 300 constituents trading above their 200-day moving average peaked in October 2024, following the unprecedented “9/24 policy stimulus”, and has fallen continuously ever since — including through this year, when the cap-weighted index was making new highs.
This visually illustrates the “K-shaped” divergence: a handful of mega-caps, mostly semiconductor and tech names boosted by AI demand, have been holding the index up, while most domestic-oriented stocks haven't crossed their 200-day moving average since.
We flagged that divergence in our Charts of the Week series earlier this summer and in our last monthly view: consumer names looked cheap on almost every screen, but we didn't think the bottom was in. That call has played out since July.
Our proprietary data says the same thing from the ground up. In our August update, we saw luxury keep declining, brands under pressure, and the brands that held up best (Luckin, Guming, for instance) did so by funding their own discounts.
One more update on last month. We named Chinese open-source models capturing global token share as a possible re-rating catalyst. It looks weaker today. In our view, that narrative never built real momentum in the capital markets: the listed LLM names (Z.AI, Minimax) in Hong Kong have been declining since July but still are not cheap on price-to-sales.
Recently, a new narrative is taking shape around whether open-weight models are losing the momentum needed to catch up. As frontier labs increasingly hide their chain-of-thought, distillation becomes harder, and the pace of closing the gap becomes more difficult to maintain. While we don’t have strong evidence yet, this could be a potential narrative shift to watch for, as it may cast a more pessimistic light on Hong Kong-listed Chinese tech names whose valuations require growing global market share to justify.
Since we launched Baiguan Pro, we’ve built several baskets to track other themes that could come under the spotlight beyond AI and semiconductors. For instance, our two latest:
The power grid trade, where State Grid’s RMB 4 trillion 2026–2030 capex makes volume structurally supported
and the shift from buying things to buying experiences, where services retail has been outgrowing goods.
We will continue diving into themes and sectors to help readers gain a deeper understanding of how to express thematic trends in the Chinese equities market.
Our Views This Month
The bottom line: we are lowering both A-shares and Hong Kong this month.