China aims to address industrial overcapacity with European leaders

In recent times, Asian equities, particularly in Mainland China, have experienced a noteworthy rally. This trend included significant gains on the STAR Board and Japan’s Nikkei 225, contrasting with declines in the markets of Australia, India, and Taiwan. The rally was partly supported by the groundbreaking of a new hydroelectric dam in Tibet, which is set to be three times larger than the current Three Gorges Dam, thus boosting industrial and construction-related stocks. Additionally, optimism regarding trade discussions between the United States and China surged as President Donald Trump hinted at a future visit to China to meet with President Xi Jinping, and a U.S. Treasury representative engaged with Chinese officials in Stockholm. However, despite this progress, concerns centered around an impending tariff deadline on August 1st contributed to profit-taking behaviors among investors, leading to downturns in both Hong Kong and Mainland China markets. Notably, Premier Li Keqiang engaged with European leaders at the EU-China Business Symposium, where discussions highlighted industrial overcapacity as a significant issue. This has further prompted China's government to prioritize addressing overcapacity, particularly in the automotive and solar panel sectors. While China’s industrial sector generally benefited from renewed infrastructure investments, not all companies saw gains. For instance, China Power Construction and Inner Mongolia Baotou Steel experienced notable declines, with the latter falling by 2% and 9.6%, respectively. China's industrial profits are expected to be reported shortly, and the markets are still adjusting to recent regulations concerning instant commerce promotions, though these stocks showed a positive trajectory leading up to this point.