China's policy combination boosts confidence in the international market, with overnight Chinese stocks surging to a two-year high, hand in hand with the renminbi soaring. In early trading on September 25, offshore renminbi against the US dollar broke through the 7.0 mark, the first time since May last year.

The surge of Chinese assets has become the focus of heated discussions. Goldman Sachs' conference call was overloaded, with attendance reaching maximum capacity, addressing the five most important questions from clients during the meeting.

Q1: Is trading active?

Yes, the trading volume has explosively increased.

Hong Kong stock trading volume increased by 137% compared to the 20-day average, Shanghai Stock Exchange increased by 83%, and Shenzhen Stock Exchange increased by 66%. Similarly, Goldman Sachs' trading volume in Hong Kong stocks increased by 143% compared to the 4-week average, while A-shares increased by 154%.

Q2: Are long-term investors buying?

Yes.

Goldman Sachs stated that their buy volume in H shares and A shares is 1.87 times, with buying mainly concentrated in Hong Kong. In Hong Kong, hedge funds are net buyers, accounting for 22% of our flow. Long-term investors became more active in the afternoon's trading, ultimately resulting in a buy volume in Hong Kong that is 2.77 times, representing 78% of the total flow. Buying is concentrated in the financial, consumer goods, and ETF sectors.

Q3: Is this rise due to short covering?

No.

Goldman Sachs Hong Kong TOP SHORT basket rose by 3.6% today, lower than the Hang Seng Index's 4.13% increase. This indicates that short positions have not been under pressure. It is worth noting that hedge funds had begun covering in Hong Kong before today, with a long and short ratio of 3.2 (peaked at 3.5).

Q4: How did the southbound funds perform in this rebound?

Sell.

Southbound funds accounted for 15% of today's trading volume, with a net sell of 0.553 billion US dollars, mainly selling Tencent, Meituan, and ETF 2800 HK.

Q5: What are the observations on other assets?

• Derivatives market: Trading is very active, with frequent call option trading on A shares and H shares indices, including A50, CSI300/500/1000, and HSCEI.

• Index swap: Seeing buying of CSI500/1000.

• Futures market: The morning session is relatively quiet, but the buying from hedge funds and macro funds increases in the afternoon, and also witnessing buying from hedge funds on commodities such as iron ore, copper, gold, etc.

Goldman Sachs' conclusion is: The upward momentum can continue.

Editor/Lambor