Chinese ADRs surge 2.9% as cooling CPI fuels risk rally

The Nasdaq Golden Dragon China Index surged 2.9% on July 15, as softer-than-expected US inflation data fueled a broad rally in Chinese ADRs. The June CPI rose 3.5% year-over-year, down from 4.2% in the prior month, while the seasonally adjusted monthly reading fell 0.4%.

Traders pushed back expectations for a Fed rate hike to October after the data, according to market pricing. US stock futures climbed across the board, with Nasdaq 100 futures gaining 0.9% and S&P 500 futures rising 0.38%, extending the prior session's rebound. The Dow Jones futures edged up 0.02%.

Miniso led the ADR rally, surging 9.2%, followed by Meituan at 6.2% and Zai Lab at 5.8%. Tencent gained 5%, Alibaba added 4.8%, and Atour rose 4.5%. GDS Holdings climbed 4%, while Canadian Solar, H World, and Kingsoft Cloud each advanced more than 3%. The KWEB ETF tracking Chinese stocks rose 3.2%, while the CQQQ ETF fell 0.3%.

The rally extended a broader rebound in Chinese equities, with Hong Kong's Hang Seng Index closing 1.4% higher at 24,681.1 and the Hang Seng Tech Index rising 1.3% to 4,740.49. AI model concept stocks Minimax and Zhipu surged 13% and 6%, respectively, showing the AI-driven character of the tech rally. Meituan rose more than 5% in Hong Kong, while Tencent and Alibaba each gained more than 3%.

The move in Chinese ADRs tracked a global risk-on shift after the CPI release. Spot gold jumped 2.38% to $4,095.78 per ounce, while spot silver rose 3.31% to $59.519 per ounce, reflecting broad expectations for a pivot in monetary policy. The precious metals rally added to the narrative of a weakening dollar and falling real yields, which typically benefit emerging-market equities.

The semiconductor sector showed extreme divergence. South Korea's Samsung Electronics and SK Hynix surged more than 5% and 10%, respectively, in Seoul trading, buoyed by the overnight rally in US chip stocks. SK Hynix shares briefly hit an intraday high of 2.11 million won, reclaiming a key psychological level, before extending gains to 11%. Foreign and institutional investors were net buyers of 329.7 billion won in the electronics and electrical equipment sector, while retail investors sold 340.3 billion won, according to South Korean media. Yet SK Hynix tumbled more than 5% in US pre-market trading, reversing a nearly 15% overnight ADR surge, as some capital opted to take profits after the rapid run-up. The Philadelphia Semiconductor Index had surged 2.52% in the prior session, with memory chip stocks leading gains.

IBM plunged 25% in the prior US session, its largest intraday drop since 1987, showing the violent rotation of capital within the technology sector. The divergence between IBM's collapse and the broader tech rally illustrated the selective nature of the market's risk appetite. Among other mega-cap tech names, Apple and SpaceX rose more than 1% in pre-market trading, while Nvidia and Meta edged slightly lower.

The broad-based nature of the Chinese ADR rally suggested strong investor confidence in the China tech sector, with gains spanning e-commerce, gaming, hospitality, and cloud computing. The magnitude of the move could trigger further momentum buying and positive sentiment spillover into Asian markets during the next trading session, with the Hang Seng Index already showing signs of follow-through.

This article is for informational purposes only and does not constitute investment advice.