China - Market Strategy 06 (Jul 24 - Dec 26)

[behappyalways]

'Bazooka' & Shanghai 'Glitch' Trapped Chinese Quant Funds In Massive Short Squeeze
https://www.zerohedge.com/markets/force ... sive-short


“Shareholders in some Chinese companies have cashed out more than $1 billion from their holdings in the past week, taking advantage of improving market conditions brought on by an adrenaline shot to the country’s economy.”
https://x.com/shehzadhqazi/status/1839339997486277118


Expired: Japan
Wired: China
https://x.com/zerohedge/status/1839459543979323882

[behappyalways]

Chinese Financial Executives Resign In Droves Amid Heightened Scrutiny
https://www.zerohedge.com/geopolitical/ ... d-scrutiny


Wow... look at that China ETF Call Volume!
https://x.com/AyeshaTariq/status/1839702010712436877

[winston]

CN Retail Investors Actively Open Accounts During National Day Holiday; Brokers Provide 24/7 Services

During the National Day holiday, investors opened accounts actively, according to Chinese media.

Many investors submitted applications for opening an account through the online system early in the morning, and the proportion of new account customers from the internet was high recently.

Other brokers such as Orient Securities and Guolian Securities also arranged for their staff to be on duty during the National Day holiday or provide 24/7 account opening and enquiry services.

Account-related enquiries spiked over 5x, retrieve password enquiries soared by 6x, and account opening enquiries also surged by 4x, compared with the period before the market rally, HAITONG SEC (06837.HK) said.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN

[winston]

<Research>HSBC Global Research Upgrades CN Mkt to Overweight; Valuations Still Attractive, Not Too Late to Enter

HSBC Global Research has released a report upgrading the Chinese market from Neutral to Overweight as the authorities have introduced a series of bold stimulus measures that marked a market turning point and may potentially provide an opportunity to outrun the market.

Given that the current valuations of the Chinese market remain attractive, it is still not too late to enter.

The report noted that after a 28% rebound in the FTSE China over the past two weeks, some investors are questioning whether the ship has already sailed.

However, the broker did not think so.

An anatomy of 30 historical rebounds of over 10% in the FTSE China since 2005 shows that the average rebound lasts 76 trading days with an average gain of 38%, and at least a quarter of the rebounds have seen gains close to 60%.

Consequently, China's valuation remains attractive, with an 18% discount compared to emerging markets and a historical discount rate of 5%.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN

[behappyalways]

China rally spurs US$7 bil loss for shorts of US-listed stocks
https://www.theedgesingapore.com/news/c ... ted-stocks

[winston]

China Stock Traders Ponder How Far Blockbuster Rally Can Go

by Winnie Hsu

The Hang Seng China Enterprises Index has gained 35% since last month’s low.

The way forward for Chinese equities depends on whether Beijing will follow up with more concrete measures to prop up the economy.

China saw 21.4 million railway trips on the first day of the holiday, a record single-day volume.

While the market response has been generally positive, much will depend on whether a robust fiscal stimulus package materializes.

“In the near term, the combination of monetary easing and targeted housing support should provide a temporary uplift, but a longer-lasting recovery will require more decisive fiscal action.”

Source: Bloomberg

https://finance.yahoo.com/news/chinese- ... 08812.html

[winston]

China stock scepticism gets louder as world-beating run extends

Invesco, JPM, HSBC and Nomura are among those viewing the recent rebound with skepticism and waiting for Beijing to back up its stimulus pledges with real money.

“In the short term, sentiment could overshoot but people will go back to fundamentals”.

“Because of this rally, some stocks have become really overvalued” and they lack a clear value proposition based on their likely earnings performance, he said.

Stimulus announced by Beijing has included interest-rate cuts, freeing-up of cash at banks, billions of dollars of liquidity support for stocks and a vow to end the long-term slide in property prices.

“The policies announced so far can help to smoothen out the de-leveraging process, but the balance-sheet repairing would still need to take place.”

“The rally can run, there’s a lot of money that still needs to rebalance, especially from global investors”.

“We know valuations are still below mean and could run further from a technical view. This could have more legs and how much it goes into earnings is a bigger question”.

“A stock market mania would be followed by a crash, similar to what happened in 2015”. That outcome may have a “much higher probability” than more optimistic scenarios.

China’s bonds have dropped since the stock rally started, ending at least temporarily a period in which yields set successive record lows as investors bought haven assets.

“We need to ensure that this policy blitz is effective in stabilising the downward trajectory of the housing market and not just result in a rush of hot money to equities.”

Source: Business Times

https://www.businesstimes.com.sg/compan ... un-extends

[winston]

China’s economy is in bad shape. Can its ‘whatever-it-takes’ stimulus effort turn things around?

by Juliana Liu

So far, the measures announced have focused on monetary policy, which typically refers to decisions made by central banks to influence the cost of borrowing and control inflation.

Beijing has largely held back on unveiling fiscal measures, which can include the use of taxation or other measures to impact public spending.

“The elephant in the room seems to be a lack of consumer confidence”.

“What is really needed is for the authorities to deploy the proverbial ‘big guns’ to push out more fiscal policies. Such a move could address this crisis of confidence, improve risk appetite and reflate the economy.”

After years of delay, the leadership appears to be moving decisively.

Source: CNN

https://amp.cnn.com/cnn/2024/10/06/busi ... g-hnk-intl

[behappyalways]

If the Chinese government does break out their stimulus cannon in proper size, we could see a rather dramatic rise in valuations as measured by forward P/E in the region's stocks.
https://x.com/Mayhem4Markets/status/1843240910265709046




International investor allocations into Chinese stocks are near their lowest levels in over a decade, per EFPR
https://x.com/Mayhem4Markets/status/1843241503306793111

[winston]

China Strategy - Awaiting for fiscal measures details

The National Development and Reform Commission (NDRC) held a press conference immediately after the “Golden Week” holiday regarding the economic policies yesterday (8 October).

Markets had been expecting a fiscal package of around CNY2t as reported in the media. However, the press conference held yesterday was likely disappointing to the market as the size of the fiscal stimulus package was not mentioned.

The Hang Seng Index (HSI) pulled back by 8-9% yesterday (8 October) on a combination of profit taking, disappointment from the NDRC press conference and rotation to the onshore A-share market while the CSI 300 Index rose 6% with a record turnover of CNY3.4t.

Nevertheless, the NDRC reiterated the policy tone to accelerate the implementation of a package of incremental policies to promote the upward economic structure and development, focusing more on household living conditions and consumption.

Having risen by 15-33% since the policy trio announcement on 24 September, valuation multiples of HK and Chinese equity markets have more or less “normalised” to historical average levels.

While we acknowledge that earnings and fundamentals will take time to demonstrate improvements and recovery, we believe upside risk is possible if fiscal policy support measures are to follow in a timely manner, supporting an earnings-driven market rally with economic recovery.

We look at the past four market rallies over the last decade to gauge where the markets are trading.

On average, offshore (i.e. MSCI China Index) and onshore (i.e. CSI 300 Index) Chinese equities market increased by 76% and 74% with valuation multiples expanded by an average of 66% and 65% respectively.

Current market valuations of most of the HK and Chinese equities market index have recovered to the peak of the re-opening rally in 2022-23, except ChiNext Composite Index. However, they are still below those in the 2016-18 earnings-driven rally and the 2020-2021 post-Covid rally.

After the more than 20% rally for MSCI China over the past two weeks, the risk-reward of the onshore A-share market appears to be relatively more attractive at the index level in the near-term.

With the onshore A-share market is more sensitive to policy stimulus and more momentum-driven with higher level of retail investor participation, it is likely to have a higher chance to overshoot.

We continue to view that the prime beneficiaries remain with the large-cap, index-heavy internet and platform companies and leading consumption names.

We change our cautious stance on consumer sector and prefer leading players. At the sector level, consumer discretionary, consumer staples and communication services are our most preferred sectors. We refresh our focus list on China equities.

Source: OCBC