China’s new push to collect individual income tax on assets held through offshore trusts is creating a potential source of near-term volatility for some Hong Kong-listed Chinese companies, as wealthy shareholders face an approaching deadline to settle unpaid tax liabilities.

Bank of America Securities expects the tax campaign to have its greatest impact at the individual-stock level rather than becoming a broad driver of the Hong Kong market. The immediate concern is that shareholders who need to raise cash to meet tax obligations could be forced to sell stakes in listed companies, creating sudden supply pressure in shares with concentrated ownership.

Chinese authorities announced in July that individuals would be required to pay income tax on assets placed in offshore trusts and on income generated by those assets. Unpaid liabilities must be settled within 90 days, putting the October 22 deadline increasingly into focus.

“The deadline for this offshore tax is October 22, so that gives us roughly a month to see the actual impact,” Winni Wu, China equity strategist at BofA Securities, told Reuters at a media briefing in Hong Kong.

The policy affects an ownership structure that has been widely used by wealthy Chinese entrepreneurs and shareholders of companies listed in Hong Kong and the United States. Offshore trusts can be used to hold shares and other assets, creating structures that can span multiple jurisdictions.

The tax collection campaign is now forcing some of those shareholders to reassess the structures they have used to hold wealth and investments.

The potential market impact became more visible this month when a major shareholder of Chinese hotpot chain Haidilao unexpectedly sold 259 million shares for HK$2.75 billion ($350.59 million). Haidilao shares have fallen about 17% since the sale, increasing speculation among investors about whether tax obligations are prompting some major shareholders to liquidate holdings.

The transaction does not establish that the Haidilao shareholder sold specifically to pay the offshore trust tax. But its timing has heightened investor sensitivity to the possibility that other wealthy shareholders could also need to sell listed shares to raise cash before the October deadline.

For companies with large blocks of shares controlled through offshore structures, that creates a potentially important overhang.

Private Companies Face Greater Scrutiny

BofA expects offshore-listed private companies to face greater scrutiny than state-owned enterprises under the new tax regime.

“Offshore-listing private companies might be under more scrutiny, while state-owned companies are likely less impacted,” Wu said.

The ownership structures of privately controlled companies can be more concentrated, with founders and their families often holding substantial stakes. A tax bill running into hundreds of millions of yuan could therefore create a powerful incentive to monetize part of those holdings.

State-owned companies have a different ownership structure and are less exposed to the same type of individual shareholder liquidity pressure. The policy also creates a complicated question around how authorities will determine and collect the tax from offshore structures.

Wu said there could be room for shareholders to negotiate with local tax authorities because some potential liabilities could be substantial.

“Some of the tax liability can be quite high, and it’s unrealistic to expect people have that amount of cash to immediately pay the tax,” she said.

That could mean the eventual market impact depends not only on the size of the tax liabilities but also on how aggressively they are enforced and whether taxpayers are given flexibility over payment arrangements.

The immediate risk is therefore concentrated rather than systemic.

A major shareholder selling a large position can materially affect an individual stock, particularly where daily trading volumes are relatively low or where investors interpret the transaction as a sign that additional selling could follow. The risk is more pronounced for companies whose founders or controlling shareholders have significant portions of their wealth tied up in listed shares.

For the broader Hong Kong market, however, BofA does not expect the offshore trust tax campaign to become the dominant market driver.

“The offshore trust tax collection could result in event risks on single stocks, but is unlikely to be a dominant driver for the Hong Kong market,” Wu said.

The policy does not necessarily represent a broad change in the fundamental earnings outlook for Chinese companies. Its immediate market effect is more likely to come through ownership and liquidity. In practice, the tax campaign could create temporary selling pressure even where the underlying businesses remain unchanged.

The bigger issue is what happens after the October 22 deadline.

China’s move signals greater scrutiny of offshore wealth structures at a time when authorities have been seeking to strengthen tax compliance and bring offshore-held assets more firmly within the domestic tax framework. Wealthy individuals who previously relied on offshore trusts may now face higher compliance costs and potentially greater pressure to restructure their holdings.

But that could gradually change how Chinese entrepreneurs hold stakes in publicly traded companies.

For Hong Kong-listed companies, the most important variable over the coming weeks may likely not be corporate earnings but shareholder behavior.

If major shareholders need to raise substantial amounts of cash before the deadline, block sales could create sharp movements in individual stocks. If tax authorities instead allow negotiations or payment arrangements, the immediate selling pressure could be smaller.

The Haidilao transaction has provided an early warning of what that pressure could look like, but one transaction is not enough to establish a broader market trend.

Investors will therefore be watching filings, block trades and announcements from major shareholders closely as October 22 approaches. The major concern is whether Haidilao represents an isolated case or the beginning of a broader wave of disposals by wealthy Chinese shareholders seeking liquidity for offshore tax obligations.

Global stocks extended their rally on Tuesday as renewed enthusiasm for artificial intelligence combined with signs of improving oil supply from the Middle East to ease some of the pressure that has weighed on markets in recent weeks.

The MSCI global equity benchmark gained as investors responded to a sharp rebound in technology shares and indications that disruptions to energy flows could begin to ease. Oil prices fell as much as 3% to a two-week low before recovering modestly to around $97.60 a barrel.

The decline in crude prices followed two developments that raised hopes of improved supply. A senior Iranian official told Reuters that Tehran could reopen the Strait of Hormuz within seven days if the United States eased military pressure and lifted its blockade on Iranian ports.

Separately, three sources briefed on the matter said Saudi Arabia had restarted operations at its East-West Pipeline and could resume exports from the Red Sea port of Yanbu later Tuesday.

The developments matter because the Strait of Hormuz is a critical energy chokepoint. Any credible reduction in the risk of prolonged disruption can quickly change the market’s assessment of oil supply, inflation and interest rates.

The improvement in oil markets provided support for bonds as well. The benchmark U.S. 10-year Treasury yield fell three basis points to 4.93%, moving further below the 5% level that has become an important focus for investors.

Technology stocks provided the other major source of support for global equities.

The recent surge in enthusiasm around AI was reinforced by the strong market response to Meta Platforms’ Muse AI assistant, which was launched two weeks ago. Meta shares jumped more than 11% on Monday, their biggest one-day gain since April 2024, helping revive demand for companies exposed to the AI investment cycle.

AMD reached a $1 trillion market value, while Intel and Arm Holdings gained 12.2% and 17%, respectively.

European semiconductor stocks continued to benefit from the renewed optimism. The STOXX 600 rose 0.5% on Tuesday after gaining 1% in the previous session.

“This suggests that demand for costly AI tools is robust and worth the hundreds of billions of capex spent by the hyperscalers,” said Kathleen Brooks, research director at XTB.

“If there is widespread adoption of Muse, it could add to demand for other AI tools, which could lift the AI sector, after a rough few months.”

The rally comes after a period in which investors had begun questioning whether the enormous capital expenditure by major technology companies would generate sufficient returns. Warnings from leading AI executives about the risks associated with powerful models had also added to uncertainty around the sector.

The market response to Muse has shifted some attention back toward the commercial side of AI. The key question for investors is whether new AI products can generate enough adoption and revenue to justify the hundreds of billions of dollars being committed to data centers, chips and computing infrastructure.

That makes the performance of consumer-facing AI products important for the broader technology trade. Strong adoption could support demand throughout the infrastructure chain, while weak monetization would leave companies facing the challenge of maintaining enormous capital spending without comparable revenue growth.

Investors are also looking ahead to a meeting between U.S. President Donald Trump and Chinese President Xi Jinping later this week. Xi is due to arrive in Washington on Wednesday, his first visit to the U.S. capital in more than a decade.

Markets are watching whether the two leaders can extend their existing trade truce and establish a more stable framework for relations between the world’s two largest economies. Any discussion of cooperation on artificial intelligence could also be significant for technology investors, although the outcome remains uncertain.

“For markets, the big question is what’s going to happen when the current one-year trade truce expires in November, and whilst the general tone remains positive, there still isn’t an agreement yet,” Deutsche Bank strategist Jim Reid said.

The outlook for monetary policy remains a constraint on the rally.

Although falling oil prices reduced some immediate inflation pressure, investors continue to price in further interest-rate increases from major central banks. That limits how far bond yields can fall and keeps borrowing costs elevated for companies and households.

The Federal Reserve raised interest rates last week and signaled that its campaign against inflation was not finished, leaving open the possibility of further tightening. The Bank of Japan also raised rates last week to a 31-year high, although two dissenting votes and the absence of stronger forward guidance disappointed investors looking for a more aggressive tightening path.

The yen remained vulnerable as a result, with the dollar down 0.15% against the Japanese currency at 157.14 after earlier reaching a three-week high. Japan’s authorities remain under pressure to contain the yen’s decline, with markets watching for signs of intervention.

“FX intervention remains a blunt tool to prop up currencies, and without a forceful monetary policy response it will be difficult for Japanese authorities to rein in the selloff in the yen,” said Matthew Ryan, head of market strategy at Ebury.

The market’s reaction on Tuesday therefore rests on two separate but connected developments. Lower oil prices reduce the immediate threat of another inflation shock, while renewed enthusiasm for AI is restoring demand for technology stocks.

Analysts believe the chance of that combination supporting a sustained global rally will depend on developments in energy supply, the path of interest rates, and whether the latest wave of AI spending produces evidence of strong commercial adoption.

David Ellison’s Paramount Skydance has cleared the last major regulatory obstacle to its $110 billion acquisition of Warner Bros. Discovery, putting the company on track to create one of Hollywood’s largest entertainment groups.

Paramount reached a settlement with 12 U.S. states that had sued to block the transaction, California Attorney General Rob Bonta announced Monday. The settlement removes the immediate threat of the antitrust case and allows Paramount to move toward closing the deal.

“We have complete clearance for this merger and can move toward closing,” Ellison said in a memo to employees obtained by Business Insider.

Ellison said Paramount is tentatively planning to complete the acquisition in about two weeks.

The settlement includes several commitments aimed at addressing concerns about the effect of the merger on Hollywood’s movie production, theatrical distribution, television networks and news operations.

Under the agreement, Paramount will release at least 30 movies in theaters annually for the next two years, followed by at least 32 movies annually for the subsequent three years. At least 20% of those releases must qualify as “tentpoles,” defined as films with production budgets of at least $50 million, adjusted for inflation. Paramount also agreed to increase its U.S. production spending by at least $300 million annually for five years. The company pledged not to sell either its Paramount movie lot or the Warner Bros. lot.

The commitments address one of the central concerns raised by opponents of the transaction: that combining two major Hollywood studios could reduce the number of films produced and limit opportunities for filmmakers and other industry workers.

The settlement also covers news and cable television.

Paramount agreed to establish a board intended to support the continued editorial independence of CBS News and CNN and ensure what Bonta described as objective, fact-based reporting. The company will also negotiate carriage rates separately for Paramount’s existing cable networks and Warner Bros. Discovery’s networks for five years.

Paramount separately reached a settlement with the Writers Guild of America, which had also sued to stop the transaction.

A Hollywood Giant Takes Shape

The acquisition will dramatically expand Ellison’s media empire.

Paramount already owns Paramount Pictures, CBS, Paramount+, Pluto TV and cable networks including Comedy Central. Once the Warner Bros. Discovery transaction closes, it will also control Warner Bros. studio, HBO, HBO Max and major television networks including CNN, TBS and HGTV. The combined company will bring together two extensive film libraries, major television operations and competing streaming platforms at a time when traditional media companies are under pressure to achieve scale.

Paramount agreed in February to acquire WBD for $31 per share following a bidding contest that also involved Netflix. Netflix had proposed acquiring WBD’s studio and streaming assets for $27.75 per share.

Ellison has argued that combining the businesses will create a company with enough scale to compete more effectively with Netflix and Disney.

The transaction, however, has been closely scrutinized because of the amount of media content and distribution infrastructure that would come under one corporate owner. The 12-state lawsuit, filed alongside a separate case by the Writers Guild in July, argued that the merger would give Paramount excessive control over theatrical movies, major film productions and basic cable networks.

Paramount rejected those arguments, maintaining that the transaction would strengthen competition in the entertainment industry and benefit consumers. The company also pointed to approvals from other major regulatory authorities, including the U.S. Department of Justice.

The deal nevertheless suffered a significant setback in July when a federal judge granted plaintiffs a temporary restraining order, putting the transaction on hold.

The settlement now removes that immediate legal barrier.

Paramount was seeking to complete the transaction before the end of September. Under the agreement, failure to close by October 1 would have triggered a so-called ticking fee of about $7 million a day, or approximately $650 million per quarter, payable to WBD shareholders.

The settlement therefore does more than resolve a major legal threat. It also clears a path for Paramount to avoid a rapidly accumulating financial cost associated with delaying the transaction.

The Streaming And Cost Equation

The combination of Paramount+ and HBO Max is one of the most consequential elements of the transaction for consumers.

Paramount+ gives the company a large existing streaming operation, while HBO Max brings HBO’s premium programming and Warner Bros.’ extensive film and television library. Combining those assets could create a significantly broader streaming service capable of competing more directly with Netflix and Disney+.

But greater scale does not automatically translate into lower prices or a better consumer experience.

Mike Proulx, a media-focused research director at Forrester, said consumers are primarily concerned about what the merger means for their entertainment bills.

“Regulators spent months debating theatrical output, production commitments, and market structure,” Proulx said. “But consumers are simply asking, ‘Will this merger improve my entertainment experience without increasing my monthly bill?’”

That question could become more important once Paramount begins integrating the two companies.

The merger brings potential efficiencies through the combination of streaming operations, technology, marketing, content libraries, and corporate functions. At the same time, the two companies have overlapping businesses and large workforces, creating pressure to eliminate duplicated costs.

Inside Paramount, employees have previously expressed uncertainty about whether the acquisition would put jobs at risk or ultimately provide greater stability by giving the company more scale.

For Hollywood workers, the commitments on theatrical releases and U.S. production spending offer some near-term protection. Paramount’s agreement to maintain at least 30 theatrical releases annually, increase that number to 32 in later years, and spend an additional $300 million a year on U.S. production sets measurable obligations for the combined company.

The longer-term impact is expected to hinge on how Paramount balances those commitments against the economics of streaming. The company is inheriting a media landscape in which traditional television advertising is under pressure, cable subscriptions continue to decline, and streaming businesses are being pushed to demonstrate sustainable profitability rather than simply subscriber growth.

Warner Bros. Discovery brings valuable assets but also significant complexity. HBO, Warner Bros., CNN and the cable networks operate under different economic models, while Paramount has its own mix of broadcast television, film, streaming and cable businesses.

Ellison’s challenge after closing will likely shift from securing the transaction to integrating those assets while preserving the value of their individual brands.

Paramount is not simply acquiring Warner Bros. Discovery and inheriting its operations. It is entering the transaction with commitments covering theatrical output, domestic production, news governance, and cable-network negotiations.