To The Moon

I. Performance of Global Equity Indices (in US Dollar)

Source: Bloomberg, Tiger Brokers

Key Highlights

◼ Last week, U.S. equities saw heightened volatility, with both the S&P 500 and Nasdaq ending roughly flat. On the earnings front, the U.S. market remained resilient: among companies that have reported Q3 results, 82% beat EPS expectations, and the S&P 500’s net profit margin is expected to reach 13.1%, a 15-year high. Meanwhile, macro indicators softened, and the probability of a December rate cut has fallen to below 50%. However, due to high fiscal deficits and heavy Treasury supply, the medium-term easing trend remains unchanged.

◼From a structural perspective, high-beta sectors have become crowded and appear expensive, increasing the risk of pullbacks. We recommend trimming high-beta themes on strength, focusing instead on platform-based AI leaders and memory/storage names with strong earnings visibility, while using equity index hedges to manage volatility. Recently, the Greater China market has been relatively stable. Although October inflation data improved, much of the lift came from holidays and promotional activity; excluding gold-price effects, underlying consumer demand remains soft. Policy support is targeted rather than broad-based, meaning overall easing is limited, and profit recovery is likely to stay gradual. Under this backdrop, a broad-based rally is unlikely—alpha will mainly come from sector and stock selection. In the near term, indices may stay range-bound, and we will continue to focus on high-quality tech stocks and undervalued cyclical names to capture structural opportunities.

◼ This week, key events to watch include the FOMC minutes, the delayed September nonfarm payrolls, and NVIDIA’s earnings, along with its forward guidance on the AI sector’s outlook.

II. Key Market Themes

U.S. Equities: Rate Cuts Remain Uncertain, Earnings Stay Resilient, and AI Requires a Focus on Certainty

Last week, U.S. equities experienced a roller-coaster ride—rising, then falling, then rebounding—only to see both the S&P 500 and Nasdaq end the week essentially flat. Overall, the U.S. remains in a late-cycle environment characterized by slowing growth but resilient corporate earnings. According to FactSet, over 90% of S&P 500 constituents have reported Q3 results, with around 82% beating EPS expectations and roughly 76% exceeding revenue estimates. Moreover, the blended net profit margin for the S&P 500 in Q3 is projected to reach 13.1%, far above both prior levels and long-term averages, marking the strongest reading in nearly 15 years.

Source: FactSet

On the rates front, expectations for a December rate cut have cooled significantly—from an initial 90% to 65% last week, and to around 50% more recently. Part of this stems from delays in key economic data due to the government shutdown, as well as tactical disagreements within the Fed over near-term policy moves. Doves favor continued “insurance cuts,” while hawks such as Neel Kashkari have voiced opposition. However, we believe these debates do not change the medium-term easing trajectory. Elevated fiscal deficits and heavy Treasury supply imply that the Fed will ultimately need larger rate cuts to maintain debt sustainability and financial stability.

From a flows perspective, CTA and other systematic strategies are still holding relatively elevated long exposures to U.S. equities. A moderate pullback in the indices could therefore trigger model-driven selling that may exacerbate volatility. Meanwhile, positioning in high-beta and small-cap growth stocks has reached levels close to historical extremes, with valuations also stretched. In our view, the current market structure is less supportive for short squeezes and far more prone to de-crowding and valuation compression. Strategically, we recommend taking profits on secondary high-beta thematic names during rallies, while maintaining a preference for upstream AI hardware companies with clear earnings realization paths. For hedging, we suggest maintaining a “sell high, buy low” approach to index overlays. Overall, within AI-related allocations, we are focused on two key segments: first, platform-based AI leaders with full-stack advantages and clear visibility in earnings delivery; and second, the memory sector within the hardware supply chain, where demand is set to surge with exceptionally high certainty.

Greater China: Volatility Likely to Persist, and Earnings Recovery Will Be Key in the Next Phase

Unlike the sharp swings in U.S. equities, the Greater China market has been relatively subdued in recent weeks. At the macro level, both CPI and PPI showed a temporary rebound in October, but the main drivers were one-off factors such as holidays and promotional events. Excluding the impact of rising gold prices and the gold-buying frenzy, overall consumer demand remains weak. Meanwhile, nominal household income growth continues to be dragged down by the property sector and softer wage expectations, while credit and TSF data indicate that the real economy remains cautious about borrowing. Policy direction has also shifted toward targeted support and supply-side optimization rather than broad-based easing, implying a slower pace in nominal growth and corporate earnings recovery.

In this environment, it is difficult for the Greater China market to see a broad-based beta-driven rallyOn t. Instead, it should be treated as a market where patience is needed and alpha must be earned through sector and stock selection. he trading front, A-share sentiment indicators sit in a neutral-to-positive range, but turnover and stock index futures volumes have weakened recently—reflecting increasingly cautious investor behavior. At the same time, earnings revisions remain negative, suggesting that indices are more likely to remain range-bound rather than trend strongly in one direction. In the Hong Kong market, Southbound flows continue to rotate into value and high-dividend stocks, while high-beta segments such as AI and semiconductors tend to be sold down first when global risk appetite weakens, leading to amplified volatility.

Source: Wind, Tiger Brokers

Despite the overall sluggish pace, earnings recovery among platform-based AI leaders has begun to show through. Tencent’s Q3 results delivered double-digit growth in both revenue and profit, with advertising, gaming, and fintech benefiting from AI-driven targeted delivery and operational efficiency gains. Notably, the company has not significantly increased capital expenditure; instead, it has advanced its AI strategy through more efficient deployment and integration of existing computing resources. This has helped reinforce its free cash flow and shareholder return capacity. Meanwhile, Alibaba experienced short-term sentiment pressure following U.S. national security allegations last week. However, as a full-stack AI platform with proprietary large models, cloud infrastructure, and broad ecosystem integration, Alibaba retains strong long-term competitiveness supported by robust free cash flow and deep commercial applications.

Overall, the next major upward move in the Greater China market will require a recovery in earnings expectations. In the near to medium term, indices are likely to remain range-bound. Going forward, we will reduce reliance on broad-market beta and continue to focus on two long-term themes—high-quality technology leaders and undervalued cyclical sectors—to capture structural opportunities.

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