To The Moon

The $ISHARES A50(02823)$ which is heavily weighted toward large-cap A-share financials, consumer staples, and energy names - sectors directly sensitive to domestic demand and policy stimulus cycles, closed at a fresh 52 week low of HKD 15.16 yesterday

The Relative Strength Index (RSI) of the ChinaA50 ETF is currently at 22.4, a level that Bloomberg notes historically precedes short-term technical bounces

Meanwhile, the Chinese economy has seen a modest rebound following recent stimulus programs introduced by the Chinese government since Aug 2026, with third quarter GDP growing by 4.5%, above the consensus expectation of a +4.4% increase

Macquarie Sales & Trading (S&T) summarises the latest China GDP stats, as well as September data that was released earlier this Monday

Read on for important disclaimers:

The below communication has been prepared by Sales and Trading (S&T) Personnel at Macquarie and is not a product of the Macquarie Research Department. For important disclosures relating to this communication, please see: www.macquarie.com/salesandtradingdisclaimer

GDP growth in 3Q accelerated from 4.3% year-on-year (yoy) in 2Q to 4.5% (consensus: 4.4%). This modest rebound is largely driven by the new round of policy support rolled out since mid-August. Looking ahead, S&T expects growth to further accelerate to 4.7% yoy in 4Q26, implying annual growth of 4.6%.

Modest rebound on recent stimulus measures

In Sep, the majority of incoming data surprised to the upside:

– Industrial production rose by 5.5% yoy in Sep (consensus: 5.5%; Aug: 5.2%), the fastest since this April.

– Retail sales grew by 1.1% yoy (consensus: 0.5%; Aug: 0.4%), also the fastest since this April.

– Fixed Asset Investment (Sep alone) fell 7% yoy, the smallest decline since this April.

– Exports surged by 36% yoy (consensus: 26%; Aug: 25%), the fastest since 2021 (excluding new year effect)

This happened as Beijing has rolled out a series of policy support since mid-Aug. The key focus has been the so called “six networks”, which combine traditional and new infrastructure projects, including power grids, water networks, computing power networks and others.

Growth could accelerate further in 4Q. From early Sep, policy banks began deploying the RMB800 billion policy based financial instrument to support infrastructure projects. In late Sep and early Oct, policymakers announced additional measures, including an extra RMB550 billion local government bond quota and a 1% interest subsidy for eligible first-time homebuyers. These measures could lead to faster growth in 4Q.

These measures are just “mini stimulus”, designed to secure this year’s growth target, rather than to reflate the broader economy or engineer a structural turnaround in the housing sector. Since policymakers tend to do just enough to meet the growth target, the ongoing AI driven export boom has reduced the urgency to boost domestic demand.

Twin shocks persisted in 3Q

So far in 2026, China’s economy has been hit by twin shocks: a positive shock from the AI boom and a negative one from the Iran crisis. In 3Q, the AI shock strengthened further, with exports rising at the fastest pace since 1Q21 (excluding Chinese New Year distortions). Meanwhile, higher oil prices continued to weigh on consumer demand, with retail fuel consumption falling 13% yoy in 3Q (2Q: down 23%).

Uneven growth: Higher oil prices pushed PPI inflation up to 5.0% yoy in Sep, the highest reading since June 2022. Consequently, nominal GDP growth edged up from 5.9% yoy in 2Q to 6.0% yoy in 3Q26, outpacing real GDP growth for the second consecutive quarter (Fig 2). However, the expansion remains highly uneven. Firms and sectors exposed to the AI boom or higher energy prices are enjoying strong earnings, while much of the rest of the economy is still struggling.

Weak labor market: The headline unemployment rate in Sep was 5.2%, which is the same as one year ago. However, the softening domestic demand suggests that the labor market may face more pressure compared with one year ago.

Details about Monday’s data

Production rebounded as energy shock waned, AI surged

Industrial production accelerated to 5.5% in Sep, the fastest pace since April this year (Aug: 5.2%; consensus: 5.5%; Fig 3).

– The tech supply chain remained the main pillar of support: chip production grew by 18% yoy in Sep and, more broadly, value added in the computer and telecom industry rose 16% yoy.

– Recovery in the energy complex provided a tailwind: value added in the coal industry improved from -6% to -3% yoy in Sep, oil/gas extraction grew by 10% yoy, and the chemical industry returned to growth at 2% yoy.

– Auto production fell by 6% yoy in Sep, the fastest decline since 1Q23. Auto trade has been showing an increasingly two-speed pattern, with domestic demand becoming an ever larger drag:

In 3Q26, passenger car exports surged by 81% yoy in volume terms, the fastest pace since 2H23; yet domestic retail sales fell by 25% yoy, the fastest decline since early 2020, according to CPCA (Fig 4)​​​​​​​

Consumption picked up on higher fuel and chip prices

Retail sales grew by 1.1% in Sep, beating market expectations (Aug: 0.4%; consensus: 0.5%; Fig 5). This is also the fastest pace of growth since April this year.

– The biggest driver behind the rebound was fuel, with sales revenue down just 1% yoy in Sep after a 7% yoy decline in Aug. It alone accounted for ~40% of the rebound in headline growth. However, this was mainly due to higher fuel prices: we estimate that fuel sales volumes fell by 16% yoy in both Aug and Sep.

– Another tailwind came from mobile phone sales, which surged by 31% yoy in Sep, mainly due to higher chip prices. However, auto sales, the largest component of the retail sales basket, fell by a sharper 21% yoy.

– Restaurant sales grew by 2.1% yoy in Sep, up from 1.0% yoy in Aug. Golden Week (Oct 1-7) data indicate that total tourism revenue increased by 4% yoy, while spending per tourist fell by 2% yoy, the largest decline since 4Q22.

– According to the NBS quarterly survey, household consumption grew by 3.5% yoy in 3Q (down from 3.8% in 2Q), while household disposable income rose by 5.4% yoy (down from 5.6% in 2Q)

Official FAI improved on policy push

Fixed Asset Investment (FAI) fell by 7.2% yoy in Jan-Sep (consensus: -7.3%). According to our estimate, it fell by 7.2% yoy in Sep alone, vs. -11% yoy in Aug and the consensus forecast of -8%. This is consistent with the Official Construction PMI, which rose from 46.9 in Aug to 50.3 in Sep.

– By breakdown, infrastructure FAI fell by 11% yoy in Sep (Aug: -15%), while manufacturing FAI dropped by 1% yoy (Aug: -6%). Both improvements were likely supported by recent policy measures (Fig 6).

– However, property FAI fell by 26% yoy (Aug: -25%). By comparison, housing under construction, which used to correlate closely with property FAI, declined by only 13% yoy

Housing softness persisted, with megacities a bright spot

On the demand side,

– Existing home prices in 70 major cities fell by 0.3% month-on-month (mom) in Sep, marking the 5th consecutive month of declines at the same pace. The number of cities reporting sequential home price increases rose from 3 in Aug to 9 in Sep.

– Notably, prices in tier-1 cities rose by 0.2% mom, extending gains for the 7th straight month and marking the longest recovery since Sep 2021.

– New home sales fell by 21% yoy in floor space (Aug: -15%) and by 20% yoy in value (Aug: -12%).

On the supply side,

– Housing new starts fell by 26% yoy in Sep (Aug: -31%), while completions dropped by 36% yoy (Aug: -28%) (Fig 8).

– Following the announcement of the new presales rule in late August, the official data have yet to show much impact: developer financing fell by 26% yoy in Sep (Aug: -27%), alongside a 16% yoy decline in sales revenue

New credit steadied on the back of new stimulus

New credit was RMB3.5 trillion in Sep, about the same as a year earlier and slightly above expectations (consensus: RMB3.3 trillion). This kept the credit impulse broadly stable, although overall credit growth slipped marginally to 7.1% yoy from 7.2%.

– The main support came from government bond issuance, which was RMB0.3 trillion higher than a year ago. Meanwhile, corporate long-term loans was roughly unchanged from last year, helped by the rollout of the policy-based financial instrument in early Sep to support infrastructure investment.

– By contrast, the consumer sector remained weak, with new household loans RMB0.4tn lower than a year ago.

M1 growth slowed from 4.1% to 3.2% yoy, in part because of a higher comparison base. At the same time, fiscal support has not yet been fully delivered, with outstanding fiscal deposits still up 14% yoy in Sep.

Exports took another leg higher on AI capex boom

Exports surged by 36% yoy in Sep (consensus: 26%; prior: 25%; Fig 11-12), well above market expectations. Excluding the Lunar New Year distortions, this is the fastest pace since 1Q 2021. Meanwhile, imports rose by 31% yoy in Sep, while the trade surplus widened to a record US$134 billion.

The AI capex boom remained the key tailwind, with chip exports surging 136% yoy and exports of computers and components up 92% yoy. Stronger global demand related to AI also spilled over to non-AI products: labour-intensive exports (including toys, furniture, clothing, textiles and suitcases) rose 23% yoy in Sep, the fastest pace since 2Q21.

By destination: unsurprisingly, the East Asian tech supply chain saw the fastest growth, with exports to Korea and Taiwan both up 69% and ASEAN up 52% yoy. Direct exports to the US rose by 39% yoy, with levels back at their highest since Dec 2024.

Inflation rebounded, with energy doing the heavy lifting

China’s PPI inflation accelerated to 5.0% yoy in Sep (consensus: 4.4%; prior: 3.8%), the highest since June 2022. Meanwhile, CPI inflation edged up to 0.9% yoy (consensus: 1.0%; prior: 0.8%; Fig 13).

– Oil prices were the main driver of the PPI pickup. Domestic oil and gas prices rose 25% yoy in Sep (vs 11% in Aug), while chemical prices increased 12% yoy (vs 9% in Aug). The oil complex alone accounted for around 60% of the acceleration in PPI inflation from August to September, with coal contributing a further 20% (Fig 14).

CPI inflation was likewise driven largely by energy. Domestic fuel prices rose 15% yoy in Sep, up from 8% in Aug, making this the biggest contributor to the rise in headline CPI.

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The iShares FTSE China A50 ETF (2823 HK) is a Hong Kong-listed ETF that aims to track the FTSE China A50 Index — a benchmark of the 50 largest companies listed on the Shanghai and Shenzhen stock exchanges.

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