CITIC: Bearish, Morgan Stanley: Market is very optimistic, Goldman Sachs experts: This time is different

Ignited! From domestic securities firms to overseas institutions, they have all clearly expressed their bullish views on Chinese assets.

From the gathering of major financial regulatory agencies at the beginning of the week, announcing a heavyweight stimulus policy, to the rare analysis of the economic situation at the September Political Bureau meeting on Thursday, conveying signals of significant fiscal and monetary support, this series of actions has completely ignited optimistic sentiments at home and abroad, leading to a historic turnaround for Chinese assets.

The Shanghai Composite Index broke through 3,000 points in just 3 trading days from over 2,700 points. Trading volume once again exceeded trillions, reaching a new high in nearly 5 months. The major A-share index rose by over 6% this week, with the Shanghai 50 Index surging by 11.86%.

Looking ahead, CITIC Securities succinctly summarized it in one word: Go!

Morgan Stanley stated that unprecedented stimulus measures have driven the bullish sentiment in A-shares. From a technical perspective, the Shanghai and Shenzhen 300 Index may rise by about 10% in the short term. They also believe that the scale, speed, and execution of the stimulus are crucial to maintaining the rebound to the next level.

Goldman Sachs' fund flow experts exclaimed that this "China trade" is different from the past!

CITIC: Go!

On September 26, CITIC Securities released a research report with the title "Go" in just one word. The report believes that the overall rise in the A-share market is not only about confidence but also a return of morale:

The signal is clear, summed up in one word: Go!

Morgan Stanley: Market sentiment is very optimistic

Morgan Stanley stated that unprecedented stimulus measures have driven the surge in bullish sentiment in A-shares. They hold a positive attitude towards China's stimulus policies and believe that the scale, speed, and execution of the stimulus are crucial to maintaining the rebound to the next level.

According to analysts including Laura Wang, data from a report released on September 26 by Morgan Stanley showed that the weighted and simple MSASI indicators measuring A-share investor sentiment rose by 27 and 20 percentage points to 58% and 53% respectively compared to September 11.

Introduced by Morgan Stanley in March 2019, the MSASI index aims to measure the level of market sentiment in the A-share market through direct quantitative data. These data include margin financing balance, new registered investors, A-share turnover, ChiNext turnover, northbound turnover growth rate, stock index futures turnover growth rate, relative strength index based on a 30-day cycle of the Shanghai and Shenzhen 300 Index, the number of limit-up A-shares, and the range of profit forecast revisions.

Data observed by Morgan Stanley showed that the average daily trading volume of ChiNext, A-shares, stock index futures, and northbound trading increased by 20%, 29%, 51%, and 35% respectively from September 12 to 25 compared to the previous period (September 5 to 11). The relative strength index of the Shanghai and Shenzhen 300 Index increased by 21 percentage points from September 11 Based on the analysis of the borrowing cost of 2.25% under the refinancing plan and the current dividend yield of 2.46% of the CSI 300 Index, Morgan Stanley predicts that, from a technical perspective, the CSI 300 may rise by about 10% in the short term.

However, Morgan Stanley also emphasizes the importance of the scale, speed, and execution of stimulus policies:

We believe that rapid follow-up may be the most crucial at this time, with clear execution, implementation, and timetable.

Goldman Sachs Capital Flow Expert: This "China Trade" is Different from Before!

In a report released this Thursday, Rubner, Managing Director of the Global Markets Division at Goldman Sachs, stated that Goldman Sachs is beginning to see a fear of missing out (FOMO) mentality emerging locally in China, with market consensus shifting, indicating that this may not be a contrarian trade this time.

Goldman Sachs believes that the current positioning is very favorable for Chinese stocks. Rubner listed several signs to support this view:

• Record demand for Chinese stocks. On Tuesday, September 24, the Prime Brokerage (PB) business at Goldman Sachs saw the largest single-day net buying volume of Chinese stocks since March 2021, the second largest in the past decade, driven almost entirely by long positions.
• From a fund flow perspective, on Wednesday, September 25, Goldman Sachs observed continued demand for Chinese stocks, specifically long positions.
• Chinese stocks have been bought for eight consecutive days in the Goldman Sachs PB business (macro managers, quant and multi-managers, i.e., short-term traders), rather than the traditional long/short or long-only (LO) positions. Stocks may be forced to rise.
• As of the end of August, global mutual funds held Chinese stocks accounting for 5.1% of assets, a level lower than 99% over the past decade.
• As of the end of August, actively managed mutual funds were underweight Chinese stocks by 310 basis points compared to the benchmark on an asset-weighted basis.
• On the Goldman Sachs PB platform, the total and net allocations to China remain very low, currently below 93% and 86% levels of the past five years, respectively.
• Prior to the recent rebound, hedge funds had less than 7% exposure to Chinese stocks, the lowest level in five years