Source: Barron's Weekly

To prevent further decline in the economy and stock market, the Chinese government has introduced a series of stimulus measures starting from September. Each subsequent announcement and press conference has been closely watched, triggering a wave of "buy everything related to China" as investors reevaluate Chinese assets.

However, this indiscriminate buying may not be sustainable. ETFs investing in Chinese stocks have retraced after a recent sharp rise. As of Wednesday (October 16), $iShares MSCI China ETF (MCHI.US)$ this week has seen a cumulative decline of 5.6%. $Invesco China Technology ETF (CQQQ.US)$ and $KraneShares CSI China Internet ETF (KWEB.US)$ Both decreased by 7.5%. $Invesco Golden Dragon China ETF (PGJ.US)$ Decreased by 7%.

As of Wednesday, up to October, $KraneShares CSI China Internet ETF (KWEB.US)$ decreased by nearly 5%. $Invesco China Technology ETF (CQQQ.US)$ and $Invesco Golden Dragon China ETF (PGJ.US)$ Both fell by nearly 4%. $iShares MSCI China ETF (MCHI.US)$ Dropped more than 2%.

Senior Chinese observers had pointed out during the significant rise in the Chinese stock market due to policy changes that the details of the upcoming major measures are crucial for the sustained improvement of investor sentiment and the reversal of the economic situation. Currently, investors are still waiting for these details.

Capital Economics analysts believe that the plan proposed at the October 12 finance ministry meeting to increase government debt and support the real estate market is equally important, but there is no mention of measures to "subsidize consumers on a large scale." Some economists believe that establishing a safety net, or directly distributing subsidies to consumers, is a way to encourage Chinese households to release funds from savings.

A Capital Economics analyst said: "In addition, due to the lack of forward-looking guidance on the size of next year's budget deficit, it is still difficult to determine the scale and duration of fiscal stimulus measures."

TS Lombard expects that in the coming months, Beijing will launch a 3 trillion yuan (approximately $420 billion) stimulus plan through measures such as local government debt restructuring, bank capital restructuring, and revitalizing consumption.

The next focus will be the National People's Congress, where any budget plan must be approved by the Standing Committee of the National People's Congress. Investors may find the answer to the question of "how large is the stimulus plan" in this meeting. The National People's Congress is expected to convene later in October, with some analysts suggesting a possible delay until November, at which point Beijing will "recalibrate" based on the results of the U.S. election.

IG Group market strategist Yeap Jun Rong believes that the next U.S. president will determine Sino-U.S. trade relations, and the effectiveness of the policies announced in September will take some time to be reflected in economic data.

In the past few weeks, the trend of the Chinese stock market has strengthened a view: investors should prepare for volatile trends after a big rally.

In the product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively. $Baosheng Media Group (BAOS.US)$(Julius Baer) Chinese strategist Richard Tang recently pointed out that the rebound of the Chinese stock market will enter the second phase, characterized by a slower pace of rise, increased volatility, and investors will refocus on profit and valuation. He believes that investors will determine their exposure to China by selling stocks with weaker fundamentals and increasing their shareholding in high-quality stocks.

Tang advises investors to focus on potential policy beneficiaries and attractively valued stocks. He also advises investors to reduce their shareholding in real estate stocks, as regardless of the policy intensity, this industry will take longer to recover.

Editor/Rocky