November 2025
THE CIO’S PERSPECTIVE
The first meeting in six years between Donald Trump and Xi Jinping did not meet expectations, especially after the hype Trump had fuelled ahead of his trip to Korea. In essence, the goal post was moved back where it was last February. The chokehold set by China on exports of refined rare earth and magnets was put on hold for one year, in return for tariffs on Chinese exports being cut by 10% (from an average 57% as calculated by the Peterson Institute for International Economics to 47%), and the US postponing a proposed expansion of its existing exports blacklist to affiliates of companies already blacklisted, a move which would have added thousands of companies to the US Entity List. There was no mention of any critical matter that were expected to be discussed, be it access by China to US advanced chip technology, or the US official stance on Taiwan’s status. Instead of a peace agreement, this looks more like a fragile ceasefire to us.
To our surprise, China agreed to restore access by the United States (and by the rest of the world) to all types of refined rare earths, including antimony and germanium that are critical to the US military industry. This must be a relief for European, Japanese, Korean and Indian car manufacturers which were caught in the crossfire.
China’s global dominance of refined rare earth and permanent magnets is even more fascinating that the United States was the global dominating force with its Mountain Pass mine in California until it abandoned the sector in the 90’s, letting China step in and build a monopoly.
Notwithstanding the temporary truce reached in Busan, we believe that as long as the US keeps a chokehold on China’s access to US chip technology using its far-reaching Foreign Direct Product Rule (FDPR), China will apply the same principle to its exports of critical rare earth in a way French people would call “l’arroseur arrosé” or “the biter bit” in English. Compared to these two issues, everything else is secondary, be it the purchase of soybeans, letting Chinese companies set up factories in the United States or cutting US import tariffs.
On the tariff front, the most recent trade data published by China showed how little impact US tariffs have had on the Chinese trade balance. Chinese exports rose by 8.3% YoY in September, the highest monthly data recorded so far this year, even though exports to the US dropped by 27% YoY. Exports to non-US countries were up by 14.8% YoY, including exports to Africa up 56% YoY, to Latin America up 15.2% YoY, to Southeast Asia up 16% and to the European Union up 14%. This explains why Chinese negotiators adopted recently a much tougher stance when dealing with their American counterparts.
On the microprocessor front, China has also taken a much more assertive stance following the progress achieved by its homegrown chip industry to the point that it banned the purchase of Nvidia advanced GPUs by Chinese AI platforms on the black market. According to a recent article published in the Financial Times, custom officers even seized smuggled stockpiles of Nvidia GPUs. Nvidia’s sales to China only represented 5.9% of its sales in the second quarter of fiscal year 2026, down from a peak of 26.4% in fiscal year 2022.
On the AI front, there is not a single week without major announcements being made by hyperscalers and their suppliers. Earlier this month OpenAI, the company behind ChatGPT, announced that it would soon need for its Stargate project and the data centres it will build high-bandwidth memory (HBM) chips equivalent to 900,000 wafers per month, which is twice as much as the current global capacity. To get there, it received a commitment by Nvidia to invest USD100bn and it signed high profile purchase agreements with the two largest manufacturers of HBM chips in the world, SK Hynix and Samsung Electronics, pushing the stock price of these two companies by 61.2% and 28.4% respectively in October.
Still on the AI front, two hyperscalers revised upwards their capex plan in October. Google will now spend $92bn in 2025, up 77% from 2024, and Meta $71bn this year, up 92% from last year. Talking about 2026, Google mentioned a “significant increase” in capital expenditures over 2025, while Meta mentioned a “notably larger” budget over 2025.
As the saying goes, “all roads lead to Rome”, Rome being in this case Taiwan’s TSMC that will manufacture the vast majority (if not the entirety) of the chips needed by hyperscalers to build their data centres. TSMC’s share price rose by 14.9% in October. Exports of microprocessors represented as much as 23.1% of the nominal GDP of Taiwan in the twelve months to August 2025, pushing up the GDP growth of Taiwan to 8.0% in the second quarter of the year.
As we all know by now, AI data centres need a humongous amount of energy, and that’s where the real bottleneck will take place. To the point that Microsoft signed an agreement a year ago to re-open and purchase the entire electricity generation of the notorious Three Mile Island nuclear power plant in Pennsylvania. In that regard, we came across a thought-provoking datapoint: In 2024, the US built 30GW of electricity generation capacity. To satisfy the demand of hyperscalers, it is estimated that another 100GW to 150GW of capacity will have to be built by 2030. By comparison, China built 426GW of additional power generation capacity in 2024.
WORDS FROM THE MANAGER
Most of the market action this month centred on Korea as both SK Hynix and Samsung Electronics released excellent sets of quarterly numbers, and as both companies announced having signed large supply agreements with Nvidia and Open AI to satisfy the gargantuan capital expenditure plans of American hyperscalers. The exceptional demand for Korean memory chips is even making a meaningful impact on the macroeconomic profile of the country: Korean exports rose by 4.4% from August to September. Zooming in, technology exports rose by 6.4% MoM, and more specifically semiconductors exports rose by a spectacular 9.3% MoM.
It is interesting to notice that the chip manufacturing bottleneck has suddenly moved from logic chips where TSMC in Taiwan is the dominant force to memory chips, a market cornered by three manufacturers – two Koreans (SK Hynix and Samsung Electronics) and one American (Micron).
SK Hynix gained 61.2% in October, while Samsung Electronics gained 28.4%. Moves of this magnitude are unusual in Korea for companies of that size (the market capitalisation of SK Hynix stands at $300bn, Samsung Electronics’ at $450bn). The main Korean index, Kospi, gained 20% in October.
The bullish forecasts of US hyperscalers also had an impact in our Taiwanese holdings: TSMC gained 14.9% while Chroma ATE, the testing equipment manufacturer that supplies system-level testing machines for the IT sector, from EV batteries to Nvidia’s GPUs chips, gained 41.4%. The Taiwanese TAIEX index was the second-best performer across the region in October, up 9.3%.
In India, we saw the non-banking financial sector perform well, with margins improving while demand for credit picked up in rural areas, driven by a good monsoon.
At the same time, Chinese equity markets disappointed. The uncertainties surrounding the meeting that took place at the end of the month between Xi and Trump weighted down on the market, and even more on the IT and healthcare sectors as investors rotated out of China and into Korea and Taiwan to get closer to the hyperscalers’ actions. The Hang Seng China Enterprise index of Chinese companies listed in Hong Kong and the MSCI China index both lost 4% in October.
Another detractor in October was gold-related stocks, a sector we are directly exposed through Zhaojin Mining. As gold price dropped by 8% from its $4400 an ounce peak reached on 20th October, Zhaojin Mining dropped by 16%. The stock is still up 165% year-to-date.
CHINA PORTFOLIO
La Francaise JKC China Equity saw its NAV per share drop by 5.7% in October when the MSCI China index dropped by 4.0%.
The cash position of the fund stood at 4.3% at the end of the month.
The best performers in the fund this month were largely defensive stocks China Life (+11%), Zijing Gold International (+9%), Ping An Insurance (+5.8%), ICBC (+4.9%) and China Merchant Bank (+4%).
The worst performers were all IT or healthcare related: Xiaomi (-20%), Akeso (-19.7%), Hengrui Pharmaceutical (-15.3%), Kuaishou (-14.5%) and Damai Entertainment (-14%).
There was no addition or removal in the portfolio during the month.
ASIA PORTFOLIO
La Francaise JKC Asia Equity saw its NAV per share rise by 2.5% in October when the MSCI Asia ex-Japan index rose by 4.4%.
The cash position of the fund stood at 3.4% at the end of the month.
The best performers of the fund this month were SK Hynix (+61.2%), Chroma ATE (+41.4%), Samsung Electronics (+28.4%), Shriram Finance (+21.6%) and TSMC (+14.9%).
The worst performers were Xiaomi (-20%), Hengrui Pharmaceutical (-15.3%), Kuaishou (-14.5%), Fuyao Glass (-11.4%) and Trip.com (-8.8%).
There was no addition to the portfolio. However, we exited Akeso in China.
ESG HIGHLIGHTS OF THE MONTH
Early October saw the California Air Resources Board (CARB) unveil a list of over 4,000 companies obligated to adhere to the state’s new climate reporting laws. These rules mandate disclosures on climate-related risks and opportunities, with some firms also required to report on value chain greenhouse gas emissions. The new legislation introduces climate reporting requirements for most large US companies—even as other climate disclosure regulations, such as the SEC’s climate reporting rule, grow increasingly unlikely to take effect.
The European Commission announced that a set of planned legislative measures will be delayed via “de-prioritisation.” This includes the rollout of European Sustainability Reporting Standards (ESRS) for non-EU companies under the Corporate Sustainability Reporting Directive (CSRD). The delay follows pushback from the Trump administration against proposed CSRD reporting requirements for US companies, as well as a recent EU-US framework agreement where the EU committed to ensuring the CSRD “does not impose undue restrictions on transatlantic trade.”
Late October brought a consultation paper from the China Securities Regulatory Commission (CSRC) and the Fund Industry Association, outlining proposed guidelines for mutual fund performance comparison benchmarks. The rules highlight the benchmark’s role in reflecting a fund’s positioning and investment style—banning arbitrary changes—strengthen investment constraints, and crucially tie benchmarks to fund managers’ performance evaluations and compensation. This aims to prevent fund managers from “style drift” and align managers’ interests with those of investors.
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