Key Points

• China Trade Rebound: China’s exports jumped 5.9% in November after the U.S. tariff truce, helping lift the country’s record trade surplus even as weak imports underscored persistent softness in domestic demand.
• Asia Markets Mixed: Asia-Pacific equities traded unevenly, with the CSI 300 rising on strong trade data while Japan’s deeper-than-expected GDP contraction and caution ahead of the RBA decision tempered broader regional sentiment.
• Border Tensions: Thailand launched air strikes along its Cambodian border after ceasefire violations, triggering mass civilian evacuations and raising geopolitical risk across a region already navigating fragile economic conditions.
• China AI Spend: Chinese internet giants are accelerating AI infrastructure investment, fueling demand for domestic chipmakers such as Cambricon, Hygon and Innolight as U.S. export curbs intensify the shift toward local compute solutions.

China’s Export Rebound Signals Relief After U.S. Trade Truce

China’s exports rose 5.9% in November, sharply outperforming expectations and marking a strong rebound from October’s contraction as manufacturers accelerated shipments following a one-year tariff truce with the U.S. Imports grew just 1.9%, underscoring continued weakness in domestic demand amid a prolonged housing downturn and soft labor conditions.

The improved export momentum pushed China’s 11-month trade surplus to $1.076 trillion, up more than 21% from last year, even as factory activity remained in contraction. Policymakers are expected to introduce incremental easing at this month’s Central Economic Work Conference to support a 2026 growth target of around 5%, with forecasts calling for a wider fiscal deficit and modest rate cuts. Analysts warn that sustained growth will require a shift toward stronger household consumption, despite the recent strengthening of the yuan.

Asia-Pacific Markets Mixed as China’s Export Rebound Lifts Mainland Shares

Asia-Pacific equities traded mixed as investors assessed China’s stronger-than-expected November trade data while awaiting the Reserve Bank of Australia’s rate decision. The Hang Seng fell 0.84% even as the CSI 300 gained 1.11% after China posted a 5.9% jump in exports, reversing October’s contraction.

Japan’s economy disappointed with a deeper 2.3% annualized GDP decline in Q3, softening the Nikkei, while South Korea’s Kospi posted modest gains. Australia’s ASX slipped ahead of a widely expected RBA hold at 3.60% through 2026. In India, IndiGo shares dropped over 5% following regulatory scrutiny after widespread flight cancellations. U.S. indices ended last week higher, with the S&P 500 marking a fourth consecutive daily gain and trading just below record levels.

Thai–Cambodian Border Tensions Escalate as Air Strikes Resume

Thailand launched air strikes along its disputed border with Cambodia after both sides accused each other of violating a recent ceasefire, reigniting one of Southeast Asia’s most persistent territorial flashpoints. The clashes, which have already left one Thai soldier dead and forced the evacuation of more than 385,000 civilians, mark the most serious escalation since a brief war in July that killed 48 people and displaced hundreds of thousands.

Cambodia claims Thailand initiated new attacks despite earlier peace agreements brokered by regional leaders and the U.S., while Thailand cites continued security threats and a recent landmine blast. The renewed conflict underscores the fragility of border stability and raises concerns over broader regional risk at a time when Southeast Asia is already navigating economic headwinds.

Chinese AI Spending Surge Opens Tailwinds for Domestic Chipmakers

China’s major internet platforms are sharply increasing investment in artificial intelligence infrastructure, fueling expectations that domestic semiconductor and optical module suppliers will be key beneficiaries. Alibaba signaled it may exceed its planned 380 billion yuan AI buildout as cloud demand outpaces available compute, a trend analysts expect peers to follow.

With U.S. restrictions limiting access to Nvidia’s most advanced chips, attention has shifted to mainland-listed firms such as Cambricon and Hygon, while newly listed GPU maker Moore Threads has drawn strong investor interest after a 400% debut rally. Analysts highlight rising opportunities for semiconductor production equipment vendors and optical module leaders like Innolight, which stand to gain as China accelerates onshore compute capacity and global data-center demand expands.

Conclusion

Global markets open the week balancing signs of resilience with emerging risks. China’s stronger export performance lifted sentiment across parts of Asia, though weak domestic demand and ongoing policy uncertainty remain key watchpoints heading into 2026. Regional markets were mixed as Japan’s deeper GDP contraction and geopolitical tensions along the Thai-Cambodian border added layers of caution.

At the same time, China’s accelerating AI investment cycle is reshaping expectations for domestic chip and infrastructure suppliers. Investors continue to weigh these crosscurrents, with upcoming central bank decisions and geopolitical developments likely to guide near-term positioning and market direction.

Investment Insights

• China Trade Divergence: China’s export rebound offers near-term support for manufacturers, but weak imports signal that domestic demand remains fragile; investors may benefit from distinguishing between externally driven growth plays and consumption-linked sectors still under pressure.
• Asia Positioning: Mixed regional equity performance and Japan’s sharper GDP decline argue for balanced Asia-Pacific exposure, avoiding concentrated bets as monetary paths and growth outlooks diverge heading into 2026.
• Geopolitical Hedging: Renewed Thailand–Cambodia border tensions highlight the need for geopolitical risk buffers; portfolios with Southeast Asia exposure should assume episodic volatility rather than linear recovery.
• China AI Buildout: Accelerating AI capex by Chinese tech giants strengthens the investment case for domestic chip, compute, and optical module suppliers; rather than viewing these firms as substitutes for U.S. peers, investors should treat China’s AI hardware ecosystem as a distinct, policy-driven opportunity set.

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