Market Dissection
In this kind of market environment, Hong Kong stocks still opened sharply higher by over 1%, which was clearly asking to be sold off. The opening was the high point, followed by a steady decline, closing down 0.90%.
Israel is about to face elections, and Netanyahu will confront a difficult re-election battle on October 27. To secure re-election, the war cannot stop, otherwise he loses his value and can only maintain a hardline stance. He has stated he seeks to restart large-scale military operations against Iran, with the military having prepared multi-day bombing plans, and the intensity of strikes could exceed the joint US-Israel action in February this year.
Trump is also about to face midterm elections, with his approval rating having fallen to a low of 31%. He and Netanyahu are like two companions in misfortune, neither can afford to lose, as losing would spell major trouble for both. The two can only huddle together for warmth. On Sunday, Trump publicly endorsed Netanyahu on Truth Social, warning that "if Israel elects the wrong leader, meaning anyone other than Bibi (Netanyahu)," the US would have to face Iran alone. For now, they can only maintain their tough rhetoric for the elections, and logically they will not take action. Overall US stock performance has not been bad either.
But domestic stock markets are hard to describe. What weighed on sentiment today was CATL (ASX: 03750), which plunged over 11%. Looking at earnings first, the company's third-quarter net profit attributable to shareholders was 21.246 billion yuan, with year-on-year growth slowing to 14.54%, down 5.77 percentage points quarter-on-quarter. Single-quarter gross margin fell to 20.69%, down 2.46 percentage points quarter-on-quarter. The company stated that the phased pressure on profitability was mainly due to the combined short-term effects of consumption tax (resumption) collection and export tax rebate changes, inventory impairment, and product mix fluctuations, and that long-term profitability has not fundamentally changed. However, the fourth quarter is traditionally a peak production season, and initial production scheduling fell short of previously optimistic market estimates.
As for reasons for the decline, lower earnings are only one factor. Objectively, tax expenses and overseas expansion costs squeezing various aspects are also reasons, but in the broader context of the auto industry, this is inevitable. Look at the entire auto sector — which company is doing well? Nobody is making much money, and only CATL has the highest profit, which is clearly unsustainable. De-CATLization is a major trend. Additionally, its energy storage business did not meet expectations. Originally hoped to take over growth, but performance was not strong enough to form a hedge. Only when the broader environment improves and solid-state batteries achieve a breakthrough will there be opportunities.
Furthermore, Aito ran into trouble again, with an accident and fire reported today. Some again questioned the battery aspect. All negative news, which dragged down the entire lithium battery sector. As a representative blue chip, CATL's sharp decline also impacted other stocks, such as Tencent (ASX: 00700), which fell over 4% today.
The tech sector was saved somewhat by SpaceX. In the third quarter, SpaceX's AI revenue grew more than 9-fold year-on-year to $7.56 billion, becoming the company's largest revenue source for the first time. Its AI revenue mainly comes from leasing data center capacity to developers including Anthropic, Google, and Reflection. A comparable stock, Baige Digital (ASX: 01396): as of mid-2026, its intended computing power technology service orders in hand exceeded 37 billion yuan, of which delivered and stably billed scale exceeded 20 billion yuan; over 95% of newly signed orders this year are three-to-five-year long-term contracts, and over 95% include prepayments. It rose over 3%.
Super Micro Computer's results also significantly beat market expectations. Preliminary data showed that for the third quarter ended September 30, the company's revenue was $18.5 billion to $19.5 billion, far exceeding the analyst average estimate of $15.2 billion and well above the company's previous guidance of $14.5 billion to $15.5 billion. A comparable stock, Lenovo Group (ASX: 00992), has signed long-term supply agreements (LTAs) with memory manufacturers to address global memory chip supply tightness and cost pressures, improving the stability of component procurement for 2027. Institutions expect the company to deliver strong results in the second quarter of fiscal year 2027, and it rose nearly 3% today.
Additionally, the sharp rally in Samsung Electronics and SK Hynix after the Korean market opened was also a stimulus. Tech stocks are more about following the earnings line. Montage Technology (ASX: 06809) issued a positive profit alert, expecting to record a profit of 1.2 billion to 1.3 billion yuan for the third quarter ended September 30, 2026, a year-on-year increase of 153.6% to 174.7%; revenue of approximately 2.079 billion yuan, up about 46% year-on-year. Management expects demand for interconnect chips to increase further in the fourth quarter. Foreign capital is also adding positions. JPMorgan's shareholding in Montage Technology (ASX: 06809) increased from 7.06% to 7.35% on October 15, and it rose nearly 9% today.
On October 20, the Jiangsu Provincial Government issued the "Jiangsu Province Physical AI and World Model High-Quality Dataset Construction Action Plan (2026-2028)," which mentioned conducting key technology research on physical AI and world model data. Morgan Stanley predicts that over the next decade or so, physical AI may drive global GDP growth by 8-10 times, transforming the global manufacturing landscape. The AI+ direction continues to ferment. "The first stock in full-scenario AI risk control applications," Baige Digital (ASX: 02672), packages risk identification, pricing, early warning, and disposal capabilities into standardized model services (MaaS), where enterprises call on demand and pay by usage. From January to August 2026, MaaS service revenue was approximately 47.4 million yuan, compared to about 7 million yuan in the same period last year, with call volume exceeding 7.5 million times. Revenue scale is still early-stage, but the growth curve is steep, indicating this path has been proven. It rose nearly 11% today; Creality (ASX: 03388): a large number of Creality Cloud models have been adapted, paired with AI modeling tools like CubeMe and SnapForm to support uploading images to generate printable 3D models. The company's multicolor 3D printer SPARKXi8 has opened pre-sales domestically at 2,509 yuan, with a final price as low as 2,199 yuan after Double Eleven platform coupons. This model previously raised over $4.63 million in an Indiegogo overseas crowdfunding campaign, with over 10,000 backers, setting multiple platform records in the 3D printing category. Industry analysis notes that the company's dense new product launches in the second half are expected to broaden the mass consumer market.
The 2026 European Society for Medical Oncology (ESMO) Annual Meeting will be held from October 23-27 in Madrid, Spain. As the date approaches, what capital is most interested in is the three confirmed points of Lepu Biopharma (ASX: 02157) CLARITY-Gastric01 (CMG901) mentioned yesterday: the 3L+ population OS co-primary endpoint was met, the overall OS key secondary endpoint was met, and overall PFS did not reach statistical significance. What the market cares most about is expression stratification. This time, the CLDN18.2 positive definition was expanded to expression ratio ≥25%, covering about 60% of patients. If OS benefit is concentrated only above a certain expression threshold, or within a certain treatment line, then whether this "OS-driven" approval pathway is solid depends on how clean the stratification data is. The market is relatively positive on this, and it rose over 7% again today.
Among the robot concept stocks that strengthened yesterday, only the robot brain direction showed continuity. SIASUN (ASX: 06106): in 2025, the core carrier of the robot brain — robot controllers — ranked first globally and in China in sales, with global/China market shares of 24.8%/45.2% respectively. In the first half of this year, SIASUN's robot brain shipments exceeded 8,000 units, up over 80% year-on-year; revenue during the period was 264 million yuan, up 67.5% year-on-year; comprehensive gross margin rose 1.2 percentage points to 46.6%, corresponding to gross profit of approximately 123 million yuan, up about 72% year-on-year. It rose over 16% again today.
Sector Focus
The production capacity data for the first three quarters recently released by the National Bureau of Statistics may become the trigger for igniting the livestock sector. At the end of the third quarter, national pig inventory was 425.33 million head, a decrease of 11.47 million head year-on-year, down 2.6%; among which breeding sow inventory was 36.02 million head, a decrease of 4.33 million head year-on-year, down 10.7%, with the decline expanding by 4.2 percentage points from the end of the second quarter, equivalent to 96.0% of the normal retention level of 37.5 million head. According to industry analysis, this means breeding sow inventory has fallen below the regulatory target line for the first time after multiple cycles, and basic production capacity has entered a contraction range. In September, the national average pig price was 10.49 yuan/kg, and the industry has accumulated losses for one year, with capital chain pressure continuously building. Breeding sow capacity is expected to continue declining. Current sector valuation is at historical lows, and future pig cycle reversal opportunities are viewed favorably. Main stocks: Dekon Food (ASX: 02419), Muyuan Foods (ASX: 02714).
Stock Spotlight
TOPNC (ASX: 07688): Plans to acquire precision machine tool equity, aerospace orders surge with outstanding performance. On October 20, the company announced it plans to acquire no less than 70% equity of the target company. The target company's products are widely used in 3C precision structural parts, AI liquid cooling plates, optical module structural components, humanoid robot precision joints, and new energy vehicle components. The company's revenue in the first half of 2026 was 166 million yuan, down 62.6% year-on-year; net loss attributable to shareholders was 57.87 million yuan. Gross margin continued to rise: comprehensive gross margin in the first half of 2026 was 46.6%, up 3.7 percentage points year-on-year.
Comment: This acquisition will achieve product line complementarity, quickly enter high-growth areas, and release synergies in R&D, supply chain, manufacturing, and sales after-sales, accelerating the domestic substitution process of core industrial mother machine equipment. The company is a leader in commercial aerospace industrial mother machines, ranking first in China's aerospace five-axis CNC machine tool market with a 10% share. It is the world's only company to launch a full-moving-component carbon fiber composite five-axis gantry machine tool, with lightweight properties, strong thermal stability, and good precision retention, repeat positioning accuracy of 0.004mm, and processing efficiency improved by 30%-50% compared to traditional steel structure gantries. It has self-developed RocOs CNC system, heavy-duty spindles, friction stir welding, and automatic drilling and riveting complete processes. General machine tool localization rate is 98%, and aerospace production line complete machine solutions are independently controllable, breaking overseas embargo blockades. 5-meter-class friction stir welding production line: 50mm thick aluminum alloy double-sided friction stir welding, weld strength reaching 90% of base material, single-piece rocket body manufacturing cost reduced by 50%, efficiency doubled, already deployed with leading private rocket customers. In terms of business segments, aerospace intelligent manufacturing equipment revenue was 127 million yuan. Compact general market five-axis machine tool revenue was 17 million yuan, up 137.4% from 7 million yuan in the same period last year, which the company attributed to increased customer awareness driven by prior market promotion and marketing investment. Large-size carbon fiber composite five-axis machine tool revenue was 20 million yuan, up 5.2% from 19 million yuan in the same period last year. Aerospace orders surged. New contracts signed in the first half of 2026: 470 million yuan, up 115.6% year-on-year; of which aerospace orders were 404 million yuan, accounting for over 85% of new signings, with incremental growth almost entirely from commercial rocket customers, concentrated in gradual revenue recognition from the second half of 2026 to 2027. The company's overall competitiveness in China's high-end CNC machine tool industry accelerates the domestic substitution process of core industrial mother machine equipment. TOPNC's acquisition strengthens its high-end CNC machine tool layout, fills the gap in general high-speed precision machine tools, and quickly enters the AI hardware industry chain.
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