On September 24, the People's Bank of China, China Banking and Insurance Regulatory Commission, and China Securities Regulatory Commission made a significant announcement at the State Council press conference, releasing policies related to "reducing existing housing loan interest rates, further reducing reserve requirements, vigorously developing equity funds, and arrangements for mid- to long-term funds entering the market."

Affected by the bullish news, Chinese concept stocks collectively surged, with the triple leveraged China Large Cap ETF skyrocketing by 30% in a single day, attracting the attention of the entire market; the Nasdaq Golden Dragon Index of China achieved its largest two-year increase.

In fact, looking at the top gainers of Chinese concepts this month, sectors such as consumer discretionary, internet, and brokerage have been rising continuously for several days, with the largest increase of nearly 50% for the month. $NIO Inc (NIO.US)$ Among American stock investors, there are more 'smart money' strategically positioned, conveying what signals behind this?

How long can this round of market trends last? Let's take a look at the latest analysis from Wall Street.

Behind the surge in Chinese concept stocks in this wave, there are actually a series of catalysts at play. In terms of overseas factors, the significant rate cut by the Federal Reserve had a notable short-term boost on the trend of risk assets such as stocks, leading to a 4% increase in the Chinese concept index after the September 18 interest rate meeting; furthermore, yesterday, a slew of favorable domestic policies were introduced, with reserve and rate cuts expected not only to drive domestic economic development but also to inject incremental funds into the stock market, causing the Chinese concept index to skyrocket 9% overnight.

In addition, the appreciation of the renminbi and the long-term undervaluation of Chinese assets may both serve as important drivers for the influx of overseas funds into Chinese concept stocks. It is widely believed that the rise in the renminbi exchange rate will further enhance the attractiveness of Chinese assets, attracting more global funds to flow in.

In addition, the Chinese stock market has long been at a low valuation. With the gradual improvement of domestic company performance, high-quality leading Chinese concept stocks may undergo value reassessment. According to statistics from Kaiyuan Securities Research, the current valuation of some e-commerce leading enterprises is only around 8 times, less than 9 times. While the valuations of some comprehensive internet companies or technology Chinese concept stocks have reached 15 times. Compared to overseas markets, such as Nvidia and other M7 companies, the PE ratios of these Chinese concept stocks are indeed lower. If the US cuts interest rates in the future, long-term funds will reallocate assets.

Meanwhile, despite the gathering favorable factors, foreign capital is still significantly underweight in Chinese assets. Industry insiders have told domestic media that hedge funds' allocation to the Chinese stock market is only 6.8%, hitting a five-year low, lower than in February this year and about 1% lower than the peak in April-May. There is still a lot of room for increased shareholding.

However, with recent favorable policies coming out frequently, Wall Street investment banks have also voiced their optimism, actively bullish on China's capital markets and Chinese concept stocks. Bank of America pointed out that a series of measures launched yesterday will immediately provide liquidity to the market. Furthermore, if the market performs well and lasts long enough, it will further promote the return of individual investors and overseas investors, helping to stabilize the market.

The latest interpretation by analysts at JPMorgan Chase believes that the comprehensive stimulus measures introduced by the central bank on Tuesday are the most extensive loosening policy since 2015. Currently, the short-selling ratio in the Hong Kong market (as a percentage of turnover) has dropped from 15-22% last week to 13.6% on Tuesday, lower than the average level since 2016, indicating that a large amount of short positions have been covered.

Additionally, according to investor feedback, due to the lackluster performance over the past four years, many global investors have reduced their holdings of Chinese assets. However, they are willing to return when the timing of stimulative policies is right. Overall, the current policy-driven market rebound is evident, but further fiscal stimulus and further coordination of structural policies will be needed in the future.

The Chinese concept stock market is on the verge of breaking out, how should one deploy?

Yesterday, Hong Kong stocks and Chinese concept stocks collectively surged. Some media outlets pointed out that overseas hedge funds' funds may be the main force of foreign inflows. Looking at the list of top gainers, industry preferences for funding are quite obvious, including - consumer, high dividends, and internet.

JPMorgan suggests focusing on the real estate, discretionary consumer, and materials sectors, especially companies benefiting from lower down payments and mortgage rates, such as $KE Holdings (BEKE.US)$ and $JD.com (JD.US)$ 。另外，教育板块中的龙头企业，如 $TAL Education (TAL.US)$ ，其在行业整合后市场地位或能更为稳固。

天风证券表示，全球市场比较下中国资产当前仍具性价比，在预期逐渐修复、期待后续基本面逐渐改善的基础上，当前港股中概仍具估值吸引力，风险回报比High. In terms of Chinese concept stocks, institutions provide focus and target recommendations:

First is internet platforms, including $Alibaba (BABA.US)$Please use your Futubull account to access the feature.$Bilibili (BILI.US)$Please use your Futubull account to access the feature.$PDD Holdings (PDD.US)$ Wait;

The second is the new energy vehicle startups, including $Li Auto (LI.US)$Please use your Futubull account to access the feature.$XPeng (XPEV.US)$ Wait;

The third is new consumer trends, including $POP MART (09992.HK)$Please use your Futubull account to access the feature.$MINISO (MNSO.US)$Please use your Futubull account to access the feature.$Luckin Coffee (LKNCY.US)$ Wait;

Fourth, OTA & travel, such as$Trip.com (TCOM.US)$ , as well as stocks potentially benefiting from policy reversals $New Oriental (EDU.US)$ According to documents filed with the U.S. Securities and Exchange Commission (SEC), some of the most prominent actions Third Point took in the second quarter, respectively, were to establish positions, shareholding of and more.

The volume surged in the Chinese large cap ETF, skyrocketing overnight!

Recently, the US stock market has also received high attention on Chinese concept ETFs and related options. Overnight, $iShares China Large-Cap ETF (FXI.US)$ Volume soared nearly 10%, with a turnover exceeding $5 billion, three times as much as the previous day, ranking tenth in the entire US stock market.

In addition, triple long position on the Chinese large cap $Direxion Daily FTSE China Bull 3X Shares ETF (YINN.US)$ Growth approaching 30%, the daily return rate leading the entire US stock ETF market; double long position on Chinese internet stocks $Direxion Daily CSI China Internet Index Bull 2x Shares ETF (CWEB.US)$ Also rose by over 20%.

The options market is also very hot. $iShares China Large-Cap ETF (FXI.US)$ Multiple call options expiring this Friday have all earned tens of times the profit, with premiums rising up to 75 times.

According to Futu's previous reportBefore this round of Chinese concept stock market boom, 'smart money' quietly accumulated, buying a large number of call options for this ETF. Approximately 0.03 million FXI call option contracts changed hands on Monday, allowing holders to purchase 3 million shares at a price of $29.50 per share before October 18. The trading volume of call options on that day reached the highest level since July, 3.5 times the trading volume of put options.

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