Fed Pauses Rate Hikes; Tech Stock Selloff Intensifies | Weekly Highlights Review

Industrial profits surge 15.5% in first three quarters

Data released by the National Bureau of Statistics on October 27 show that in the first three quarters of this year, profits of industrial enterprises above designated size nationwide grew 15.5% year on year, maintaining double-digit growth since the start of the year. In September, profits of industrial enterprises above designated size nationwide grew 14.4%.

By industry, the electronics sector contributed significantly to profit growth. From January to September, profits in the electronics sector doubled year on year, driving a 9.6 percentage point increase in the profits of all industrial enterprises above designated size, and providing important support for the relatively rapid growth of profits of industrial enterprises above designated size.

The characteristics of the industrial structure continuing to move toward new and better development have become more prominent. In the first three quarters, profits of high-tech manufacturing above designated size grew 52.0% year on year, 36.5 percentage points higher than the growth rate of all industry above designated size. High-tech manufacturing accounted for 25.5% of the profits of all industrial enterprises above designated size, up 6.2 percentage points from the same period last year.

[Commentary] Since the start of this year, new quality productive forces have been released at an accelerated pace, resonating with the global cycle of the artificial intelligence and consumer electronics industrial chains. The market space for the electronics sector and high-tech manufacturing has expanded significantly, driving the optimization of the industrial structure. Looking ahead, corporate profitability still has strong support. Stabilizing-investment policies are accelerating the transition from the deployment of funds to tangible work volumes, while global AI infrastructure investment will continue to support the electronic information and equipment manufacturing industrial chains. However, risks such as tightening global monetary policy, geopolitics and fluctuations in energy prices should also be guarded against.

800 billion yuan of new policy-based financial instruments fully deployed

As of October 28, all 800 billion yuan of the 2026 new policy-based financial instruments had been fully deployed, leveraging a total project investment of more than 11.5 trillion yuan. Of this, more than 70% of the funds went to major economic provinces, nearly 50% went to new quality productive forces fields such as artificial intelligence and the digital economy, and projects with private capital participation accounted for 30%.

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The Ministry of Finance also recently arranged the use of 550 billion yuan of the remaining local government debt quota. Of this, 250 billion yuan of the remaining special debt quota was allocated to regions with actual project funding needs in the fourth quarter of this year, with a tilt toward major economic provinces, to support priority guarantees for the funding needs of projects under construction; new projects focus on key areas such as the construction of the "six networks," effectively leveraging the catalytic role of government investment.

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China's first regional electricity market officially operates

On October 24, China's first regional electricity market—the Southern Regional Electricity Market—shifted from trial operation to official operation. In the five provinces and regions of Guangdong, Guangxi, Yunnan, Guizhou and Hainan, power sources including coal power, hydropower, nuclear power, wind power, photovoltaic and gas power bid under the same set of rules and uniformly form prices, with spot electricity prices refreshed every 15 minutes, breaking down inter-provincial barriers and allowing clean energy to flow freely.

Since the Southern Regional Electricity Market launched continuous settlement trial operation in June 2025, it has undergone more than a year of practical testing under extreme conditions, completed the leap from pilot exploration to institutional maturity, and marked a major breakthrough in the construction of the national unified electricity market system.

Data show that from January to September this year, the Southern Regional Electricity Market recorded cumulative traded electricity of nearly 900 billion kWh, accounting for more than 70% of the grid's electricity sales; of the newly added electricity sales, 40% was provided by new energy; the maximum single-day cleared electricity exceeded 4 billion kWh, and registered market entities exceeded 290,000; the regional new energy power generation utilization rate remained above 95%, supporting new energy to become the largest power source in the entire grid.

[Commentary] In the future, electricity in the five southern provinces and regions can all be bought and sold in the same "super electricity market," achieving more efficient cross-provincial mutual support and flexible adjustment, which not only enhances the ability to guarantee electricity supply but also promotes the large-scale consumption of renewable energy. The most difficult hurdle to break through in building the national unified electricity market lies in eliminating inter-provincial barriers. The Southern Regional Electricity Market took the lead in using a unified set of rules to form a regionally integrated market architecture, accumulating valuable experience for improving the national unified electricity market system.

Total market value of the four major banks exceeds 10 trillion yuan

On the 29th, bank stocks strengthened against the market trend, with China Construction Bank, Industrial and Commercial Bank of China, Bank of Communications, Bank of Chengdu and others collectively hitting record highs during intraday trading.

As of the close, the combined total market value of the A+H shares of the four major banks—"ICBC, Agricultural Bank, Bank of China and China Construction Bank"—exceeded 10 trillion yuan for the first time. Among them, ICBC's total market value was 2.94 trillion yuan, China Construction Bank 2.35 trillion yuan, Agricultural Bank of China 2.58 trillion yuan, and Bank of China 2.15 trillion yuan.

The latest third-quarter results show that the operating revenue of the four major banks all achieved year-on-year growth, and the growth rate of net profit attributable to parent companies all exceeded 5%, with growth in net interest income constituting important support for performance.

Fitch Ratings on October 27 upgraded the viability ratings of six Chinese state-owned banks. Data from the National Financial Regulatory Administration show that in the second quarter of 2026, the net interest margin of commercial banks was 1.41%, up 1 basis point quarter on quarter. This is the first time since 2022 that the net interest margin of commercial banks has achieved quarter-on-quarter growth in a single quarter.

[Comment] Analysts believe that the new highs in bank stocks were due, on the one hand, to the steady interim results of listed banks amid a weak macroeconomic cycle and the beginning of stabilization in commercial banks' net interest margins; on the other hand, to the "deflation of tech valuations" since the third quarter, with funds moving into the banking sector as a safe haven. In addition, several major banks raised their dividend payout ratios, and long-term funds such as insurance and social security continued to increase their positions, becoming the main drivers supporting the sector's rise.

Tech stock selloff intensifies

This week, the third-quarter earnings of several large US technology companies fell short of expectations, triggering an intensified selloff in tech stocks. At Friday's close, the Philadelphia Semiconductor Index plunged 7.20%, its biggest drop since June. The selling sentiment spread to precious metals, with international gold prices tumbling sharply to $3,875.55 per ounce, hitting a more than one-year low, while silver prices also plummeted 5.79%.

Among individual stocks, Intel's share price plunged 28.59%, marking its biggest single-day drop in more than four decades. Intel's earnings report gave weak guidance for fourth-quarter performance, indicating a slowdown in demand in the personal computer market. Revenue from its Client Computing and Physical AI businesses fell 5% year on year to $8.1 billion.

On October 29, shares of Google parent Alphabet plunged nearly 12.64% after its earnings report was released, marking its biggest single-day drop since its listing in 2004. Its third-quarter revenue and profit both fell short of expectations, and free cash flow was negative for a second consecutive quarter.

Among the five companies in the "Magnificent Seven" that have reported earnings, Amazon, Alphabet and Meta saw net outflows of about $33.5 billion, $9.1 billion and $2.1 billion, respectively. In addition to Alphabet's sharp decline, Amazon's share price also fell nearly 7% at one point.

[Comment] The third-quarter reports being released one after another show that AI infrastructure investment is putting significant pressure on the cash flow of some tech giants, once again raising investor concerns about the returns on AI investment. In the past, the market was willing to pay for AI's growth prospects and technological narrative, but now AI investment has entered a stage where commercial returns are being tested, and tech giants are also diverging. Take Google, for example: while its AI narrative has suffered a setback, growth in search advertising—an important source of funding for its AI buildout—is also slowing, making matters worse and prompting questions from investors. Tech giants' cash-burning behavior continues, but Wall Street is clearly more cautious.

Fed announces unchanged rates

The Federal Reserve announced its October interest rate decision on October 28, with the Federal Open Market Committee (FOMC) voting 10-2 to keep the benchmark interest rate unchanged.

Fed Chair Warsh said that since the September rate hike, financial and credit conditions for some businesses and households have tightened, though overall financial conditions have not reached a tight level, which will help stabilize prices.

At the same time, the pace of Fed reform is deepening. He disclosed that by 2028, the number of FOMC meetings at which interest rates are voted on will be reduced from the current eight to six, with two strategic policy meetings introduced.

[Comment] The Fed's decision to hold steady this time was in line with market expectations. Analysts noted that the Fed has a tradition of not adjusting interest rates when elections are near. After the midterm elections, if Republicans continue to control Congress, the United States may introduce more measures to cut taxes domestically and raise tariffs externally, which could in turn exacerbate upward inflation pressure. If inflation data perform poorly again while the job market remains strong, market expectations for a one-time 50-basis-point rate hike by the Fed will rise.

Anthropic sprints toward IPO

On October 26 local time, US artificial intelligence large-model company Anthropic submitted an S-1 prospectus to the US Securities and Exchange Commission (SEC). The issue price, number of shares to be issued and fundraising size have not yet been determined, but market valuation expectations have already surged to $1.5 trillion to $2 trillion. If completed at the upper limit, this would become one of the largest IPOs in history.

Overnight, the Philadelphia Semiconductor Index surged 2.82%, and on the 27th Asia-Pacific tech stocks rebounded collectively, with South Korea's KOSPI index rising more than 3% during the session.

The filing shows that Anthropic's revenue in the first half of 2026 was $16.286 billion, about 14 times the $1.163 billion in the same period a year earlier. In the second quarter, it achieved operating profit of $974 million, with an operating margin of about 8%. Computing efficiency continued to improve: revenue generated per $1 spent on computing power and infrastructure rose from $0.40 in the first quarter of 2025 to $2.08 in the second quarter of 2026.

However, the prospectus also warned that the recent revenue growth rate may not be sustainable, and computing and infrastructure expenses will remain the largest operating expenditure for the foreseeable future.

[Comment] Judging from the financial data, Anthropic's revenue and profit are growing rapidly, and its quarterly operating revenue has turned positive. This report card proves that frontier large models can also quickly generate huge revenue and achieve stage profitability, injecting confidence into the entire AI sector. But whether the current profitability can last through the growth cycle remains to be verified. The key point is that Anthropic has already signed hundreds of billions of dollars in computing power bills for the coming years, locking in huge costs in advance, while revenue is settled according to customers' actual usage. There remains huge uncertainty over whether future revenue growth can continue to outpace computing power costs.