Hedge funds have been rushing into Chinese stocks, betting that China's new economic stimulus plan will boost growth in the world's second-largest economy.
Goldman Sachs Group Inc.’s prime brokerage report showed that Chinese stocks saw the largest single-day net buying since March 2021 on Tuesday, the second largest single-day net buying in the past 10 years. The buying was almost entirely driven by investors who increased their long positions. Although funds bought all types of Chinese stocks, the move was mainly driven by A shares, with H shares having a smaller impact.
Chinese stocks surged on Tuesday, with the CSI 300 and Shanghai Composite indexes rising 4% after the central bank announced a series of measures aimed at boosting the economy, real estate sector and stock market.
Flows into Chinese stocks through options also increased. Open interest in call options on the iShares China Large-Cap ETF (FXI) hit a decade high, up about 580,000 contracts, according to Goldman Sachs.
A rebound in Chinese stocks lost some momentum on Wednesday as Goldman Sachs strategists including Kinger Lau said China’s monetary stimulus “could be enough to catalyze another policy-led rally.”
Hedge funds' total and net allocations to Chinese stocks remain at their lowest levels in five years.
In early trading on Thursday, A-shares continued to rise strongly, with blue-chip stocks performing best. The Shanghai Composite 50 Index rose by more than 1%, the Shanghai Composite Index once again surpassed 2,900 points, and the Shenzhen Component Index also broke through 8,600 points. In terms of Hong Kong stocks, the Hang Seng Index continued to rise, rising by more than 2%, and the Hang Seng Technology Index rose by more than 4%. Japanese and Korean stock markets also rose across the board.
"Asian markets are riding a wave of optimism, thanks to China's unusually all-out determination to build momentum for Golden Week and year-end," said Hebe Chen, an analyst at IG Markets Ltd. "That, combined with the Federal Reserve's rate cut last week, has created broad risk sentiment in the region."
Going forward, how successful the Federal Reserve is in guiding the U.S. economy to a soft landing will be an important factor in determining the outlook for other asset classes, said Solita Marcelli of UBS Group AG.
“The market has been overestimating the Fed’s easing for the last three years and I think it’s probably going to continue to do so,” said Michael Rosen, chief investment officer at Angeles Investments. “But something has changed with the 50 basis point move, which is the Fed’s willingness to move faster, be more accommodative and more comfortable with the state of the economy rather than just focusing on inflation.”
The article is forwarded from: Jinshi Data
