A-shares market is closed, but A-shares ETF is still soaring!

During the National Day holiday, the strong surge in A-shares was forced to pause due to the market closure, but in recent days, A-shares have already started to "boil", setting the tone for the market opening after the holiday.

Funds from the A-share market have been continuously flowing into related ETFs in the Hong Kong and US stock markets. Yesterday, the Hong Kong-listed Sci-Tech 50 ETF surged by over 230%, while the Shanghai-Shenzhen 300 ETF, CSI ETF, and others also experienced significant gains.

According to statistics, Bosera Sci-Tech 50 ETF, XL Bosera ChiNext ETF, Southern Sci-Tech Board 50 ETF, and X-Southern ChiNext ETF led the gains, with increases of 106.19%, 60.22%, 28.79%, and 22.19% respectively on Wednesday. The Southern Sci-Tech Board 50 ETF surged by 234.29% intraday on Wednesday, but narrowed to 28.79% by the close.

At the same time, foreign capital has been heavily buying into Chinese concept stocks and related ETFs. The Chinese concept stock index rose by 6.5% overnight to its highest level since February last year, closing up nearly 5%.

Chinese concept stock ETFs continued their pre-holiday rally, with the MSCI China ETF-iShares (MCHI) rising by 6.6% yesterday, accumulating a total increase of over 22% in the past 5 trading days. The KraneShares CSI Overseas Internet ETF (KWEB) rose by 6.4% yesterday, with a total increase of over 31% in the past 5 trading days. The iShares China Large-Cap ETF (FXI) rose by 7.19% yesterday.

Statistics show that in the week before the holiday (September 23 to September 27), the assets under management of several Chinese concept stock ETFs such as KWEB, FXI, MCHI surged, with net inflows reaching new highs in nearly one to three years.

Hedge fund guru David Tepper previously publicly stated that he would increase his allocation to Chinese assets, and has purchased more "everything China" in the US after the rate cut, such as ETFs, futures, etc.

Current signs indicate that overseas hedge funds are accelerating their "bet on China". Yan Zhaojun, an analyst at Zhongtai International, stated that in the context of the A-share and Hong Kong stock market closure, the surge in the Hong Kong stock market volume perfectly reflects the characteristics of foreign and local funds in Hong Kong entering the market successively due to the fear of missing out.

What to expect in the future?

With the trading frenzy of "betting on China", market observers have noticed funds from other Asian regions flowing back into the Chinese stock market.

Market observers indicate that funds that previously left the Chinese stock market for Japan and Southeast Asian stock markets are about to return. Stock markets in South Korea, Indonesia, Malaysia, and Thailand saw net outflows last week; BNP Paribas of France stated that over $20 billion had been withdrawn from the Japanese stock market in the first three weeks of September. Eric Yee, a senior portfolio manager at Singapore's Atlantis Investment Management, mentioned that they are reducing long positions in Asia to provide funds for buying Chinese stocks According to the latest interview and research by Bloomberg, the US hedge fund Mount Lucas Management has established a bullish position in Chinese ETFs, while GAO Capital from Singapore and Timefolio Asset Management from South Korea are buying Chinese blue-chip stocks.

In addition, market research firm DataTrek Research stated that based on historical data, Chinese stocks still have room to rise.

The firm mentioned that when comparing the relative performance of iShares FTSE China Large Cap ETF (FXI) and SPDR S&P 500 ETF Trust (SPY) within a 100-day timeframe, Chinese stocks have outperformed US stocks by over 30 percentage points during positive policy shifts in 2009, 2015, 2023, and other similar times. Currently, they are only leading by 13 percentage points.

Chen Guo, Chief Strategist at CITIC Securities, believes that in this round of confidence revaluation, low PB companies in the Chinese stock market will be systematically revalued. Especially when the market confirms confidence in the bottom line of the Chinese economic and financial system and the absence of systematic risks, and when it confirms confidence that China can overcome the debt cycle deflation, then the Chinese stock market will no longer show a large number of state-owned enterprises trading below net asset value or even lower PB ratios