"Emerging Markets Godfather" responds to Wall Street's "bullish on China" call: Stock market frenzy is not over

According to the Zhitong Finance APP, Mark Mobius, a veteran on Wall Street known as the "Emerging Markets Godfather," recently stated in an interview that if policymakers continue to introduce measures to support the market, the rebound in the Chinese stock market may continue. Mobius' bullish view aligns perfectly with the views of Wall Street financial giants such as Goldman Sachs and Citigroup, who all believe that the surge in the Chinese stock market (including Hong Kong stocks and A-shares) since late September is not a flash in the pan. Instead, it marks the beginning of a new epic "long-term bull market" in the Chinese stock market driven by strong expectations of government stimulus policies for the financial market and the real economy.

"The bearish sentiment has been completely shattered, so we can expect the market to continue to be strongly bullish," said Mark Mobius, Chairman of the Mobius Emerging Opportunities Fund and a veteran investor in emerging markets for decades, in an email on Monday. He also emphasized in the interview that the duration of this rebound in the Chinese stock market will depend on "the various measures taken by the Chinese government to increase market liquidity."

The 88-year-old globally renowned fund manager turned bullish on the Chinese stock market earlier this year mainly due to significant measures to support the real estate industry introduced by the government. Since late September, the government has successively announced the latest stimulus measures including interest rate cuts, reserve requirement ratio cuts, liquidity support in the hundreds of billions, as well as the top-level policy tone of boosting the private economy, stimulating consumption, and comprehensively improving residents' income to boost the economy. As a result, the benchmark indices of the Hong Kong and A-share markets have rapidly surged in just a few trading days.

After a series of policy combinations were announced, Mobius quickly expressed that the strength and timing of this round of stimulus policies exceeded expectations, revitalizing the Chinese stock market. In the short term, the rebound is bringing significant investment opportunities for industries such as technology and consumer goods.

Since September 24th, the Chinese government has introduced a package of stimulus measures to boost the Chinese economy, while providing extremely strong liquidity support for the domestic financial market, and striving to revitalize the continuously sluggish real estate industry amid the throes of a debt crisis. This package of policies has significantly boosted global investors' confidence in the Hong Kong and A-share markets. It is understood that the benchmark index of the Hong Kong stock market, the Hang Seng Index, has risen by over 35% in the past month ending on October 7th, becoming the best-performing benchmark index among more than 90 global stock indices during the same period this year.

In a recent interview, Mobius reiterated his positive outlook on the Chinese stock market, stating that under the policy support to drive economic growth, the Chinese stock market will have a greater range of upside potential. However, when discussing the reopening of the Chinese A-share market after the National Day Golden Week holiday, he is not eager to blindly increase positions. "We are waiting for the market to stabilize, so the post-holiday market reopening is not a time for a large influx of positions."

"He said in an interview.

Before the opening of A-shares on Tuesday, the bullish sentiment on Wall Street was already very strong

Since the Golden Week holiday began last week, the overall Hong Kong stock market has continued its strong upward trend since the end of September, but on Tuesday, it experienced a sharp pullback under profit-taking pressure. Since September 24th, when the Chinese government introduced a heavyweight stimulus package, the Hang Seng Index has risen by as much as 18%. The Hang Seng Tech Index, which includes Chinese tech giants such as Alibaba, Tencent, and Baidu, known as the "barometer of Chinese tech stocks," has outperformed the Hang Seng Index, with a surge of up to 33% since September 24th.

In the U.S. stock market, this epic bullish trend in the Chinese stock market has spread to almost all ETFs related to the Chinese stock market—especially leveraged ETFs that go long on the Chinese stock market, as well as star Chinese concept stocks such as Alibaba and Baidu. The 3x long FTSE China ETF (YINN.US) saw a remarkable increase during the National Day holiday, with a surge of up to 130% since September 24th, while the 3x short CSI 300 ETF (CHAU.US) saw a similarly astonishing increase, reaching 129%. Chinese concept stocks and leveraged ETFs that go long on the Chinese stock market have skyrocketed in value in just a few days after a slump lasting for three years, highlighting the strong bullish sentiment of foreign capital towards the Chinese stock market.

From the trends of Hong Kong stocks and Chinese assets in the U.S. stock market, it is evident that most Wall Street investment institutions are undoubtedly very optimistic about the opening of A-shares. During the National Day golden period when A-shares were not trading, they significantly boosted the prices of Hong Kong stocks and Chinese concept stocks in the U.S. stock market, indicating that these foreign institutions are expecting a continued strong uptrend in A-shares after the opening next week. As expected, by the close of trading on Tuesday, the Shanghai Composite Index rose by 4.59%, the ChiNext Index surged by over 17%, and the total turnover of the Shanghai and Shenzhen stock markets exceeded 3.4 trillion, setting a historical record.

The government's massive stimulus plan has triggered a new wave of foreign capital inflows and a frenzy of upgrading investment ratings for the Chinese stock market. Some foreign institutions that have long been bearish on the Chinese stock market (including Hong Kong and A-shares), including global asset management giant BlackRock Inc. and Wall Street financial giant Morgan Stanley, have also shifted to a bullish stance. These foreign institutions have used substantial amounts of money to drive a massive rebound in the Chinese stock market. Wall Street investment banks and hedge fund institutions, which have long been cautious about the Chinese stock market, have suddenly turned overwhelmingly bullish on Hong Kong stocks and A-shares.

BlackRock, which has long been cautious about the Chinese stock market, recently announced an upgrade in its rating on Chinese stocks from "neutral" to "overweight." The institution believes that given the discount of the Chinese stock market compared to developed market stock markets is close to record levels, and with strong catalysts that could stimulate investors to re-enter the market, major institutions still have room to moderately increase their holdings of Chinese stocks in the short term.

Renowned billionaire investor David Tepper has advised investors to "buy everything" related to China. Tepper founded the hedge fund Appaloosa Management in 1993. He attributes his significant bet on the Chinese stock market to the massive stimulus package introduced by China this week. Tepper, who followed the global AI trend in 2023, is now urging investors to "buy everything" related to China and sell overvalued U.S. tech stocks like NVIDIAGoldman Sachs, known as the "vanguard of the global stock market bull market," has raised its rating on the Chinese stock market to "overweight" in its latest report, and has raised the target level of the CSI 300 Index from 4000 to 4600. The CSI 300 Index closed at 4256.10 points on Tuesday. Goldman Sachs has also raised the target level of the MSCI China Index, which covers core Chinese assets such as Alibaba, Tencent, and Kweichow Moutai, from 66 to 84, compared to the index's close at 76 on Monday. In terms of industry allocation, Goldman Sachs stated that due to increased capital market activity and improved asset performance, it has raised insurance and other financial institutions (such as securities firms, exchanges, and investment institutions) to "overweight." At the same time, Goldman Sachs maintains its "overweight" stance on Chinese internet and entertainment, technology hardware and semiconductors, consumer retail and services, as well as daily necessities.

Another Wall Street giant, Citigroup, recently published a research report stating that it has raised the target for the Hang Seng Index by 24% to 26,000 points by the end of June 2025, and set the year-end target for 2025 at 28,000 points. Citigroup has also raised the target points for the CSI 300 and MSCI China Index in the first half of next year to 4,600 and 84, respectively, with year-end target points set at 4,900 and 90.

Global investment institutions such as Wall Street are seeing significant funds flowing out of India and the Japanese and South Korean stock markets, seemingly starting to take profits and flowing into the Chinese stock market, which benefits from more favorable valuations and continued strong stimulus policies. The Nifty Index, the benchmark stock index in India, fell by 4.5% last week, marking its worst weekly performance since June 2022.

According to Nikhilesh Kasi, a trader at Goldman Sachs in India, the most frequently asked question by clients in the past two weeks has been "Are we seeing funds flowing from India to China?" To this, Kasi has clearly answered, "Yes," and explained that this trend is very evident based on the fund flow they have observed.

In its latest research report, CICC stated that EPFR's latest fund flow data shows that overseas active funds have seen their first inflow in 14 months. CICC's report shows that passive foreign funds continue to be the main inflow, with passive funds flowing into Hong Kong stocks and ADRs totaling $2.87 billion as of last Wednesday (September 26 to October 2), which is 3-4 times the size of the previous week and a new high since 2016. The core focus of foreign fund inflows last week was that overseas active funds turned into a net inflow of $190 million into A-shares, $120 million into Hong Kong stocks and ADRs. Although the scale is not large, it marks the first net inflow after 65 consecutive weeks of outflows since the end of June 2023**Regionally, the focus is mainly on actively managed funds investing in China and the entire Asian region. In emerging markets, the scale ratio of passive to active funds is close to 2:8, with active funds therefore dominating absolutely.

Core of cautious stance: Specific policy implementation on the fiscal side is needed to drive the economy forward

In this once sluggish stock market, some opposing voices still exist. According to analysts with a more cautious stance, the direction of the Chinese stock market depends on whether the government will take more specific stimulating measures to support economic growth, and whether it will wait for the government to support its stimulus plan with real money.

Rajiv Jain, the fund manager of the GQG Partners Emerging Markets Equity Fund, managing a fund size of up to $23 billion, expects that this rebound may be temporary, while Nomura economists warn that risks of a bubble burst similar to 2015 still exist.

The sudden new bull market in the Chinese stock market has raised concerns among some analysts that the gains may have gone too far, too fast. Some analysts doubt whether the Chinese market can continue to revive if deep-rooted economic issues (such as long-term imbalance in housing supply and demand) remain unresolved.

"Although the overall stock market response is very positive, to some extent it depends on the specific implementation of a strong fiscal stimulus plan." wrote the Amundi Investment Solutions strategy team, including Alessia Berardi, in a report. "In the short term, a combination of a series of monetary easing policies and targeted substantial housing support should bring temporary stimulus effects, but a more lasting recovery may require more decisive fiscal actions."

Tai Hui, Chief Market Strategist for Asia Pacific at J.P. Morgan Asset Management, said in a media interview, "For me, the change in direction and mindset of the authorities is very important, but the market expects specific consumer spending during the Golden Week holiday, as well as how the government follows up on implementing fiscal support, which will be key catalysts to sustain the strong stock market rally we have seen so far." "Some foreign investors may choose to wait for economic data to bottom out and wait for new policies to directly shift towards consolidation."

Lynn Song, Chief Economist for Greater China at ING Bank in Hong Kong, said, "There are still some major challenges to address, and this is not an easy road. We need to ensure that a series of policy measures can effectively stabilize the downward trend in the real estate market, rather than just leading to hot money flowing into the stock market." Lynn Song also stated that if the Chinese stock market cools down, bonds may benefit. "If any problems arise in the market next, we will certainly face the risk of returning to a similar environment as in the previous months."