Chinese assets surge again, all rising across the board!

Chinese assets are experiencing a unique rally!

Last night, due to Iran's missile attack on Israel, most global markets experienced a sharp decline. This morning, the Japanese and South Korean stock markets also fell across the board. However, Chinese assets have surged at this time. Last night, triple-long FTSE China ETF skyrocketed over 12%, and the Nasdaq China Golden Dragon Index rose by over 5%.

In the morning session today, the Hong Kong stock market once again exploded. The Hang Seng Technology Index rose by 7%, the Hang Seng China Enterprises Index rose by nearly 5%, and the Hang Seng Index rose by over 4%.

Chinese assets surge across the board again

Last night, the US stock market plummeted across the board, causing an impact on the Asia-Pacific markets this morning. However, this did not affect the trend of Chinese assets. Last night, the triple-long FTSE China ETF surged over 12%, the Nasdaq China Golden Dragon Index rose by over 5%, and Pinduoduo surged by 8%.

In the morning session today, the Hong Kong stock market surged across the board. The Hong Kong Hang Seng Index opened with a 0.74% increase, and the Hang Seng Technology Index rose by 1.86%. Subsequently, the major indices quickly expanded. Chinese brokerage stocks continued to soar, with Shenwan Hongyuan Hong Kong surging by over 63%, CICC International rising by over 39%, and Guotai Junan International rising by over 21%.

The real estate sector saw even greater gains. Sunac China surged by 37% at one point, Beike surged by over 18%, Vanke Corporation surged by over 17%, while Shimao Services, Sunac Services, Country Garden Services, Greentown China, and others surged across the board.

Some well-known individual stocks also saw significant gains, with Meituan surging by over 7% at one point, Postal Savings Bank of China rising by over 8%, Bilibili skyrocketing by 13%, Oriental Zirconium rising by over 8%, as well as gains of over 5% for Li Auto, JD.com, Pop Mart, Kingdee International, SMIC, Xiaomi, Kuaishou, and more.

It is worth noting that the FTSE China A50 Index also saw gains expand to over 5% at one point.

Huatai Securities stated that under the warm policy environment last week, the Hang Seng Index broke through the 20,000 mark and has surpassed the high point in May this year as of September 30, with some room to reach the early 2023 high point. Currently, attention should be paid to the risk premium and the short interest ratio, which have reached extreme levels:

Short interest: As of September 30, the short interest ratio of the Hang Seng Index fell to 7.5%, below the normal range of 10%-20%, at the 4th percentile since 2010; Foreign capital: Trading volume and passive foreign capital improved last week, while active foreign capital still saw a net outflow; Southbound capital: The net inflow scale of Southbound capital narrowed last week, with trading accounting for over 30%, and on September 30, Southbound funds once again saw a significant net inflow, with the AH premium back above 148; Industrial capital: The enthusiasm for buybacks has cooled down, with software and services, banks, retail, and other sectors leading in terms of buyback market value ratio.

Foreign institutions make a big turn

On October 1, BlackRock Investment Research Institute stated that it has upgraded its rating on Chinese stocks from neutral to overweight. The institution believes that given the record discount of Chinese stocks compared to developed market stocks and the potential catalysts that may stimulate investors to re-enter the market, there is still room for moderate increase in holding Chinese stocks in the short term. There were previous rumors that the institution was leaving China.

On September 30, Goldman Sachs pointed out in its latest research report that with the government's introduction of strong growth-promoting policies and the gradual normalization of the e-commerce market environment, the market share of major e-commerce platforms is stabilizing, making the e-commerce industry one of the most important areas for revaluation in the Chinese internet sector. Goldman Sachs has raised its preference for e-commerce to the top two positions in its sub-sector of the Chinese internet industry, tied with the gaming industry Goldman Sachs pointed out that the median price-to-earnings ratio of the Chinese internet industry for the next 12 months is 14.3 times, still more than 40% lower than that of the US internet industry. The valuations of e-commerce companies such as Alibaba, Pinduoduo, and JD.com are only 9-12 times, still below the median of the Chinese internet industry, indicating significant potential for value reassessment.

In addition, foreign media reports that global investors are preparing to return to China. Institutional investors managing over a trillion US dollars in client funds have stated that measures taken by the Chinese government to attract more cash into the stock market and stimulate consumer spending have enhanced the attractiveness of Chinese companies. Gabriel Sacks, an emerging markets portfolio manager at UK asset management firm Abrdn, stated that the group "selectively" purchased Chinese stocks last week.

CICC (Hong Kong) believes that reviewing the performance of the Hong Kong stock market during the Golden Week holiday over the past 10 years, the historical probability of the Hong Kong stock market achieving positive returns during this period exceeds 70%. Only in 2018 and 2023 did the market experience declines during the National Day holiday (corresponding to the escalation of US-China trade tensions after former US President Trump took office and the escalation of geopolitical conflicts between Israel and Palestine, respectively, impacting risk asset performance). The probability of positive returns for the Hang Seng Index and the Hang Seng Tech Index during the National Day holiday over the past 10 years reached 70.0% and 77.8% respectively, with average returns of 1.54% and 1.82%. The best performance during the National Day holiday was in 2015, with the Hang Seng Index and the Hang Seng Tech Index accumulating gains of 8.01% and 6.62% respectively, mainly driven by the monetary settlement of shantytowns in 2015, boosting industries such as real estate and initiating a bull market in Hong Kong stocks dominated by the real estate chain. In this round, as domestic economic support policies continue to be implemented and the economic outlook marginally improves, the downward trend in interest rates overseas is confirmed. The Hong Kong stock market will first undergo a valuation bottoming out, with future trends leaning towards the upside. Stocks in interest rate-sensitive industries, including internet leaders, pharmaceuticals, and consumer goods, have greater price elasticity.

Source: Securities Times