China markets reopen as AI optimism clashes with weak spending

China’s markets reopened after the Golden Week holiday, with investors weighing whether enthusiasm for artificial intelligence can offset signs of weakening consumer spending.

Holiday data showed that households were tightening their belts, opting for cheaper road trips instead of flights, while box office revenues fell short of expectations.

The spending pullback comes as demand for AI talent surges, propelling global tech stocks to record highs even as China’s markets briefly paused and companies deepened ties with AI firms like OpenAI.

Chinese traders initiate a search for hints on policy changes in the market 

During the Chinese market closure, a measure of major mainland stocks listed in Hong Kong dropped by 0.3%, with the offshore yuan declining slightly.

Regarding the situation, traders are looking for clues on policy changes ahead of the Communist Party’s meeting, scheduled to take place from October 20 to 23. In this meeting, officials will discuss plans to be implemented over the next five years.

Another factor that sparks hope for a solution is a potential meeting between US President Donald Trump and the President of the People’s Republic of China, Xi Jinping. The meeting is anticipated to take place at the November APEC summit in South Korea. Analysts project that this could have an impact if tariff talks start again.

Xin-Yao Ng, an Investment Director and Fund Manager at Aberdeen Investments, commented on the topic of discussion, stating that he was not pleased with the early data for tourism during the holidays.

He predicted that the data would remain about the same or decrease unless new and more accurate information is released later. The fund manager made these remarks regarding the opening of the mainland stock market. 

In the meantime, reliable sources have highlighted that the CSI 300 Index has increased for five consecutive months through September, marking its prolonged success since 2017.

The heightened excitement over chip stocks has mainly triggered this increase after DeepSeek introduced a new model and Huawei Technologies Co. announced its intention to double production of its top AI chips. 

Following this, Ian Samson, a Multi Asset Portfolio Manager at Fidelity International in Singapore, pointed out that at one point, if fast-growing Chinese firms, particularly in the internet sector, can achieve their earnings expectations, investors view them as very appealing compared to other firms globally.

Weak consumer spending in China raises concerns in the market 

Spending during Golden Week suggested that consumers are cautious with their money. According to sources, people continued to spend on travel and experiences, but box office and airline demand were not as robust as anticipated.

In addition, shares of movie stocks, such as Maoyan Entertainment and Damai Entertainment Holdings Ltd., declined sharply in Hong Kong after Citigroup highlighted low ticket sales. 

Travellers, on the other hand, began moving away from air and rail to road trips, and the number of highway passengers in private cars rose 6% compared to last year during Golden Week, according to Morgan Stanley.

This was after data from the Ministry of Transport showed that total passenger traffic was approximately 7% higher over the first seven days than it was last year. This percentage reflected a decrease from the 8% increase observed during May’s five-day Labour Day holiday.

Regarding the situation, analysts at Julius Baer stated that the Golden Week results indicate that consumer spending in China remains weak, and this will likely add to the pressure on investors to sell off their shares in consumer good-related stocks

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