After the Chinese government implemented a series of bullish policies, Chinese stocks surged last week. The CSI 300 Index soared by 15.7% last week, marking the strongest weekly performance since November 2008. The Hang Seng China Enterprises Index rose for 11 consecutive trading days, achieving the longest uptrend since 2018.

This has attracted recommendations from numerous Wall Street giants. They believe that these bullish policies demonstrate the Chinese government's determination to support the economy, thus the momentum in Chinese stocks can continue. Stephen Jen, the CEO of the British hedge fund Eurizon SLJ Capital and the well-known proponent of the 'Dollar Smile Theory,' is the latest influential figure to join this camp.

According to him, with the recent stimulus policies, Chinese stocks will continue to rise, the Renminbi will appreciate, and Chinese bonds will decline.

As of the close on September 27th (last Friday), the ChinaBond Composite Index fell by 0.49% in a single day, marking the largest single-day decline since late 2016. Meanwhile, the main contracts of 30-year and 10-year government bond futures dropped by 2.56% and 0.96% respectively. Data shows that various types of money market ETFs and bond ETFs saw a net outflow of 36 billion yuan in the past week. The stock-bond 'seesaw' effect is evident.

Jen stated in his latest report: 'Investors have very low exposure to all Chinese stocks. Chinese stocks are severely undervalued, and a significant rebound is entirely possible.'

Last month, he mentioned that with the Federal Reserve cutting interest rates, Chinese companies might sell $1 trillion worth of U.S. dollar-denominated assets, potentially leading to a 10% appreciation of the Renminbi.

Jen, who previously served as the global currency research head at Morgan Stanley, is also a renowned proponent of the 'Dollar Smile Theory.' This theory explains the performance of the dollar exchange rate in various economic environments, especially the phenomenon that the dollar tends to appreciate when the U.S. economy is strong or facing an economic downturn.

He expects that as the US inflation approaches the Federal Reserve's target, the world's largest economy, But after the bursting of the internet bubble and the Fed's rate cut in 2001, the ROI dropped by more than 10%.Jen mentioned the impact of Chinese asset repatriation, stating, 'Imagine an avalanche, the renminbi will appreciate, and it is likely to be allowed to appreciate - 5% to 10% is moderate and acceptable for China.'

In fact, after the Chinese government launched comprehensive stimulus measures, investors including hedge fund legend David Tepper have expressed bullish sentiments towards Chinese stocks. Last week, he stated that he will go all-in on Chinese stocks, calling it a 'buy everything' moment.

Goldman Sachs also mentioned that the current rebound is different from the past and not likely to fade easily. Morgan Stanley expects CSI 300 index to have a further 10% upside. Bloomberg survey reveals that out of 12 Wall Street investors surveyed last week, 8 believe that now is the turning point for a long-term rebound in Chinese stocks.

Jen states that as the Fed cuts rates, China is also stepping up its efforts, and with oil prices still low, risk assets 'should perform well'.

"After the US election, I expect global stock markets to rebound strongly until the end of the year," he added.

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