Not long after the market opened on December 4, the decline in government bond futures widened, with the 30-year government bond futures falling nearly 1% and the 10-year government bond futures dropping 0.3%. The yield on the 30-year government bond '25 Ultra-Long Special Government Bond 06' rose by 2.4 basis points to 2.26%, hitting a new high since October 15.
In the stock market, after a slight rise at the opening, the A-share market experienced a sharp decline across the board before rebounding somewhat. At one point, the number of declining stocks in the entire market exceeded 4,000.
The trend in Hong Kong stocks was similar, $Hang Seng TECH Index (800700.HK)$ Once falling by more than 0.6%, it is now up by 0.91%. $Hang Seng China Enterprises Index (800100.HK)$ up 0.47%, $Hang Seng Index (800000.HK)$ up 0.27%.
What exactly has happened recently that caused both the stock and bond markets to weaken frequently?
Stocks and bonds weakened.
On December 4, the yields on major interest rate bonds in the interbank market rose further. The yield on the 30-year government bond '25 Ultra-Long Special Government Bond 06' increased by 1.5 basis points to 2.2510%, the yield on the 10-year China Development Bank bond '25 CDB 15' rose by 1.7 basis points to 1.9350%, and the yield on the 10-year government bond '25 Interest-Bearing Government Bond 16' increased by 1 basis point to 1.8475%. The 30-year government bond futures once fell nearly 1%.
Notably, today $China Vanke Co.,Ltd. (000002.SZ)$ most domestic bonds also declined. '21 Vanke 06' plummeted over 22%, triggering an intraday trading halt, '21 Vanke 04' fell more than 17%, '22 Vanke 04' dropped over 16%, and '21 Vanke 02' decreased by more than 15%.
The stock market also showed weak momentum. Although non-ferrous metals performed strongly in overseas markets, non-ferrous metals in the A-share market were not strong during the morning session, with no stocks hitting the daily limit. Cultured diamonds, which performed well yesterday, plunged during the morning session. Recently popular AI smartphones and AI camera lenses also lost steam. At one point, the number of declining stocks across the market exceeded 4,000.
Last night, although U.S. stocks closed higher, most Chinese概念股 still weakened, with the Nasdaq China Golden Dragon Index falling 1.38%. As of the close, $Alibaba (BABA.US)$ it dropped 1.89%, $Baidu (BIDU.US)$ Down 1.44%, $PDD Holdings (PDD.US)$ Down 1.43%, $Bilibili (BILI.US)$ Down 2.36%, $NIO Inc (NIO.US)$ Down 4.77%.
What is going on?
The main reason for the market downturn may still be related to year-end liquidity expectations and fundamental conditions. On one hand, due to settlement requirements at the end of each year, market performance is generally lackluster; on the other hand, there remain concerns about corporate earnings growth. Externally, the Japanese market could still be a source of volatility.
Pacific Securities believes that global risk appetite is rebounding, with major asset classes trending upward. The rise in precious metals and non-ferrous metal prices indicates a warming of market risk sentiment, as major global assets are transitioning from volatility to a bullish trend. Trading in U.S. stocks has been light ahead of the Christmas holiday, but an overall bullish trend has been established, with the Dow Jones Industrial Average breaking through a key resistance level first. Among tech stocks, Google has taken over from NVIDIA as the leading stock due to its TPU technology advantage. The A-share market has shown weakness in the short term, but in the medium to long term, as overseas risk assets strengthen and the renminbi appreciates, indices are expected to continue rising. In particular, the ChiNext Index and CSI 1000 have already filled gaps, creating conditions for further upside potential.
Regarding Hong Kong stocks, Dongwu Securities believes that confirmation of a short-term rebound in the Hong Kong market still requires new catalysts, and new overseas risks should not be overlooked. From a medium- to long-term allocation perspective, the current position is attractive.
First, the market expects a significant increase in the probability of a Fed rate cut in December, but it is worth noting that the Fed may adopt a hawkish rate cut. If this occurs, the market may adjust its expectations for rate cuts, and the rebound in Hong Kong stocks might fall short of expectations.
Second, from a medium- to long-term perspective, Hang Seng Tech currently holds allocation value. On one hand, concerns about the AI technology narrative in U.S. stocks have eased somewhat; on the other hand, the AI technology narrative in Hong Kong stocks still lacks strong catalysts.
Third, potential unwinding of yen carry trades could trigger deleveraging risks in dollar-denominated assets, thereby impacting Hong Kong stocks. The governor of the Bank of Japan has sent a clear signal of an interest rate hike in December. Signs of a rapid rise in Japanese bond yields along with a strengthening yen are evident. If this trend continues, coupled with a Fed rate cut in December leading to a narrowing of the U.S.-Japan interest rate differential, it is highly likely to trigger carry trade unwinding. This means some investors may sell U.S. Treasuries to repay yen, while others might choose to sell U.S. Treasuries and buy Japanese bonds. At the same time, this could lead to temporary deleveraging in U.S. stocks, and risk appetite in Hong Kong stocks would also be affected.
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