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

[behappyalways]

Alibaba, JD.com lead China selloff after latest Beijing warning
https://www.theedgesingapore.com/news/c ... ng-warning

[behappyalways]

Chinese government instructed Chinese semi companies to issue press releases saying their own stocks might be overvalued and to tell investors to be prudent
https://x.com/JackFarley96/status/2072392392582353296

[winston]

China’s tax crackdown shakes A-share and Hong Kong-listed firms with major payouts

by Julie Zhang

China’s anti-tax evasion campaign is sweeping across the A-share and Hong Kong stock markets, with at least 80 listed firms already having been ordered to pay back corporate income taxes and late fees to local authorities.

The number of listed companies involved in the first half of the year is likely to soon surpass the total of 89 for full-year 2025, raising concerns that Beijing’s taxation drive could be extended amid local debt black holes, which would threaten corporate earnings, cash flows and investor sentiment.

Pharmaceutical, new materials, chemicals, environmental protection, agriculture and information technology firms, accounted for most of the cases, according to Shanghai-based Wind, a Chinese financial market data provider.

Source: SCMP

https://www.scmp.com/economy/article/33 ... pe=section

[winston]

Chinese traders unwind leveraged bets at fastest pace since 2016

The outstanding balance of debt taken out for stock purchases in Shanghai and Shenzhen, fell by 2.8% to 2.75 trillion yuan (US$405 billion or RM1.66 billion) on Friday, the fastest pace of contraction since January 2016,

Star 50 index falling more than 7% and the CSI 300 Index losing 3.6%.

Source: Bloomberg

https://theedgemalaysia.com/node/811287

[winston]

China: Hedge Funds

China’s quantitative hedge funds saw some of their steepest drawdowns last week as a local market rout deepened following the global selloff in chip stocks.

A quant fund at DeepSeek founder Liang Wenfeng’s investment firm slumped 15.7% in the week ended July 17, according to data seen by Bloomberg.

The sharp drawdowns highlight the impact of the wild swings in artificial intelligence-related stocks, which surged earlier this year before plunging recently as worries of a bubble intensified.

Source: Bloomberg

[behappyalways]

"23 ETFs favored by Central Huijin—a subsidiary of China’s SWF—or its asset mgmt arm recorded 96.1B yuan in net inflows last wk, signaling potential state buying.
https://x.com/ChinaBeigeBook/status/2079252307493916710


China's government just pumped 13.8 Billion Yuan ($2 Billion USD) into their largest ETF tracking semiconductor stocks, the fund's largest inflow in history
https://x.com/Barchart/status/2079398033511330274

[winston]

Investors shift focus to China’s July Politburo meeting for stock-stimulus clues

by Zhang Shidong

The Communist Party is expected to kick off its July Politburo meeting next week.

The high-level huddle’s policy rhetoric could also sway China’s US$15 trillion onshore stock market, which is at a crossroads after regulatory intervention to restore investor confidence.

Source: SCMP

https://www.scmp.com/business/china-bus ... pe=section

[winston]

JPM: China Equity Strategy - Policy put emerges after tech sell-off, 2Q earnings catalyst

Policy put emerges after AI-led deaveraging. The sharp AI-led onshore sell-off has finally triggered a policy response.

Over the weekend, China Reform Holding and China Chengtong announced Rmb60bn of purchases in onshore equities and ETFs, while indicating they will continue to add holdings.

Notably, tech companies were explicitly included alongside central SOE stocks and ETFs. Our ETF flow tracker shows a swift reversal over the past week across both benchmark ETFs and AI/tech-focused products such as STAR 50 and STAR Chip ETFs.

Daily A-share buybacks have also recently surged to a YTD high. Positioning also looks less stretched, with the A-share margin-buy ratio normalized and, regionally, Korea’s leveraged ETF unwind estimated to be ~75% through.

However, a more sustainable market rebalancing in China equities still requires stronger fundamental support from non-AI and domestic demand cohorts, which appears limited at this stage.

Our China economists expect additional policy support could be introduced after the July Politburo meeting if June activity data and 3Q momentum remain soft.

JPM China AI ecosystem top picks are Zhongji Innolight, Victory Giant-H, JCET-A and Weichai-H in the global supply chain, and NAURA, AMEC-A, Baidu, Zhipu and Iluvatar CoreX as localization plays.

We think China’s AI ecosystem can reassert leadership during the earnings season, outperforming on both 2Q results and 2H guidance.

Source: JPM

[winston]

A-shares: crowded trades meets a liquidity test.

The Shanghai Composite and CSI 300 Indices fell 4.6% and 2.8% over the past two weeks, leaving them down 3.9% and up 0.4% YTD, respectively.

The recent pullback was driven by caution ahead of large IPOs (e.g. CXMT) and profit-taking in crowded AI and semiconductor stocks, with a rotation into resources and banks.

Because the selling was concentrated in prior growth winners rather than a broad-based correction, the movement appears more like a positioning reset than a macro capitulation.

Source: UOBKH

[winston]

China’s social security fund boosts stakes in A-share firms in first 7 months, data shows

by Julie Zhang

China’s social security sovereign fund cast a vote of confidence in the onshore stock market by increasing stakes in A-share companies in the first seven months of this year, financial data showed.

“[The fund] is investing in China’s tech sector to capture its faster growth rate”.

“It should be positive for those who are chosen by long-term capital.”

The buying came as the CSI 300 Index, which tracks the 300 largest and most liquid stocks listed on the Shanghai and Shenzhen exchanges, slipped 0.98 per cent on Monday, bringing its year-to-date decline to 3.7 per cent.

Global sell-offs in artificial intelligence stocks have spilled over into A shares.

Source: SCMP

https://www.scmp.com/business/banking-f ... pe=section