Under a series of bullish policy stimuli, Chinese assets have recently experienced a strong rebound in the market.
During the surge in the Chinese stock market, Chinese concept stocks have also shined on Wall Street. Looking at the performance in the past 10 days, $Bilibili (BILI.US)$ the stock prices have doubled, $Futu Holdings Ltd (FUTU.US)$ rising nearly 90% in total, $KE Holdings (BEKE.US)$ up 75% in total, $JD.com (JD.US)$Please use your Futubull account to access the feature.$PDD Holdings (PDD.US)$ Average increase of over 55%.
In addition, the strong market performance coupled with enhanced stimulus expectations are quietly changing overseas investors' attitudes towards the Chinese stock market, with overseas hedge funds pouring in. Judging from the performance of Chinese asset ETFs listed in the U.S., several Chinese concept stock ETFs have seen a strong rebound in scale, hitting a new high for the period.
$Direxion Daily FTSE China Bull 3X Shares ETF (YINN.US)$ In the last 10 trading days, it has accumulated an increase of nearly 132%;
$Direxion Daily CSI China Internet Index Bull 2x Shares ETF (CWEB.US)$ Cumulative increase by nearly 115%;
$Direxion Daily CSI 300 China A Share Bull 2X Shares (CHAU.US)$ Cumulative increase by over 92%;
$KraneShares CSI China Internet ETF (KWEB.US)$Please use your Futubull account to access the feature.$Invesco China Technology ETF (CQQQ.US)$ Both rose by nearly 50%.
Funds are already in action.
Behind the recent rise in Chinese assets, foreign capital with keen sense of smell is undergoing significant changes, returning to the Chinese market has become the hottest topics now.
Billionaire hedge fund founder David Tepper stated on Thursday that after the rate cut by the Federal Reserve, his next big bet is to buy all China-related stocks, suggesting a potential doubling of investment limits for China-related stocks.
In addition, according to Bloomberg's interview survey, the American hedge fund Mount Lucas Management has established a call position on China ETFs, while GAO Capital from Singapore and Timefolio Asset Management from South Korea are buying blue chip stocks in China. Tribeca Investment Partners, headquartered in Sydney, is also buying stocks related to China such as Australian mining companies.
David Aspell, Chief Investment Officer of Mount Lucas, stated that many investors who had long been away from the Chinese market are now returning, betting that the Chinese stock market will bottom out and rebound strongly before the economic recovery. He himself is betting on the rebound of consumer stocks like JD.com through tools such as call options spreads.
On October 2nd, market observers noted that funds that had previously left the Chinese stock market for Japan and Southeast Asian stock markets are returning. Last week, there was a net outflow in the stock markets of South Korea, Indonesia, Malaysia, and Thailand. In the first three weeks of September, over 20 billion dollars had been withdrawn from the Japanese stock market. Jason Lui, a strategist at BNP Paribas in Paris, believes that some foreign investors are reducing their holdings in Japan and reallocating funds back to China.
Chinese concept stocks have experienced a "short squeeze" in which the shorts have already lost a huge $7 billion.
It is worth noting that according to a report from the market analysis company S3 Partners, the significant rebound in the Chinese stock market driven by stimulus measures has resulted in traders short selling US-listed Chinese concept stocks incurring losses of approximately 6.9 billion dollars.
S3 Partners' data shows that this astonishing surge has wiped out about 3.7 billion dollars in profits from short sellers of Chinese concept stocks since the beginning of the year, and they are currently facing paper losses of about 3.2 billion dollars.
S3 predictive analytics general manager Ihor Dusaniwsky stated in the report: "Before the recent rebound, short sellers have been building positions." However, he added that since the rebound, short selling activity in this type of stocks has slowed down.
However, the data shows that despite recent rises in Chinese stocks listed in the US, the bears are not in a rush to close their positions. However, if the market continues to rise, S3 expects a "large number of short covering in this sector" will further boost stock prices.
Options traders are eyeing the Chinese concept stock ETF for bullish bets, Wall Street investment banks say the upward momentum can still be sustained.
The explosion of Chinese assets has become a hot topic in the market. Options traders have also increased their bets on the recovery of the Chinese stock market.
In the options market, the call volume of a $4.3 billion $iShares China Large-Cap ETF (FXI.US)$ soared to the highest level since February. Betting on a 10% rise versus a 10% fall in a one-month contract premium jumped to the highest level since 2015, while in early August, the contract was deeply discounted. In the largest trade of the day, an investor spent $6.75 million to buy options, allowing them to buy 15 million shares of stock at $33 per share before mid-November, betting on at least another 12% increase.
Morgan Stanley's latest statement indicates that if the Chinese government announces more spending measures in the coming weeks, the Chinese stock market may rise further by 10% to 15%.
Mark Mobius, also known as the "godfather of emerging markets," recently expressed his view that under stimulus measures, the Chinese stock market is rejuvenating. The intensity and timing of this round of stimulus measures exceeded expectations, leading to a rapid rebound in the A-share index. In the short term, the rebound presents opportunities for sectors such as technology and consumer goods. Converting short-term optimism into a sustainable bull market will require time and further reforms.
Editor/Somer
