With massive trading volume and repeated record-breaking, how do you see the explosive surge in the Chinese stock market?

On October 2, Deutsche Bank analyst Peter Milliken released a strategy report stating that such a massive rebound indicates a sharp change in market trends. The analyst said:

"This uptrend will continue. Based on our experience, the large-cap index's short covering usually does not last for just a few days, but represents a trend change."

In September, the CSI 300 index rose by 23.06% for the entire month. As for the Hang Seng Index, it has accumulated a 17.48% increase, accounting for the majority of this year's gains so far.

Deutsche Bank stated that despite the possibility of the market being overbought in the short term, investors should continue to increase their shareholding positions. One reason is that investors' positions in A shares or Hong Kong stocks are usually only half what they were before the pandemic, and such a situation requires a substantial amount of trading and market action to reverse.

Moreover, it is worth noting that the United States accounts for 63% of the iShares Global Equity Index, with Japan in second place at only 5%. If U.S. stocks' share decreases to 50%, then the allocation of stocks from other regions in the world will increase by one-third, according to Deutsche Bank. The analysis indicates:

"With the high allocation to U.S. stocks, investors often stick to a specific style. If the U.S. performs poorly, investors focused on momentum and technology are likely to shift their focus to other leading tech companies. In this process, China will receive more attention."

Both the Hang Seng Index and A-share index components are often world-leading companies with dominant scale on a global level. Half of these companies have net cash, providing funds for extensive buybacks or investments in organic or inorganic growth plans.

Deutsche Bank also expects that by the approaching of 2025, no institutions dare to miss the opportunity to increase their shareholding of Chinese stocks, as they will generate more buying activity early in 2025.

In addition, with a series of significant bullish policies in China, Deutsche Bank economist Xiong Yi stated that liquidity support will also come from the People's Bank of China in the form of over 500 billion yuan in swaps, providing funds for non-banking financial institutions to purchase stocks.

Deutsche Bank also pointed out, "As consumption gradually heats up and profit margins increase, we expect this to drive more stock allocations in the future. Therefore, we advise investors to continue looking for market entry opportunities".

Editor/ping