Caifinance News on October 7th (Editor: Feng Yi) As the National Day Golden Week draws to a close, the A-share market, which has been closed for several days, is about to return. Hong Kong stocks, as the main direction for funds to increase holdings of Chinese assets during the holidays, are still staging the final "buying frenzy".

On the last trading day of the "National Day Golden Week", major ETF products in the Hong Kong stock market that track A-shares continue to maintain a comprehensive upward trend.

Among them, two products tracking the STAR Market are leading the gains. $Bosera STAR 50 Index ETF (02832.HK)$Please use your Futubull account to access the feature.$CSOP STAR 50 Index ETF (03109.HK)$ Increased by 32.52% and 14.35% respectively.

It is worth noting that the above two ETFs have accumulated approximately 124% and 49% increases, respectively, during the entire National Day holiday market, showing a strong preference for high-risk chasing of short-term funds.

In addition, tracking the blue-chip weight of A shares $iShares FTSE A50 China Index ETF (02823.HK)$Please use your Futubull account to access the feature.$CSOP FTSE China A50 ETF (02822.HK)$ continue to strengthen, each rising by nearly 4%, also reaching new highs during the entire holiday period. It is evident that the market is very confident in the A-share market after the holiday.

Apart from the Hong Kong stock market, overseas markets and funds have also accelerated positions through ETF products during the National Day period.

Taking the example of the current largest market capitalization and most liquid US stocks, $iShares China Large-Cap ETF (FXI.US)$ during the National Day holiday, it rose by 12.37%, and the trading volume quickly expanded to historical highs. Since September 24, the iShares Core MSCI China Index ETF has risen by nearly 30%, closely tracking the A-share market.

According to the data released by Huaxin Securities analysts Lv Sijiang and Ma Chen recently, the continuous outflow of foreign capital from the mainland of China reversed from the 25th, with net inflows of 1.9 billion US dollars on the 25th and 26th. The continuous outflows of US funds from China also turned into inflows.

On October 3, another ETF product named 'China Dragon' made its debut on the US stock market— $Roundhill China Dragons ETF (DRAG.US)$ , with constituent stocks including $TENCENT (00700.HK)$Please use your Futubull account to access the feature.$PDD Holdings (PDD.US)$Please use your Futubull account to access the feature.$Alibaba (BABA.US)$ / $BABA-W (09988.HK)$Please use your Futubull account to access the feature.$MEITUAN-W (03690.HK)$Please use your Futubull account to access the feature.$BYD Company Limited (002594.SZ)$ / $BYD COMPANY (01211.HK)$Please use your Futubull account to access the feature.$XIAOMI-W (01810.HK)$Please use your Futubull account to access the feature.$JD.com (JD.US)$ / $JD-SW (09618.HK)$Please use your Futubull account to access the feature.$Baidu (BIDU.US)$ / $BIDU-SW (09888.HK)$ and $NetEase (NTES.US)$ / $NTES-S (09999.HK)$ Wait for the internet giants.

Chief Asset Research Officer of GF Securities, Dai Kang, stated that currently dormant accounts of domestic brokerages have been reawakened. Those born in the 1960s, 1970s, and 1980s, who have long ignored the stock market, are now entering the market to add funds, expected to become the main source of incremental funds after the holidays. Nowadays, many investors are also increasing positions through ETFs.

Overall, ETFs have become one of the important channels for investors to quickly get on board in this round of market. According to media reports, in the 5 trading days before the holiday, A-share and Hong Kong-related ETFs received a net inflow of over 110 billion yuan. Combined with the strong performance of A-share related ETF products in the Hong Kong stock market during the holiday, it may also be a prelude to the related indices' performance after A-shares open.

On the other hand, since the start of this round of market, AH stocks, as the "link" between the Hong Kong and A-share markets, have also attracted continuous large-scale buying from foreign institutions due to their relatively undervalued nature.

According to data disclosed by the Hong Kong Stock Exchange, foreign institutions have been accelerating their positions in Chinese assets in the past week, with JPMorgan's trading seats sweeping more than 8 billion Hong Kong dollars. Specifically, AH stocks are one of the major directions for JPMorgan's position building.

Data shows that on September 25th, JPMorgan increased its holdings of CM Bank H shares by 0.895 billion Hong Kong dollars, followed by an increase of 1.771 billion Hong Kong dollars in Ping An Insurance H shares on September 26th. On September 27th, they bought China Pacific Insurance H shares for 0.267 billion Hong Kong dollars, BYD Company H shares for 1.791 billion Hong Kong dollars, and Tsingtao Brewery H shares for 0.242 billion Hong Kong dollars. On September 30th, they further increased their holdings of Zijin Mining Group by approximately 0.222 billion Hong Kong dollars and Conch Cement by approximately 0.287 billion Hong Kong dollars.

CICC pointed out in the latest research report that the A-share market was closed for the National Day holiday, providing a good window to analyze the flow of overseas funds as a 'control variable.'

CICC stated that short-term foreign capital inflows indeed have some support. Comprehensive data from various sources shows that from September 26th to October 2nd, passive foreign capital inflows into A-shares were $2.64 billion, while inflows into Hong Kong stocks and ADRs were $2.87 billion, an increase of 3-4 times compared to the previous week, reaching a new high since 2016.

In addition, actively managed overseas funds switched to net inflows into A-shares of $0.19 billion, inflows into Hong Kong stocks and ADRs of $0.12 billion during the week. Although the scale is not large, this marks the first time of net inflows after 65 consecutive weeks of outflows since the end of June 2023.

CICC also emphasized that the subsequent trends of active foreign capital deserve attention, as sustained inflows require more policies and more optimistic expectations to drive them. By the end of August, global actively managed funds allocated 5% to Chinese stocks (with a high of 14.6% at the beginning of 2021). It is estimated that if the current underweight allocation shifts to benchmark weight, it could result in an inflow of nearly $40 billion, equivalent to the total outflow since March 2023.

As of the close on October 7th, due to the 'rush' of Hong Kong stocks during the holiday period, the Hang Seng Stock Connect China AH Premium Index has converged from the pre-holiday 148.36 to 128.49.

This means that if the A-share stocks in the AH stock segment can maintain the previous premium level, there is at least about 15% room for post-holiday catch-up.

What's more interesting is that currently including $CMSC (06099.HK)$Please use your Futubull account to access the feature.$WUXI APPTEC (02359.HK)$Please use your Futubull account to access the feature.$CHINA VANKE (02202.HK)$ Up to 9 individual stocks have already exhibited a phenomenon of AH premium inversion (i.e. H shares trading higher than A shares), and the comparative effect on the AH stock sector's post-holiday market performance is also worth noting.

Looking ahead, according to a research report from CITIC Securities, significant changes in policy signals have occurred, leading to a major market expectation reversal. Continued intensification of domestic demand policies or advancement of price signals may come sooner than expected, marking a major turning point in the market. Following the anticipation of a major reversal, the characteristic feature will be the entry of incremental funds mainly by retail investors, leading to a short-term pulse-like surge in prices.

Editor / jayden