The market suddenly adjusted!
Yesterday, against the background of bullish expectations emerging from the trade dispute, A-shares surged then fell back, Hong Kong stocks weakened towards the end, and southbound funds sold off significantly. Today, A-shares and Hong Kong stocks once again faced sell-offs. In the morning session, Hong Kong stocks plummeted, and A-share sentiment was also hit, leading to a plunge in the index. So, what exactly happened?
Analysts believe that there were no significant bearish news on the horizon. After the USA's so-called 'reciprocal tariffs,' many stocks performed strongly, with a clear bullish advantage. In the preceding period, all expiration dates of equity index futures showed continuous discounts, which might indicate strong buying power in the spot market. However, as the market progressed and a long holiday approached, there might have been some profit-taking.
A broad sell-off.
After a significant sell-off from southbound funds yesterday, this morning, the Hang Seng TECH Index's decline expanded to 2%, Horizon Robotics fell over 9%, Meituan and JD.com dropped more than 4%, and Kuaishou and HUA HONG SEMI fell over 3%. With the plummet in Hong Kong stocks, A-shares also followed the trend.
In the morning session, the benchmark for A-shares, the BSE 50 Index, fell over 3%, with fewer than 30 of the 265 stocks on the BSE rising. Kobair, Guangxia Huaneng, and KaiFa Technology all dropped over 10%. Meanwhile, both the CSI 1000 Index and CNI 2000 Index showed significant declines. Computing concept stocks fell sharply, with Range Intelligent Computing Technology Group dropping over 10%, Shanghai Fullhan Microelectronics down over 7%, and Accelink Technologies, Shanghai Cooltech Power, and Tianyu Digital Technology also seeing losses over 5%. Recent IPOs faced a broad correction, with Kobair dropping over 16%, Hongdi Technology down over 12%, and KaiFa Technology, Jialiqi, and Tianhe Magnetics all falling over 8%.
By the close of the midday session, there were more stocks declining than rising, with over 4,100 stocks in the Shanghai and Shenzhen BSE markets showing red, and a total turnover of 780.2 billion in the morning. The Shanghai index closed down 0.1%, Shenzhen Component Index down 0.66%, and the GEM down 0.68%.
Analysts believe that this sell-off may be related to the withdrawal of long positions. According to data from Guosen Securities, on April 16, 2025, all types of equity index futures were deeply discounted, with the main IH contract having a 12.06% annualized discount, the main IF contract at a 12.86% annualized discount, the main IC contract at a 14% annualized discount, and the main IM contract at a 23.3% annualized discount. However, this situation has gradually improved this week, which may indicate that hedge funds have undergone structural decomposition and have partially unwound positions in both directions.
Additionally, with the May Day holiday approaching and the trading disputes having many variables, after the stock index rebounded by two hundred points, it reached a profit-taking risk aversion Range. Historically, there tends to be a risk aversion trade before long holidays, especially involving leveraged funds.
Subsequent expectations.
So, how will the stock market unfold subsequently? Analysts believe there is still support downward. A State Council executive meeting held on April 18 pointed out that it is necessary to continuously stabilize the stock market and promote the steady and healthy development of the Real Estate market. Once relevant measures are introduced, they should reach enterprises and the public directly, increasing implementation efficiency to ensure effectiveness. There is also a possibility of reiterating this viewpoint at the high-level meeting scheduled for the end of April.
There is also a noticeable optimistic data emerging from the industrial level and the ETF level. According to data released by Tianfeng on April 23, industrial capital has shifted from net reduction to net increase. The net increase in industrial capital this period is 6.814 billion yuan, with the banking, electronics, and textile and apparel industries leading in net increase scale, while the media, agriculture, forestry, animal husbandry, and fishery, and food and beverage industries showed a slight net reduction. This is the first occurrence of net increase since October 2024, indicating that market confidence has somewhat recovered.
The net subscription amount for ETFs has also significantly increased. This period's net subscription amount for existing stock-type ETFs is 204.368 billion yuan, a substantial increase of 196.065 billion yuan from the previous period, shifting from net outflow to net inflow. Products such as Huatai-PineBridge 300ETF, China Asset 300ETF, E Fund 300ETF, Harvest 300ETF, and China AMC Shanghai A50 Exchange Traded Fund are leading in net subscriptions, indicating that investors hold an optimistic attitude towards the market outlook.
Xiangcai Securities stated that the policy expectations in May 2025 will be more positive than in previous years, especially in the context of the USA's so-called 'reciprocal tariffs'. A new policy is expected to be implemented at the high-level meeting in April. Regarding the capital situation, it is likely to remain relatively loose, primarily sourced from long-term capital entering the market. In terms of fundamentals, as April's annual reports have been disclosed, May is in a relatively vacant period with a lack of new fundamental driving factors. The Technology Sector is likely to be in a consolidation phase in May, while dividend-related areas such as Banks, Insurance, and port transportation will receive more attention.
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Editor/lambor
