On the first day of the National Day holiday, two seemingly unrelated events occurred in the world that had a profound impact on the opening of A-shares after the holiday.
1. Fed Chairman Jerome Powell changed his tone to slow down interest rate cuts
The content of Powell's speech
Powell previously announced that he would cut interest rates continuously this year to improve the United States economy, but in less than half a month, he changed his tone and said that he would suspend interest rate cuts. In his prepared remarks, he mentioned that the United States economy and employment are generally healthy, that the Fed is "recalibrating" the key interest rate, and that interest rates are moving to a "more neutral position", that is, neither stimulating nor dampening the economy, and the so-called "neutral rate" is set by Fed officials at around 3%, well below the current level.
The underlying purpose behind it
There is a complex purpose behind this act. The Federal Reserve has been raising interest rates for nearly four years, and now the interest rate is at a 20-year high of 5.38%, which has caused a lot of hot money from countries around the world to flow into United States banks. When hot money goes to United States to save, other countries face the dilemma of withdrawing money. For example, in some countries, the rich no longer invest in new factories, resulting in a significant reduction in jobs for ordinary people, an increase in unemployment, a decrease in income, and a decline in consumption power, no orders in factories, a decline in employee wages, a downturn in the economy, and a suppression of housing prices and stock markets.
Correlation with A-shares
The purpose of United States capital is to attract hot money back through interest rate hikes, depreciate the assets of various countries, and then let hot money flow out through interest rate cuts United States so as to acquire low-priced and high-quality assets. In their eyes, China is a gathering place for high-quality assets, and in September, A-shares were shorted to about 2,700 points, and many stocks, especially large state-owned enterprise stocks such as banks, steel, minerals, electricity, photovoltaics, new energy, technology, etc., are at historical lows, and many are below net assets.
They want to further suppress A-shares before the National Day and buy them at a low price after the holiday. However, China's central bank acted quickly, investing trillions of funds in a short period of time, pulling up the A-share index by a few hundred points in four days, bursting the short-selling funds and recovering the low-level chips. Seeing this, Powell changed his tune and tried to influence the expectations of domestic retail investors for the opening of A-shares after the holiday, so that Western capital drove the decline of European and American stock indexes, which indirectly affected the good start of A-shares.
Second, Iran suddenly attacked Israel
The circumstances of the event
Iran's sudden massive strike on Israel at this point in time, dropping down 200 cruise missiles and hypersonic missiles at once, is a far cry from Iran's new president's previous claim that it will not use missiles to resolve disputes with Israel.
Impact on the economy
This situation may worsen the situation in the Middle East, and international oil prices are likely to rise sharply. The unstable situation in the Middle East will affect the economic situation of all countries in the world and generate bad expectations. With the Fed already signaling a pause on cutting interest rates, the bearishness of these two events will cause peripheral stock indices to turn downward.
Impact on A-shares
The decline of peripheral stock indexes will have a great impact on the good start of A-shares, and may even lead to a bad start. Jewish capital may take the opportunity to make waves and use the prepared funds to suppress the A-share stock index, recover the hundreds of billions of losses caused by shorting and liquidating before the holiday, and get back the high-quality asset stocks that were previously sold to suppress the stock index.
3. Retail investors' response and market outlook
In the face of such a situation, some retail investors have responded positively. As the "cousin" in the article, he decided to withdraw the bank's 200,000 deposits and transfer them to a securities account, and buy all the stocks on the first day before the National Day. This behavior reflects the attitude of some retail investors, who hope to defend China's high-quality assets through their own actions, and do not care whether the post-holiday season is off to a good start, but rather hope that retail investors will unite to blow up short-selling capital.
From a professional point of view, the A-share market is indeed facing the impact of a complex international situation. The Fed's monetary policy swing and the sudden change in the situation in the Middle East are external factors that cannot be ignored. However, China's stock market also has its own characteristics and advantages. China has a huge domestic market and strong endogenous economic momentum.
While external forces may try to influence A-shares, the Chinese government also has a range of policy tools to stabilize the market. For example, the central bank's capital investment made a strong counterattack to the short-selling forces before the holiday.
For the average investor, while the enthusiastic act of investing money like the "cousin" is a determination to defend the market, it is also important to recognize that there are risks involved in investing in the stock market. In the current complex international environment, investors need to analyze the market more rationally and not just be driven by patriotic feelings.
On the one hand, it is necessary to pay attention to the development of the international situation, such as the subsequent real monetary policy trend of the Federal Reserve, and whether the situation in the Middle East will deteriorate further. On the other hand, it is also necessary to conduct in-depth research on the impact of domestic policies on different industries. For example, those large state-owned enterprises that are considered to be high-quality assets, although their stock prices are currently low, what are their development prospects, and whether they will benefit from domestic policy support.
In terms of international capital flows, although the United States is trying to manipulate global capital flows through monetary policy, China is also strengthening financial supervision to prevent the disorderly inflow and outflow of hot money.
Moreover, with the continuous development of China's economy and the gradual opening up of the financial market, more and more international capital is also optimistic about the long-term investment value of the Chinese market. This is like a tug-of-war, international capital has both the power to short, and the power to be bullish on China and long.
From a macroeconomic perspective, the stable development of China's economy is a solid foundation for the A-share market. China's continuous progress in many fields such as science and technology, manufacturing and so on has provided a broad space for the development of enterprises. For example, in the field of new energy, China is in a leading position in the world in terms of technology research and development, production scale, etc., and the growth potential of related enterprises is huge. Looking at the consumer market, the huge population base and escalating consumer demand also provide abundant profit opportunities for enterprises.
Although there is uncertainty about the trend of A-shares after the holiday, due to external factors, in the long run, as long as China's economy maintains stable growth and enterprises continue to develop and innovate, the A-share market has huge investment value. Investors need to remain calm in a complex situation, not only to see the risks, but also to grasp the opportunities, and respond to market volatility through reasonable asset allocation.
In any case, we should face the changes in the market with a positive attitude. Each of us has a role to play in this battle to defend China's high-quality assets. We can support the development of China's real economy through reasonable investment and contribute to the prosperity of the country.
Finally, I hope that everyone can operate cautiously and rationally in the investment process, and jointly contribute to the development of China's economy and the stability of the A-share market. Let's look forward to the surprises that the A-share market can bring us after the National Day!