Chinese assets continue to soar! Is the bull market here? This time it's really different!

After a series of heavy-handed policies, Chinese assets have been soaring in the past few days!

In the A-share market, there has been a continuous surge for 4 days. On September 27th, the ChiNext Index surged nearly 12% at one point, marking the largest intraday gain in history. Stocks such as Luzhou Laojiao (000568.SZ) have hit the daily limit consecutively, while Oriental Wealth (300059.SZ) has risen by over 50% over 4 trading days, and Vanke A has also hit the daily limit for two consecutive days.

In the Hong Kong stock market, there has also been a continuous surge. Since mid-September, the Hang Seng TECH Index has surged over 26%, entering a technical bull market. Directly benefiting from the market recovery, the Hong Kong Stock Exchange (00388.HK) has risen nearly 33% since mid-September, demonstrating the market's sentiment.

Chinese concept stocks listed in the US have also been sought after by investors. The Nasdaq Golden Dragon China Index has risen nearly 18% since September 24th. Companies like Alibaba (BABA.US), Pinduoduo (PDD.US), JD.com, Beike, and others have experienced significant increases.

However, after such a frenzy of gains, many investors are feeling uneasy. Is this time really different? Will the market surge and then enter a bear market again? After all, earlier this year in early February, the A-share market experienced a similar upward trend, only to gradually decline afterwards.

Reserve requirement ratio cuts and interest rate cuts officially implemented, continuous heavy positive news hitting the market

It is well known that the surge in Chinese assets this time is mainly due to policy stimulus.

Specifically, before the market opened on September 27th, the much-anticipated reserve requirement ratio cuts and interest rate cuts were officially implemented. The People's Bank of China announced that starting from September 27, 2024, the reserve requirement ratio for financial institutions would be reduced by 0.5 percentage points (excluding financial institutions with a 5% reserve requirement ratio already in effect); the 7-day reverse repurchase operation rate in the open market was adjusted from 1.70% to 1.50%. The operation rates for 14-day reverse repurchase and temporary reverse and repurchase operations in the open market would continue to be determined by adding or subtracting points from the 7-day reverse repurchase operation rate, with the magnitude of the adjustment remaining unchanged.

On September 26th, the Central Political Bureau of the Communist Party of China held a meeting where various positive news was announced.

For example, it was mentioned at the meeting that efforts should be made to increase the intensity of counter-cyclical adjustments in fiscal and monetary policies, ensure necessary fiscal expenditures, and effectively carry out grassroots "three guarantees" work.

The meeting also emphasized the need to boost the capital market, vigorously guide medium and long-term funds into the market, remove barriers for social security, insurance, wealth management, and other funds to enter the market. Support for mergers and acquisitions of listed companies, steady progress in public fund reforms, and the formulation of policy measures to protect small and medium investors were also discussed The meeting also emphasized the issuance and use of ultra-long-term special national bonds and local government special bonds to better leverage the role of government investment. It is necessary to reduce the reserve requirement ratio and implement a substantial interest rate cut.

In addition, the meeting also pointed out the need to promote the stabilization of the real estate market, strictly control the increment of commercial housing construction, optimize the existing stock, improve quality, increase the lending intensity for "white-listed" projects, support the revitalization of idle land reserves. It is necessary to address public concerns, adjust housing purchase restrictions, lower interest rates on existing housing loans, expedite the improvement of land, fiscal, and financial policies, and promote the establishment of a new model for real estate development.

On the morning of September 25th, the central bank announced a 30 basis point cut in the 1-year MLF rate to 2%. This is also the first market-driven interest rate to decrease after Pan Gongsheng, the governor of the central bank, announced the recent arrangements for reserve requirement cuts and interest rate cuts at a press conference on September 24th.

On the evening of September 24th, the Securities Regulatory Commission made major moves regarding mergers and acquisitions, market value management, and more.

On the morning of September 24th, the State Council Information Office held a press conference where the People's Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission announced a series of major policies. These policies include but are not limited to: 1) reducing the reserve requirement ratio and policy rates, driving down market benchmark rates; 2) lowering interest rates on existing housing loans and unifying the minimum down payment ratio for housing loans; 3) establishing convenience for the exchange of securities, funds, and insurance companies, supporting eligible securities, funds, and insurance companies to obtain liquidity from the central bank through asset pledging, significantly enhancing fund acquisition capabilities and stock holding capabilities. Establishing special refinancing to guide banks to provide loans to listed companies and major shareholders, supporting stock repurchases and holdings; 4) a stabilization fund may be introduced in the future, currently under study.

Overall, since September 24th, a series of policy combinations have been continuously launched, covering a wide range of areas of public concern, with significant significance and good sustainability.

CITIC Securities pointed out that the rare analysis of the economic situation at the September Politburo meeting involves policies in many areas such as finance, monetary, capital markets, employment, and private economy. Guotai Junan Securities believes that this Politburo meeting may be an important turning point for the stable growth policy, representing a more positive policy orientation. Although there are not many specific incremental measures proposed in this meeting, under a more positive policy environment, further policy enhancements can continue to be expected.

Furthermore, this wave of policies came fiercely and swiftly, demonstrating the determination of the management, such as the policy rate cut on the 27th being the largest in nearly four years.

This time is really different! Funds are rushing to invest in Chinese assets

It is worth noting that foreign capital may also have played a role in the recent surge in Chinese assets.

On Thursday (September 26th local time), hedge fund legend David Tepper stated that after the Fed rate cut, he made a big bet on buying all Chinese-related stocks, possibly doubling the investment limit for Chinese-related stocks. David Tepper also mentioned that he expects the Fed to cut rates two to three more times, but he is nervous about the Fed cutting rates in a good economic situation. Although he does not like US stocks, he will not short them Scott Rubner, Managing Director and Strategy Expert at Goldman Sachs Global Markets, also stated on Thursday (local time) that the Chinese stock market has shown strong performance recently, with the Nasdaq Golden Dragon Index surging 19% in the past four days. Once the U.S. election is over, the Chinese stock market should become an important part of investors' investment plans.

Rubner believes that the long-awaited recovery of the Chinese stock market may finally be here, and if so, investors should consider getting involved. In a report to clients on Thursday, he wrote, "I really think this time is different for China."

Morgan Stanley China also mentioned in a recent research report that the recent comprehensive measures to stabilize the market in China are unprecedented in the history of the Chinese stock market. It is expected that both the A-share and Hong Kong stock markets in China will respond positively to the policies and may experience a tactical rebound in the near term, potentially outperforming emerging markets