Discover the new Insight Assistant and immediately experience the ‘Hong Kong Stock Market Turmoil’ that has surged to the top of Weibo’s hot search! Hong Kong stocks fell across the board in the morning session today, with the Hang Seng Index down 3.12% and the Hang Seng Tech Index down 5.19% by the midday close. However, the decline in Hong Kong stocks narrowed significantly in the afternoon, with the Hang Seng Index narrowing its loss to around 2% and the Hang Seng Tech Index to around 3.
5% by the time of writing. Additionally, the FTSE China A50 Index futures turned positive, having fallen nearly 2% during the session. Analysts have pointed out that the seesaw effect between the Japanese stock market and Hong Kong stocks in the Asia-Pacific region was prominent today, with Japanese stocks soaring and Hong Kong stocks selling off, which is considered a normal short-term correction after yesterday’s surge. Furthermore, some securities research reports have indicated that the volatility of Hong Kong stocks will significantly increase, and it is not ruled out that the market’s profit-taking is related to the correction. Looking specifically at today’s significant correction in Hong Kong stocks, on the morning of October 3rd, the real estate, pharmaceutical, and industrial sectors led the decline. By the midday close, Greenland Hong Kong fell 22. 78% to 0.61 HKD. Sunac China, Shimao Group, and Kaisa Group all saw declines exceeding 19%, while Evergrande fell 17.14%. The Hong Kong-listed Chinese securities index weakened, with Orient Securities down more than 12% and Xingye International down 8.14%. Technology stocks also weakened, with Dongfang Select down over 16%, Alibaba Health down 13.01%, and Kuaishou down more than 6%. Zhongtai International stated in today’s morning report that the current extremely steep violent lift is unsustainable, with the Hang Seng Volatility Index rising by 25. 5% to a level higher than the past year. The Hang Seng Volatility Index has only accompanied significant rises in the Hang Seng Index in April 2015 and at the end of January 2018. As the Hang Seng Index approaches the high point at the beginning of January 2023, coupled with the fact that short-term valuation repair has been very sufficient, it is expected that the volatility of Hong Kong stocks will significantly increase, and there may be pressure from profit-taking at high levels. UBS Global Research stated that, historically, October is one of the months when the Chinese stock market performs well, outperforming the monthly average by 1.5 percentage points. Due to improved market sentiment and lower positions, it is expected that short-term momentum will continue until mid-October. Daiwa Securities’ research report believes that many global long-term investors are eager to reduce their underweight position in China, with internet stocks becoming one of the focal points. In addition, Shanghai, Shenzhen, and Guangzhou have significantly relaxed restrictions on home purchases for non-local residents, and it is believed that the effectiveness of this round of loose policies will be better than previous ones. Due to the strong market sentiment, the short-term performance of real estate stocks has turned cautiously optimistic. Hong Hao, Chief Economist of SAGE Group, reiterated that the Chinese market is the most significant contrarian value investment opportunity this year, and for many analysts and traders, this is a once-in-a-lifetime historical market trend.Many current market indicators are historically significant, such as the five-day price increase and trading volume, both reaching all-time highs, and it is normal for there to be some pullback. Foreign capital is optimistic about Chinese assets in response to the recent surge in the Chinese market. Morgan Stanley has indicated that if the Chinese government announces more spending measures in the coming weeks, the Chinese stock market could potentially rise by 10% to 15%.
“The expectation of further fiscal expansion has returned to the table, allowing investors to view China from a reflationary perspective for the first time in a long while,” said Morgan Stanley’s Chief China Equity Strategist, Laura Wang, in an interview. “The last time investors viewed China through this lens was actually after the beginning of last year. At that time, global investors were valuing the MSCI China Index at an expected price-to-earnings ratio of around 12 times. ” Ray Dalio posted on LinkedIn on Monday, stating that China’s series of policy shifts last week can be compared to former European Central Bank President Draghi’s 2012 commitment to “do whatever it takes” to save the Euro. Dalio believes that the highly stimulative policies that will follow will help and support asset prices. “This is an important week, in fact, I think this week is very important and could be recorded in the annals of market economy history. As long as policymakers take the necessary actions, which require ultimate actions far beyond what is announced.” Dalio believes that the series of policy shifts last week is an important step in stimulating creative productivity. Considering that Chinese assets are still very cheap, various factors have jointly ignited the market’s ‘animal spirit,’ with a large number of investors entering the market to bottom-fish. Dalio stated that to achieve what he considers ‘perfect deleveraging,’ China needs to restructure assets and create money and credit in a balanced way (reducing interest rates below the level of inflation and nominal growth rate) to alleviate debt burdens without causing excessive inflation. Such ‘reflationary’ measures will make cash less attractive than other assets, thereby encouraging people to take risks. Policies that support the market and entrepreneurs are also stimulative and particularly beneficial in this situation. “These practices have begun to reignite bottom-fishing and ‘animal spirit,’ and we are now clearly seeing this happening.” Known as the ‘Father of Emerging Markets,’ Mark Mobius recently expressed his views that under the stimulus measures, the Chinese stock market has been revitalized. The intensity and timing of this round of stimulus have exceeded expectations, with the A-share index rebounding rapidly.In the short term, the rebound presents opportunities for industries such as technology and consumer goods. Transforming short-term optimism into a sustainable bull market requires time and further reforms. Mark Mobius pointed out that China is taking all measures to support economic growth and boost stock market confidence, including injecting liquidity into the stock market on a large scale, reducing the reserve requirement ratio for banks, and lowering interest rates.
Relevant departments are also supporting the real estate market by relaxing purchase restrictions, reducing the interest on existing mortgages, and lowering the down payment requirements for second homes. Compared to the measures taken earlier this year, the current policy has a greater impact. To date, the current round of policy stimulus has led to a strong market rebound, boosting confidence. Many investors who have been waiting for the right time to enter the market have seized the opportunity, driven both by fear of missing out and the fact that Chinese stocks are indeed undervalued. Behind the rise of Hong Kong and A-shares, the sensitive flow of foreign capital is undergoing significant changes, with a return to the Chinese market becoming the hottest topic. According to Bloomberg, many market observers have noted that funds that previously left the Chinese stock market for Japan and Southeast Asia are about to flow back. Stock markets in South Korea, Indonesia, Malaysia, and Thailand saw net outflows last week; BNP Paribas stated that over $20 billion has 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, said he is reducing long positions in Asia to fund the purchase of Chinese stocks. According to the latest interviews and research by Bloomberg, American hedge fund Mount Lucas Management has established long positions in Chinese ETFs, while Singapore’s GAO Capital and South Korea’s Timefolio Asset Management are buying Chinese blue-chip stocks. Sydney-based Tribeca Investment Partners is scooping up stocks related to China, such as Australian mining companies. David Aspell, Chief Investment Officer of Mount Lucas, said that many investors who had previously “long left the Chinese market are returning,” betting that the Chinese stock market will bottom out and rebound strongly before the economic recovery. He himself is betting on the rebound of consumer stocks like JD. com through tools such as call option spreads. (Source: Securities Times)
