Last night, Goldman Sachs' conference call was overwhelmed! Regarding the outbreak of Chinese assets, Goldman Sachs answered the five most concerning questions from clients

Wallstreetcn
2024.09.25 00:51
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Is trading active? Are long-term investors buying? Is the rise due to short covering? How is the performance of southbound funds in this rebound? How are other assets performing? Goldman Sachs' conclusion is: the upward momentum can continue

The combination of Chinese policies boosts international market confidence, with overnight Chinese concept stocks soaring to a two-year high, hand in hand with the RMB surging. In the morning of September 25th, the offshore RMB against the US dollar broke through the 7.0 mark for the first time since May last year.

The surge of Chinese assets has become the focus of discussion. Goldman Sachs' conference call was overloaded, with the number of participants reaching maximum capacity, addressing the five most concerning questions from clients during the meeting.

Q1: Is trading active?

Yes, trading volume has explosively increased.

The trading volume in the Hong Kong stock market has increased by 137% compared to the 20-day average, by 83% in the Shanghai Stock Exchange, and by 66% in the Shenzhen Stock Exchange. Similarly, Goldman Sachs' trading volume in the Hong Kong stock market has increased by 143% compared to the 4-week average, and by 154% in the A-share market.

Q2: Are long-term investors buying?

Yes.

Goldman Sachs stated that their buying volume in the Hong Kong and A-share markets is 1.87 times higher, with buying mainly concentrated in Hong Kong. In Hong Kong, hedge funds are net buyers, accounting for 22% of their flow. Long-term investors became more active in afternoon trading, with buying volume in Hong Kong ultimately reaching 2.77 times, accounting for 78% of the total flow. Purchases are concentrated in the financial, consumer goods, and ETF sectors.

Q3: Is this rise due to short covering?

No.

Goldman Sachs' Hong Kong TOP SHORT basket rose by 3.6% today, lower than the 4.13% increase in the Hang Seng Index. This indicates that short positions were not under pressure. It is worth noting that hedge funds had already started covering in Hong Kong before today, with a long/short ratio of 3.2 (peaking at 3.5).

Q4: How did the southbound funds perform in this rebound?

Sold.

Southbound funds accounted for 15% of today's trading volume, with a net sale of USD 553 million, mainly selling Tencent, Meituan, and ETF 2800 HK.

Q5: What are the observations for other assets?

  • Derivatives Market: Trading is very active, with frequent call option trading on A-share and H-share indices, including A50, CSI300/500/1000, and HSCEI.
  • Index Swaps: Seen buying on CSI500/1000.
  • Futures Market: Relatively quiet in the morning, but hedge funds and macro funds started increasing their buying in the afternoon, while also observing hedge funds buying bulk commodities (such as iron ore, copper, gold, etc.) Goldman Sachs' conclusion is: the upward momentum can continue
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