Source: Bloomberg

Author: Henry Ren, Charlotte Yang

China's stock market's worst -global performance to the best amazing reversal has stimulated investors' caution and optimism.They believe that as long as the favorable market policies continue to exist, the rise is expected to continue.

Entering in 2024, the Chinese government has introduced new measures almost every week to support the market or economy.This policy is determined to promote the increase in the Hang Seng State -owned Enterprise Index this month by more than 10%, ranking among the top of more than 90 major stock indexes worldwide.The Shanghai and Shenzhen 300 index on the shore rose for nine consecutive days, the longest rising market since 2018.

As the economy continues to face anti -wind, the "national team" may not have a good time.However, in the case of low valuation, global and local funds, investors have seen a rare window period that can be raised from this hit market.

"The official pain threshold has been touched," said Arthur Budaghyan, chief emerging market strategist of BCA Research."We have reached the oversold status, and the policy response is much more powerful. Therefore, I expect the market to have more tactical upward space from the current level."

The current market sentiment has changed rapidly compared with last month.The Shanghai and Shenzhen 300 Index fell to five years on February 2nd. The concerns of the snowball of derivatives and the addition of margin exacerbated the market's losses.

Since then, the continuous introduction of policy support measures shows the determination of Beijing to curb the decline in the stock market, and Yin Cloud has gradually dissipated.

The "National Team" has strengthened the purchase of stocks and seems to expand its goal to small -cap stocks.The China Securities Regulatory Commission has strengthened the supervision of quantitative transactions, and it is reported that it has restricted that major institutions (including the self -operated department of the securities firm) sell stocks within half an hour in the afternoon.

At the same time, the support for the real economy is also strengthening. The interest rate of the loan market (LPR) of more than 5 years is reduced by expected, and the financing support for developers has also increased.Such measures are endless.

Six months after the outflow of overseas funds, the A -share month has attracted more than 3.1 billion yuan (US $ 4.2 billion) in capital flow through the A -share interconnection mechanism.The balance of financing in China this week has also risen slightly, indicating that the popularity of the market has improved.

"Many investors are in China, they need to re -consider position deployment as soon as possible," said Karine Hirn, a partner of East Capital Asset Management."When there is a violent fluctuation, a few days of rise will cause great harm to them."

Be cautious and optimistic

Although all these factors may constitute a strong bull market, investors are very clear about the unpredictable changes in the Chinese stock market, and optimism is quite restrained.

Even after a significant rise, the major stock indexes are still 40%to 50%lower than the peak in 2021. There are almost no observed people who believe that the market can reach the high level at that time in the short term.

The official means to support the stock market this time reminds people of the strategy used when the stock market plunge in 2015.At that time, the strategy did not realize the V -type recovery, and the market took several months to finally bottom out.

Due to the lack of a good recipe for cure in the real estate market and resolving the pressure of shrinking, and Beijing's control of the private sector, long -term investors -the important pillar of market stability -may still be prohibitive.

William Blair Investment Management Manager Vivian Lin Thursston does not think this is a rebound widely participated in long -term investors."We still need more meaningful and effective policies," she said."We haven't done this yet."

Marketing attention to the upcoming two sessions and China's economic growth goals, any disappointing policy signal may trigger a new round of decline.

However, investors said that low valuations and enterprises have increased stock repurchase efforts, increasing market attractiveness.The expected P / E ratio of the MSCI China Index is 8.9 times, the average of five years below 11.9 times, and it is also lower than the 12 times higher than the emerging market peers.

Jefferies Financial Group Inc. global stock strategy director Christ Wood wrote in a report this week that if the Chinese stock market continued to rise, it would not be surprising.