Weekly Hot List Highlights: Major policies trigger a stock market surge! Gold and silver bulls enjoy a crazy week of celebration

Market Review

The US Dollar Index showed a volatile downward trend this week, with expectations of a Fed rate cut likely to record a fourth consecutive weekly decline, falling to near the 100 level at the time of publication. Spot gold continued to hit new highs this week, with traders digesting US economic data and the prospect of a Fed rate cut. Gold prices rose to a high of $2685 per ounce, hitting new highs for five consecutive days and rising for three weeks in a row; spot silver also surged, rising to a high of $32.7 per ounce, reaching a new high since 2012.

In terms of non-dollar currencies, the British pound rose to its highest level since the first quarter of 2022 against the US dollar. Bank of England Governor Bailey stated that interest rates will not return to the near-zero historical lows of four years ago. The US dollar against the Japanese yen erased its weekly gains on Friday, as Yoshihide Suga is set to become Japan's next prime minister, with the market believing that he will not hinder the Bank of Japan's normalization of monetary policy and will push the central bank to raise interest rates, leading to a rise in the yen.

International oil prices fell overall this week. At the beginning of the week, market confidence in the outlook for crude oil demand was boosted by China's stimulus policies and geopolitical risks. However, news that OPEC+ will proceed with its production increase plan in December led to a decline in oil prices.

The most eye-catching market performance this week came from the stock market, especially A-shares and Hong Kong stocks. Boosted by the latest stimulus policy package, A-shares and Hong Kong stocks surged this week. The Shanghai Composite Index rose for 8 consecutive days, with a cumulative increase of 12.8% this week, marking the largest weekly gain since the end of 2008. The ChiNext Index rose by 22.7%, and the Shenzhen Component Index rose by 17.8%. The total turnover of the Shanghai and Shenzhen stock markets exceeded one trillion yuan for 3 consecutive days. The Hang Seng Index rose by 13% this week, with a record high turnover of HKD 370 billion on Friday, and the Hang Seng TECH Index rose by over 20%.

On Friday, A-shares continued their sharp rise, even causing delays in the Shanghai Stock Exchange trading system, with the exchange confirming in an announcement that there was a delay in confirming transactions in the stock auction trading after the market opened. Several investors stated that there was a certain delay in order placement, and both brokerage trading apps and Tonghuashun stock trading software experienced abnormal trading conditions. In the afternoon, some Shanghai-listed stocks returned to normal, while some still experienced congestion and were unable to trade, needing to be gradually released.

Overseas institutions are optimistic. Morgan Stanley believes that the CSI 300 Index may still have about 10% upside potential in the short term from a technical perspective. Goldman Sachs tactical expert Scott Rubner believes that the long-awaited recovery of the Chinese stock market may finally be here and stated that buying Chinese stocks after the US election will be a key trade Billionaire investor David Tepper is also inspired by China's stimulus policies, stating he will buy "everything" related to China assets.

In the US stock market, the S&P 500 index hit a new high for the 42nd time this year, while the Golden Dragon China Index saw its biggest increase in two and a half years midweek. European stock markets hit record highs, driven by optimism related to China's stimulus policies, leading luxury goods and mining stocks.

Major Events of the Week

1. Major Announcement! Joint Release of Policy "Combination Punch" by Various Authorities

Interest rate cuts and reserve requirement cuts arrived as scheduled, with the largest interest rate cut in nearly four years! On September 27, the People's Bank of China officially cut interest rates by 20 basis points, and the operation rates of 14-day reverse repurchase agreements and temporary reverse repurchase agreements in the open market continued to be determined by adding or subtracting points from the 7-day reverse repurchase operation rate in the open market, with the magnitude of the adjustment remaining unchanged; the overnight, 7-day, and 1-month standing lending facility rates were adjusted to 2.35%, 2.50%, and 2.85% respectively. Prior to this, Pan Gongsheng, Governor of the People's Bank of China, stated that the LPR and deposit rates are expected to decrease by 0.2-0.25 percentage points.

On September 27, the central bank announced a 50 basis point reserve requirement cut, with the weighted average reserve requirement ratio for financial institutions at around 6.6%. Pan Gongsheng stated that this move will provide approximately 1 trillion yuan of long-term liquidity to the financial market; and depending on the market liquidity conditions for the rest of the year, there may be further reductions in the reserve requirement ratio by 0.25-0.5 percentage points.

Beyond interest rate cuts and reserve requirement cuts, incremental monetary policies to stabilize the property and stock markets are on the way. In the property market, measures include ① reducing interest rates on existing home loans, with an average expected decrease of about 0.5 percentage points; ② unifying the minimum down payment ratios for first and second home loans, lowering the national minimum down payment ratio for second home loans from the current 25% to 15%; ③ increasing the central bank's funding support ratio for re-loans on affordable housing from 60% to 100%; and more.

In the stock market, structural monetary policy tools to support the capital market will be introduced for the first time, including securities, fund, and insurance companies' mutual exchange convenience, with an initial scale of 500 billion yuan, only for stock market investments; and a special re-loan for stock repurchases and holdings, with an initial quota of 300 billion yuan, an interest rate of 1.75%, and a 0.5 percentage point increase by commercial banks, totaling 2.25%; as for the establishment of the stabilization fund, it is under study.

Regarding the foreign exchange market, Pan Gongsheng stated that external pressures on the stability of the RMB exchange rate have significantly eased; to prevent exchange rate overshooting risks, the RMB exchange rate will be maintained at a fundamentally stable level of reasonable equilibrium. In the bond market, ① the central bank gradually matures the conditions for issuing basic currency through the secondary market trading of government bonds. The central bank, together with the Ministry of Finance, will optimize the pace and maturity structure of government bond issuance. ② The central bank will increase the investigation and punishment of illegal activities in the interbank bond market.

Chairman of the China Securities Regulatory Commission Wu Qing stated, ① the release of six measures to promote mergers and acquisitions; ② issuance of the "Guiding Opinions on Promoting the Entry of Medium and Long-Term Funds into the Market"; ③ release of guidelines on market value management for listed companies; ④ Further support China Investment Corporation to increase holdings in the capital market; ⑤ Significantly simplify the review process, encourage listed companies to strengthen industrial integration; ⑥ Improve the investment policy system of the national social security fund and basic pension insurance fund; ⑦ Support listed companies in issuing shares in stages.

Li Yunze, Director of the China Banking and Insurance Regulatory Commission, stated that ① specific reform plans have been formed in high-risk institution gathering areas; ② increase core Tier 1 capital for 6 large commercial banks; ③ plan to expand the pilot scope of equity investment in bank-owned financial asset management companies to 18 cities; ④ optimize the policy for renewing loans for small and micro enterprises; ⑤ insurance funds will increase investment in the capital market.

2. Authoritative Interpretation of the Seven Key Points of the Central Political Bureau Meeting

The Central Political Bureau of the Communist Party of China held a meeting on September 26 to analyze and study the current economic situation and deploy the next economic work. The meeting conveyed many important information and policy signals. The following seven key points were summarized by the Shanghai Securities News:

Key Point 1: The determination to stabilize growth is highlighted, and the 5% annual growth target is still "closely constrained"; Key Point 2: Increase the intensity of countercyclical adjustments in fiscal and monetary policies, and implement a powerful interest rate cut; Key Point 3: Promote the stabilization of the real estate market, with unprecedented attention to solving real estate issues; Key Point 4: Make efforts to boost the capital market, achieve a virtuous cycle of the stock market, real economy, and residents' wealth; Key Point 5: Further regulate law enforcement and supervision related to enterprises, allowing companies to focus more on their own development; Key Point 6: Combine promoting consumption with benefiting the people, and incremental policies to expand domestic demand are expected to be introduced; Key Point 7: Continue to increase efforts to attract investment and stabilize investment, bringing new impetus to China's economic development.

3. Several Federal Reserve Officials' Speeches, Not Ruling Out the Possibility of a Significant Rate Cut

Several Federal Reserve officials spoke intensively this week, believing that the current level of interest rates still puts pressure on the U.S. economy, not ruling out the possibility of further significant rate cuts.

Among them, Federal Reserve Board Governor Brainard strongly supported the decision to cut rates by 50 basis points last week, adding that further rate cuts would be appropriate if inflation continues to slow as expected. Governor Brainard also expressed full support for a 50 basis point rate cut. Chicago Fed President Evans said that more rate cuts may be needed in the next year, and rates need to significantly decrease.

However, Federal Reserve officials who opposed the 50 basis point rate cut in September stated that inflation risks still exist and the labor market has not shown serious weakness, so the pace of rate cuts should be well managed. She also hopes that the size of the balance sheet remains as small as possible. Minneapolis Fed President Kashkari expects the Fed to take smaller rate cuts in the future, with two more rate cuts this year, each by 25 basis points. Boston Fed President Rosengren also believes that the 50 basis point rate cut at this meeting does not "lock in" the pace of future rate cuts.

In addition, New York Fed President Williams announced this week the launch of the Benchmark Interest Rate Usage Committee, which will help the market use and understand benchmark interest rates; Fed Governor Quarles stated that they are reviewing the bank liquidity leverage ratio, but there are no adjustment plans yet From an economic data perspective, the US consumer confidence in September unexpectedly recorded the largest drop in three years, lower than all economists' expectations. However, the actual GDP growth in the US in the second quarter met expectations, and initial jobless claims at the beginning of the week indicated that the labor market remains robust, slightly easing concerns about a US economic recession, leading to a slight cooling of the expectation for a 50 basis point rate cut in November.

The latest data on the inflation index favored by the Federal Reserve on Friday showed that price increases in the US in August were lower than expected, which may prompt the Federal Reserve to continue further rate cuts for the remainder of this year and next year. After the data was released, there was a slight change in interest rate expectations, with traders believing that the likelihood of a 50 basis point rate cut by the Federal Reserve in November is slightly higher than a 25 basis point cut—the probability of a 50 basis point rate cut in November is around 54%, while the probability of a 25 basis point cut remains as high as 46%.

4. Hostilities escalate between Israel and Hezbollah

Israel launched its most intense bombing on Lebanon in nearly 20 years this week, with reports of casualties among Hezbollah missile and rocket unit leaders in the airstrikes. Israel, in turn, shot down missiles fired by Hezbollah towards Tel Aviv for the first time. Israel has rejected ceasefire negotiations, Prime Minister Netanyahu has abandoned the understanding reached privately with the United States, and has distanced himself from the suggestion of a 21-day ceasefire with Lebanon, vowing that the military will continue to bomb Hezbollah targets indefinitely. The escalating hostilities between the two sides have raised concerns of a full-scale war.

5. Impending strike by US port workers could result in economic losses of up to $7.5 billion

Approximately 45,000 dockworkers at major ports on the US East Coast and Gulf of Mexico are threatening to strike on October 1st. Ocean carriers and port operators have begun sending customer notifications and preparing contingency plans. Over half of the containerized goods entering and leaving the US pass through the trade gateways affected by the strike. According to an estimate, a week-long strike could result in economic losses of up to $7.5 billion. Analysts warn that as port congestion reduces capacity and drives up freight rates, the resulting chain reaction will have global implications.

6. OPEC+ to proceed with December production increase plan

Two sources within OPEC+ have indicated that OPEC+ will proceed with the plan to increase oil production by 180,000 barrels per day in December. According to individuals familiar with Saudi thinking, the country is prepared to increase production, abandoning the unofficial crude oil price target of $100 per barrel. This indicates that Saudi Arabia has accepted the decline in oil prices.

Iraq and Kazakhstan have committed to additional production cuts of 123,000 barrels per day in September, and further cuts in the coming months to compensate for production levels exceeding the agreed levels. A source mentioned that as the compensation plans for production cuts by these countries and the production data for September become clear, an increase in production will be allowed, as the impact of the increase will be negligible In terms of demand, OPEC is optimistic. The "World Oil Outlook 2024" report released on Tuesday predicts that global energy demand will grow strongly by 24% from now until 2050. The organization also forecasts that by 2029, oil demand will reach 112.3 million barrels per day, an increase of 10.1 million barrels per day compared to 2023.

7. OpenAI plans to restructure its core business into a for-profit company

OpenAI sees high-level personnel changes again, with Chief Technology Officer Mira Murati announcing her departure. It is also reported that OpenAI is developing a plan to restructure its core business into a for-profit company, no longer controlled by its non-profit board of directors. The non-profit company will continue to exist and hold a minority stake in the for-profit company. Sam Altman will receive ownership in the for-profit company for the first time. The restructured company's value could reach $150 billion.

8. Fumio Kishida to become Japan's new Prime Minister

67-year-old Fumio Kishida won the leadership of the ruling Liberal Democratic Party in the party's presidential election on Friday, becoming the party leader. The current Japanese Prime Minister and LDP President, Yoshihide Suga, had previously announced that he would not run for re-election, meaning that after this election, the new president will succeed as prime minister.

As a former Defense Minister, Fumio Kishida hopes to reshape what he sees as an unequal alliance with the United States, signaling potential tensions between Japan and the U.S. in the future. His approach to U.S. diplomacy will be a focus of market attention.

9. Australia stands pat, no rate cut likely in the near term

On Tuesday, the Reserve Bank of Australia kept interest rates unchanged at 4.35% for the seventh consecutive meeting. In its monetary policy statement, the RBA maintained its hawkish tone and indicated that it is not ruling out any measures to combat inflation.

The statement shows that current forecasts suggest that inflation will not return to target levels until 2026. Inflation remains above target levels and exhibits persistence. The committee is determined to restore the inflation rate to target levels. RBA Governor Brock stated at a press conference that interest rates will remain unchanged for a period of time, with no immediate consideration of a rate hike; the committee does not see a possibility of a rate cut in the near term.

10. Latest amendment to U.S. "Biosecurity Law" removes WuXi Biologics

According to the U.S. Congress website, on September 23, there was progress in the legislation of the U.S. "Biosecurity Law". In the latest amendment, WuXi Biologics has been removed, but WuXi AppTec, BGI Genomics, BGI Geno, and its subsidiary Complete Genomics remain on the list. At the same time, the proposal is to be renamed the "Foreign Access to U.S. Genetic Information Prohibition Act" and will further focus on human data-related businesses. Regarding the aforementioned changes, on September 25, WuXi Biologics stated that they have no response at the moment.

11. Taobao officially announces: WeChat Pay now available for payments on Taobao

According to official news from Taobao, starting from September 27th, consumers can use WeChat Pay when shopping on Taobao. After selecting "WeChat Pay" on the payment page upon completing the product selection, consumers can smoothly complete the payment. However, using the "WeChat Pay" feature requires updating to the latest version of the Taobao APP