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

[winston]

China’s rich return to risky ‘snowball’ derivatives for yields

The stock market has since rallied further, sending many snowballs and DCNs through the knock-out levels

Snowballs grant investors bond-like coupons as long as the stock index they reference stays within a predetermined range – typically between 75 per cent and 105 per cent of the starting level.

A “knock-in” occurs if the lower end of the range is breached, handing the investor a potential loss equivalent to the drop.

When the market gains to the “knock-out” level, the investor gets paid the coupon for the holding period as the contract is terminated.

In April, CICC estimated the total market for snowballs and dynamic notes was about 100 billion yuan.

There’s a growing conviction among investors that any correction in the next year or two will not be steep enough to hit the downside cushion of the products, especially given the government’s commitment to support the market.

Source: Business Times

https://www.businesstimes.com.sg/compan ... ves-yields

[behappyalways]

Chinese Stocks Crash After Beijing Seeks To Contain Bubble: What Happens Next
https://www.zerohedge.com/markets/chine ... ppens-next

[winston]

China’s margin curbs threaten rally in stock market favourites

Investors chasing fast-moving trends face more uncertainty, as margin access can disappear quickly

The rule, in place since 2016, bars investors from using stocks with a price-to-earnings (PE) ratio above 300 as collateral to borrow funds for buying shares, either of the same company or others.

Thanks to a rally fuelled by enthusiasm for artificial intelligence (AI), the number of mainland-listed firms that now exceed this PE threshold has surged about 30 per cent on-year to 236.

Source: Business Times

https://www.businesstimes.com.sg/compan ... favourites

[winston]

CICC: A-shr Valuation Remains in Reasonable Range; Significance of Fundamentals Rising; Focus on 3 Themes

CICC’s report forecast that the uptrend of mainland A-shares since 2024's “9.24” is likely to persist.

Looking ahead to 2026, as Sino-US relations enter a new phase:-
1. The logic of reconstructing the international monetary order, is further strengthened;
2. The AI revolution enters a critical application period and
3. China's innovative industries achieve performance realization.

The significance of A-share fundamentals will continue to increase in 2026, whereas the movements of global and domestic resident funds, are also factors that cannot be overlooked.

The broker suggested focusing on three main themes:
(1) prosperous growth,
(2) breakthrough in external demand and
(3) cyclical reversal.

Chinese stocks fared excellently in the global market in 2025, with the Shanghai Composite Index setting a ten-year high, the broker said.

Previously, the broker had expressed its view that the bottom period was over; risk/ appetite was stronger than that in 2024; and prosperous investment returned to focus in terms of allocation.

The overall valuation of A-shares is still in a reasonable range and the capital side is expected to remain active.

Currently, global funds are still under-allocated to China, focusing on the power of international fund allocation rebalancing.

Domestic resident fund allocation demand has been activated by the profit effect.

From the end of this year to the first half of next year, the resonance of the Sino-foreign liquidity easing cycle and the high prosperity of growth industries are anticipated to bolster market upswing.

Source: AASTOCKS Financial News

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