China Stocks Rally on Industrial Profit Surge; Nasdaq Jumps 1.6%, Yuan Nears 3-Year High

Market Overview

Markets on Thursday were driven by two major themes: improving corporate profitability in China and a technology-led rally on Wall Street.

First, profits at Chinas industrial enterprises above designated size rose 17.6% year over year from January through July. The integrated circuit industry stood out, with profits surging 18.5-fold from a year earlier, while profits in the broader electronics industry more than doubled, rising 110%. Mainland Chinese equities rallied on stronger trading volume, with the Shanghai Composite closing at 3,956.57, up 1.13%, the Shenzhen Component Index gaining 1.50%, and the ChiNext Index advancing 1.71%.

On the technology front, Zhipu AIs latest model is reportedly running on more than 100,000 domestically produced AI chips, sending related stocks up more than 10% intraday. Meanwhile, SoftBank is reportedly in talks to acquire roughly a 60% stake in humanoid robotics company 1X, valuing the company at approximately $6 billion.

Second, U.S. equities advanced as technology stocks led the market higher. The Nasdaq Composite climbed 1.57%, the S&P 500 gained 0.72%, and the Dow Jones Industrial Average rose 0.20%. The 10-year U.S. Treasury yield moved higher to 4.67%.

Third, the Bank of Korea raised its policy rate by 25 basis points to 3.00%, marking its second consecutive rate hike. Meanwhile, three Federal Reserve officials warned that monetary policy may still be too accommodative. In foreign exchange markets, the offshore Chinese yuan strengthened past 6.72 per U.S. dollar intraday, approaching its strongest level in nearly three years.

In commodities, WTI crude oil rose approximately 1.6% to around $83.50 per barrel, while gold held steady near $4,600 per ounce.

Key Themes to WatchJackson Hole and Fed Policy Guidance

The Federal Reserve Chair is scheduled to speak at the Jackson Hole Economic Symposium on Friday evening Beijing time. The speech comes after three regional Fed presidents recently warned that current interest rates may still be too accommodative.

With inflation remaining sticky and expectations for a September rate cut continuing to fluctuate, investors will be watching closely for any signals on the future path of monetary policy. The speech is likely to be one of the most important catalysts for cross-asset pricing this week.

China‘s Industrial Profit Recovery and Domestic AI Computing

Profits at China’s industrial enterprises rose 17.6% year over year from January through July, while profits in the integrated circuit industry surged 18.5-fold. Combined with Zhipu AI‘s latest model running on domestically produced chips, the market narrative surrounding both improving profitability and China’s domestic AI computing capacity is gaining momentum.

The next key question is whether the recovery in semiconductor and electronics-sector profits can broaden into stronger downstream demand. Investors will also be watching the pace at which domestic AI computing capacity scales up and translates into real-world AI applications.

Key Events and Developments to Monitor

• Jackson Hole Economic Symposium: Watch the Fed Chair‘s Friday evening speech for guidance on the interest-rate outlook and the pace of future policy adjustments.

• China Industrial Profits: Industrial profits rose 17.6% year over year from January through July, while integrated circuit profits surged 18.5-fold. The focus now shifts to whether the earnings recovery can broaden into midstream and downstream demand.

• Zhipu GLM-5.3: Model weights are set to be open-sourced today. Watch for further expansion in domestic AI computing capacity and progress in commercial AI applications.

• Bank of Korea: Following the rate hike to 3.00%, investors will be monitoring Asia-Pacific liquidity conditions and the central bank’s balancing act between inflation and exchange-rate stability.

• Oil and the Strait of Hormuz: Watch for developments in shipping activity as geopolitical risk premiums ease and markets refocus on underlying supply-and-demand fundamentals.

• Chinese Yuan: The offshore yuan strengthened beyond 6.72 per U.S. dollar, approaching a three-year high. Further foreign capital inflows could provide additional support for Asia-Pacific equities.