Last night, U.S. stocks experienced a sell-off; this morning, the Asia-Pacific markets also saw declines. However, the A-share and Hong Kong stock markets did not continue their weakness as they did yesterday. This morning, after a slight opening lower, both major stock markets launched a counterattack. As of 9:50 AM, the main stock indices of A-shares and Hong Kong stocks made a significant counterattack, with the indices briefly turning positive, but then the indices turned green again. Analysts believe there are three positive signs in the market:
Firstly, from a structural perspective, the financial and real estate sectors saw significant gains today. On one hand, the State Council Information Office will hold a press conference on promoting the stable and healthy development of the real estate market; on the other hand, there are market rumors that banks are lowering deposit interest rates.
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Secondly, from a capital perspective, the market liquidity has been extremely abundant recently. During yesterday's sharp market correction, the 1-day Treasury repurchase rate briefly hit around 1.5% at the end of the day. This means that a lot of capital, after cashing out from the stock market, did not leave the market.
Thirdly, there is also good news from the international front. According to Global Times, the British political scene has released signals of "restarting relations with China," and the British Foreign Secretary may visit China this week.
Contrarian Counterattack
Last night, U.S. stocks sold off, and overseas Chinese assets also weakened significantly. The FTSE China A50 index futures, which is highly correlated with Chinese assets, welcomed a counterattack. The index initially fell by more than 1%, but turned positive around 10 AM.
The A-share Shanghai Composite Index turned positive around 10 AM. A-share bank stocks fluctuated and strengthened, with city commercial banks leading the gains, with Chongqing Bank surging by more than 7%, followed by Chongqing Rural Commercial Bank, Changsha Bank, Chengdu Bank, Xi'an Bank, Guiyang Bank, Jiangsu Bank, and others.
The semiconductor industry also went against the market trend, with photolithography machine concept stocks opening strong. Guofeng New Materials once hit the daily limit, Jingrui Materials, Yida Shares rose by more than 10%, followed by Baolidi, Baichuan Shares, Nanjing Photoelectric, and others.
Securities stocks also surged, with Huaxiang Securities straight to the daily limit, followed by Southwest Securities, Guohai Securities, Haitong Securities, Tianfeng Securities, Guojin Securities, and others.
Hong Kong stocks, which plummeted yesterday, also rebounded today, with the Hang Seng Index and the China Enterprises Index both turning positive. The real estate and financial sectors both rose. In terms of news, Chengdu, Tianjin, and other places have seen further relaxation of real estate policies.The Chinese yuan has also seen a rise of a hundred basis points.
Three Positive Signals
The A-share market has been quite volatile recently. In fact, investors should understand two points: first, the trend of easing has not changed; second, the trend of liquidity has not changed. The emotional level of the entire market is high, which is partly due to the development of live broadcast platforms, and on the other hand, it is also due to the rapid dispersion of chips during the previous pull-up process, leading to an unstable chip pattern. Today, the main reasons why Chinese assets are stronger than the periphery are threefold.
Firstly, today's financial real estate rebound is quite good. On the one hand, the State Council Information Office will hold a press conference on promoting the stable and healthy development of the real estate market. Minister Ni Hong of the Ministry of Housing and Urban-Rural Development, and leaders from the Ministry of Finance, Ministry of Natural Resources, People's Bank of China, and the State Financial Regulatory Administration introduced the situation of promoting the stable and healthy development of the real estate market and answered questions from reporters. Since the direction of effort is real estate and local debt, it will inevitably be a major good news for the repair of banks' balance sheets. On the other hand, the market has also spread the news that banks have lowered deposit interest rates.
Secondly, recently, we can notice that the market liquidity is actually extremely abundant. Yesterday, during the sharp adjustment of the market, the 1-day Treasury reverse repo rate hit around 1.5% at the end of the day. This rate was very high on October 8th, but it was hit down during the market crash on the 9th. This means that a lot of money has been cashed out from the stock market and then did Treasury reverse repo, and Treasury reverse repo belongs to the field trade, which also means that these funds have not left the market.
Third, the recent geopolitical situation is relatively complex, but there are not a few positive signals. According to the Global Network, "The new British government is eager to restart relations with China," and many Western media have recently made such comments. According to media reports such as Reuters, British Foreign Development Minister Rami may visit China this week. On the 14th, British Prime Minister Starmer was asked about this visit in an interview with Bloomberg and said, "We will challenge when necessary, but we are also pragmatic and hope that our country can move forward and succeed." On the same day, British Business and Trade Minister Reynolds said that the previous Conservative government "did too little" in relations with China, and the UK "needs more contact with China"; the UK does not intend to follow the EU and will not impose additional tariffs on electric vehicles imported from China.