Reading guide:Hong Kong stocks pullback。
After yesterday's sharp rise, this morning's "Hong Kong stock mutation" rushed to the hot search on Weibo!
On the morning of October 3, the three major indexes of Hong Kong stocks pulled back as a whole, and the Hang Seng Technology Index once fell by more than 7%. However, in the afternoon, the decline narrowed rapidly. As of press time, Hong Kong's Hang Seng Index narrowed its decline from 4.4% to 1.78%, and the Hang Seng Tech Index narrowed its decline from 7.3% to 3.07%.
FTSE China A50 Index futures were volatile and turned higher in the afternoon, after falling more than 1% at one point.
JPMorgan analysts pointed out in a note on Wednesday that the current valuation level of domestic real estate stocks already reflects a similar operating environment to that before the Evergrande crisis, which is unreasonable.
One stone stirs up a thousand waves. Or affected by the above news, Hong Kong real estate stocks opened higher and lower in the morning. Greenland Hong Kong fell more than 40% at one point, and the decline narrowed to nearly 23% as of press time. CIFI Holding Group, R&F Properties, Sunac China, Tianyu Real Estate, Kaisa Group, etc. have all fallen sharply.
Domestic brokerage stocks opened higher and then quickly fell back until they turned green, and the decline narrowed in the afternoon. As of press time, Orient Securities fell more than 10.66%, CITIC Securities fell more than 8%, GF Securities and CICC fell more than 4% and 3% respectively, Everbright Securities fell more than 3%, and Zhongtai Futures fell more than 4%.
Hong Kong auto stocks were also mostly weaker, as of press time, Xpeng Motors-W fell 4.91%, NIO-SW fell 5.49%, and Li Auto-W fell 3.29%.
It is worth noting that the Nikkei 225 rose 2.24% to 38,647.24 points in the same period today. Today, Hong Kong stocks and Japanese stocks have once again formed a seesaw effect. Japanese stocks fell sharply yesterday, and Hong Kong stocks rose sharply; Today, Japanese stocks rose sharply, and Hong Kong stocks fell. According to brokerage China, there seems to be a power to grab capital. Japan Chief Cabinet Secretary Yoshimasa Hayashi said that Shigeru Ishiba and Kazuo Ueda confirmed that the Japan government and the central bank will continue to cooperate as agreed. Shigeru Ishiba said that the specific monetary policy is determined by the Bank of Japan.
According to the Financial Associated Press, this morning's pullback in Hong Kong stocks is related to market profit-taking. China Thailand pointed out in this morning report that the current violent rally of extremely high slope is unsustainable, and the Hang Seng Index volatility index rose 25.5%, hitting a more than one-year high. In the past, the Hang Seng Index only rose sharply with the Hang Seng Index in April 2015 and at the end of January 2018. With the Hang Seng Index rising to a high near the high of early January 2023 and the short-term valuation repair has been sufficient, the volatility of Hong Kong stocks is expected to increase significantly, and high profit-taking pressure cannot be ruled out.
The bank expects that the focus of the market will shift from "strong policy expectations" to the verification of economic data, corporate performance and specific policy implementation. If the follow-up market enters a volatile digestion market, it is expected that the second- and third-tier industry leaders with a profit base will run out.
Zhang Yidong, global chief strategist of Industrial Securities, gave a similar view, the new policy orientation of "grasping the key points and taking the initiative", the short-term rapid repair of risk appetite to reverse the pessimistic expectation of the market's concern about policy "inaction" in the medium term, the "policy combination punch" will continue to bring about the improvement of the stock market environment and economic environment, and Hong Kong stocks and A-shares are expected to rebound from a short rebound to a continuous reversal of shocks.
Can the current rally in Chinese assets continue?
Huatai Securities believes that from the perspective of incremental funds, the first is the global foreign capital replenishment effect. It is estimated that as of the end of the second quarter, Chinese stocks accounted for 1.3% of the equity portfolio of the world's top 20 asset management institutions (including mutual funds/hedge funds/trusts, etc.), which is 1.9 pct lower than the MSCI ACWI China benchmark weight. The pivot level in 2020 (underweight 0.5pct) may bring about US$100 billion in net inflows. Secondly, the effect of closing short positions in stock. Although the proportion of short trading in Hong Kong stocks has been at a historically low level since September, the number of open short selling shares in the whole market has not dropped significantly, and the power of stock short liquidation has not yet been fully released.
DataTrek Research, a market research firm, said that if history is any guide, there may be a lot of room for this round of rally. According to the agency, if you compare the relative performance of iShares China Large Cap ETF (FXI) and SPDR S&P 500 ETF Trust (SPY) in a 100-day time frame, Chinese stocks have outperformed U.S. stocks by more than 30 percentage points during the positive policy shifts in 2009, 2015 and 2023, and are currently only 13 percentage points ahead.
According to the Securities Times, in response to the recent surge in the Chinese market, Morgan Stanley said that if the Chinese government announces more spending measures in the coming weeks, the Chinese stock market could rise by a further 10% to 15%. "Expectations of further fiscal expansion are back on the table, allowing investors to look at China from a reflationary perspective for the first time in a long time." Laura Wang, chief China equity strategist at Morgan Stanley, said in an interview, "The last time investors looked at China through this lens was actually after the beginning of last year. At the time, global investors were pricing at around 12 times the expected price-to-earnings (P/E) ratio of the MSCI China Index. ”
In a post on LinkedIn on Monday, Dalio said China's series of policy pivots last week could be compared to former European Central Bank President Mario Draghi's pledge in 2012 to keep the euro "at all costs." Dalio believes that the highly stimulus policies that will follow will help and support asset prices. "It's an important week, in fact, I think it's a very important week that will probably go down in the history of the market economy. As long as decision-makers take the necessary action, which requires final action that goes far beyond what is announced. Dalio said.
Dalio believes that last week's series of policy shifts are an important step in stimulating creative productivity, and given that Chinese assets are still very cheap, a combination of factors has ignited the "animal spirit" of the market, and a large number of investors have entered the market.
Dalio said that in order to achieve what he sees as "perfect deleveraging", China needs to restructure its assets while creating money and credit in a balanced way (bringing interest rates below inflation and nominal growth rates) to reduce the debt burden without triggering excessive inflation. And this "reflation" will make cash less attractive than other assets, encouraging people to take risks. Policies to support markets and entrepreneurs are also stimulative, especially in this context. "These practices are starting to reignite dip-buying and 'animal spirits,' and we now clearly see that this is happening."
According to Bloomberg, many market participants are observing the imminent return of funds that previously left the Chinese stock market and moved to Japan and Southeast Asian stock markets. Equities in Korea, Indonesia, Malaysia and Thailand saw net outflows last week; France Paribas said it had withdrawn more than $20 billion from the Japan stock market in the first three weeks of September. Eric Yee, senior portfolio manager at Atlantis Investment Management in Singapore, said it was trimming its long positions in Asia to fund buying Chinese stocks.
Mount Lucas Management, a hedge fund from United States, has built a bullish position in Chinese ETFs, while Singapore's GAO Capital and Korea's Timefolio Asset Management are buying Chinese blue chips, according to Bloomberg's latest interview. Sydney-based Tribeca Investment Partners snapped up China-linked stocks such as Australia mining companies.
David Aspell, chief investment officer at Mount Lucas, said that many "investors who had long been away from the Chinese market are returning" and that investors are betting that the Chinese stock market will bottom out and rebound strongly before the economy recovers. And it itself is betting on a rebound in consumer stocks such as JD.com through tools such as call spreads.
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Source: Shanghai Securities, China Fund News, Brokerage China, Securities Times
Editor: Wang Cong
Proofreading: Wen Guansen
Duty Officer: Zhong Yuqin
Review: Shi Yinan