China's stock market rebounds strongly while US stock funds face massive sell-offs

Investors typically judge the breadth of the market by observing the ratio of rising stocks to falling stocks.

According to data from KraneShares reported by Zhitong Finance and Economics APP, on Monday, a total of 5,088 stocks in the Chinese stock market rose, with only 4 stocks falling. The Shanghai Composite Index rose by 8.06%, reaching an increase of 8%, leading to a cumulative increase of 17% in September. This is the best performance in 16 years. In addition, housing restrictions in Beijing, Shanghai, and Shenzhen have been lifted, further driving the market up.

Another noteworthy phenomenon is that mainland Chinese investors are actively buying Hong Kong stocks, while Hong Kong investors are also actively buying mainland stocks.

KraneShares pointed out that the trading volume through the Northbound Trading Link (allowing Hong Kong and overseas investors to buy A-shares in China) is four times the usual volume, while the trading volume through the Southbound Trading Link (allowing mainland investors to buy stocks of Hong Kong-listed companies) is six times the usual volume.

Goldman Sachs strategist Scott Rubner stated that over the weekend, he received the most inquiries ever about the Chinese market. Rubner also mentioned, "This is a new trend, and the S&P 500 index is not a worthwhile investment target for October." He advised investors to focus on call options for iShares China Large-Cap ETF (FXI.US) and iShares MSCI Emerging Markets ETF (EEM.US).

Meanwhile, reports on Monday indicated that as of September 25th, investors have been reducing holdings of U.S. stock funds for the fifth consecutive week, mainly due to continued concerns about the health of the U.S. economy and cautious sentiment ahead of the U.S. presidential election.

According to data from the London Stock Exchange, investors sold a massive $22.43 billion worth of U.S. stock funds this week, marking the largest weekly net outflow since December 2022.

Last week, the weakness in U.S. consumer confidence further intensified concerns among investors about the labor market conditions, with the market beginning to worry that the Federal Reserve's unexpected 50 basis point rate cut was in response to a significant economic slowdown.

In terms of industry fund flows, investors withdrew $539 million from the consumer staples industry, ending a three-week streak of net buying. The real estate, industrial, and financial sectors also saw outflows of approximately $4 billion each.

In contrast to the outflows from stock funds, U.S. bond funds attracted $6 billion in net inflows during the week, maintaining a 17-week streak of fund inflows.

Among them, U.S. short to intermediate-term government and treasury funds performed the best, attracting around $3.13 billion in inflows, reaching the highest level in four weeks. In addition, U.S. taxable domestic funds and short to intermediate-term investment-grade funds also saw significant inflows of $2.21 billion and $1.17 billion, respectively At the same time, US money market funds also received a net inflow of $112.57 billion, the largest weekly inflow since December 2020