The morning session of A-shares rebounded strongly. After a slightly lower opening, major indices surged suddenly. The A50 index even skyrocketed in a straight line. The Chinext price index rose by over 2.5%, with brokerages, insurance, foldable screens, consumer electronics, smart clothing, and other sectors leading the gains, and the number of rising stocks once exceeded 4,500. At the same time, $Hang Seng TECH Index (800700.HK)$ rose nearly 3% intra-day, among the component stocks, $LI AUTO-W (02015.HK)$Please use your Futubull account to access the feature.$XPENG-W (09868.HK)$ rose by about 9%, $XIAOMI-W (01810.HK)$ up nearly 4%, $MEITUAN-W (03690.HK)$ up nearly 3%.
So, what exactly happened? Analysts believe there are three main driving factors.
First, blue-chip stocks in the overall market continued to fall, and the overflow effect of liquidity was evident. Moreover, there was significant trading volume in the morning session, with the trading amount in the first half hour increasing by nearly 70 billion yuan.
Second, in September, both the fundamentals and liquidity have shown signs of marginal improvement. Domestic countercyclical policies are expected to be strengthened, and the recent strength of the yuan is evident.
Third, at the high-level meeting yesterday, it was proposed to make good use of existing reform achievements and important experiences, emancipate the mind, be pragmatic and realistic, keep pace with the times, and earnestly implement the reform tasks by fully mobilizing positive energies from all aspects. Emancipating the mind was specifically emphasized, indicating a clear expectation of deepened reforms.
Sudden surge
Overnight, although the performance of the external market was average, the A-share market showed astonishing buying power in the morning session. In the first half hour this morning, the trading amount of A shares approached 240 billion yuan, nearly 70 billion yuan more than the same period yesterday. This characteristic is also rare in recent times.
$FTSE China A50 Index (.FTXIN9.CN)$
From the perspective of the rising structure, individual stocks are also brilliant. The ChiNext Price Index rose more than 2.5%, with brokerage and other large financial stocks continuing to strengthen. China Galaxy rose more than 8%, Shanghai Chinafortune rose more than 5%, Oriental Securities, China International Capital Corporation, GTJA, China Securities, Zheshang Securities, etc. followed the rise. Insurance, folding screens, consumer electronics, and smart clothing led the way, with over 4,500 individual stocks rising in the entire A-share market. More than 40 stocks reached the daily limit, while there were no stocks that hit the lower limit. At the same time, the Hang Seng Tech Index rose by 3%, and Li Auto Inc. and Xpeng rose by about 9%.
On the other hand, sectors such as expressways, electrical utilities, and banks continued to adjust. Jiangsu Expressway fell more than 5%, Huaneng Lancang River Hydropower Inc., Guangdong Provincial Expressway Development, Shandong Hi-Speed, China Merchants Expressway Network Technology Holdings, China Construction Bank Corporation, Industrial and Commercial Bank of China, and other stocks fell by more than 3%. It can be seen that funds are overflowing from dividend sectors and flowing into mid-small cap stocks.
The three major driving forces
From the current situation, there are three main driving forces in the equity market.
Firstly, the overflow effect of liquidity is obvious. As the saying goes, when a whale sinks, all things thrive. In the early trading session today, large-cap stocks continued to decline, leading to an increase in the demand for mid-small cap stocks. At the same time, this change in the market pattern has led to the return of liquidity. As of 10:15 am, the turnover of the Shanghai and Shenzhen stock markets exceeded 300 billion yuan, an increase of nearly 100 billion yuan compared to the same time the previous day. Huafu Securities stated that the proportion of institutional investors' market value and the performance of the mid-small cap style are highly correlated. Generally, when the proportion of institutional investors in the total market value of A-shares increases, the market style tends to favor large-cap stocks. Conversely, when the proportion of institutional investors decreases, the market style tends to favor small-cap stocks.
Secondly, according to a research report from China Securities Co., Ltd., in September, both the fundamentals and liquidity have shown marginal improvement signals: the release of semi-annual reports; further clarification of the interest rate cuts by the US Federal Reserve in September, with Chairman Powell stating at the Jackson Hole central bankers' conference that the timing of monetary policy adjustments has arrived; it is expected that counter-cyclical policies domestically will strengthen, combined with the peak season of strong performances in September and October. However, the progress of economic recovery is expected to be slow, so it is advisable to maintain a defensive sector portfolio along with a high prosperity (benefiting from domestic and foreign interest rate cuts), and the proportion can be adjusted according to macroeconomic changes. Yesterday, the offshore renminbi rose significantly, and in early trading today, it continued to strengthen, breaking through the 7.09 level.
Thirdly, there are positive signals in the policies. At the high-level meeting held yesterday, it was pointed out that further comprehensive deepening of reforms is based on the comprehensive deepening of reforms since the new era, with a solid foundation and favorable conditions. It is necessary to make good use of the existing achievements and important experiences of the reforms, emancipate the mind, be realistic and pragmatic, keep pace with the times, and fully mobilize the enthusiasm of all parties, and make every effort to organize and implement reform tasks. Among them, the emphasis on emancipating the mind and being realistic and pragmatic has released clear and positive signals, which may have a greater impact on the recovery of confidence and expectations than the improvement in liquidity, and deserves high attention.
In addition, the central bank stated that in the next stage, the People's Bank of China will continue to adhere to a supportive monetary policy stance, strengthen countercyclical adjustments, comprehensively use various monetary policy tools, increase support for the real economy, and study measures to increase reserve volume. It will enhance the coordination of macro policies, support the consolidation and enhancement of the economic recovery trend.
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