"Bull Run": 3 Major Indices Surge, ChiNext Up 42% in 5 Days

Nothing can stop the relentless rise of A-shares now. After "924," A-shares have left the rest far behind, attracting trillions of funds to compete in "bending over." Among them, the ChiNext Index has recorded a 42% increase in the last five trading days, which can be described as thrilling. While investors who have already achieved "earning a pot of gold every day" are reveling, many "latecomers" are also eager to try to get a share of the profits.

The current A-shares can be described as a raging fire boiling oil and flowers on brocade!

On September 30th, major indices once again made history. Among them, the 42% increase of the ChiNext Index in five trading days has left many investors in awe.

Looking at the sectors, as intermediary institutions, securities firms are the most direct beneficiaries; the "924" policy package has reversed the expectations of deflation, which has allowed the long-depressed consumer sector to make a quick comeback; with the average reduction of existing mortgage interest rates by 0.5%, the real estate sector has also welcomed a long-awaited surge...

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Some people describe the past week as an aircraft carrier turning on the spot.

It can be said that "buy, buy, buy" has become a consensus, and as "insiders" flock to it, foreign capital is also pouring in. The well-known hedge fund magnate David Tepper even shouted out "buy all China-related assets."

Yi Xiaobin, the director of equity investment at Shunshi Investment, said that due to the policy exceeding expectations and actually putting real money on the table, the market can be optimistic after a long period of weakness, and it is recommended to significantly increase positions and hold stocks during the holiday.

ChiNext Index rises 42% in 5 trading days

The last trading day before the National Day, A-shares continued to soar, rarely making a group of investors unable to stop. Looking at the market, as of the close, the Shanghai Composite Index rose by 8.06%, the Shenzhen Component Index rose by 10.67%, the ChiNext Index rose by 15.36%, and the Beijing Stock Exchange 50 Index rose by 22.84%.

Among them, the ChiNext Index's increase of over 15% once again set a new historical single-day record, rising by 42% in five trading days. The Shanghai Composite Index's increase in the last five trading days was 21.73%.A-share trading volume has also surged dramatically. Wind data indicates that within just 35 minutes of the stock market opening today, the transaction volume had already exceeded one trillion yuan, setting a new record for the fastest trillion yuan milestone in history. By the close of the market, the transaction volume reached a staggering 2.6115 trillion yuan, also a new historical record.

Various signs suggest that the "crazy bull" market has arrived!

Looking at specific sectors, the financial sector is the most favored by capital in the market. Among them, the securities sector stands out particularly, with all securities stocks hitting the upper limit of the daily price fluctuation range, except for the suspended Guotai Junan and Haitong Securities. In the past five trading days, the stock of Oriental Fortune has increased by more than 89%.

Driven by policy, retail investors are rushing into the market, and as the "shovel sellers" of A-shares, securities firms imply that their long-slumping brokerage business is about to experience a significant boom.

Real estate and technology stocks are also the targets of capital pursuit.

Thanks to policies such as a 0.5% reduction in existing mortgage interest rates, the complete cancellation of purchase restrictions in Guangzhou, and the relaxation of home-buying restrictions in Shanghai and Shenzhen, the real estate market has entered an unprecedented period of policy easing, which has allowed previously tense real estate companies to breathe a sigh of relief.

Choice data shows that the A-share real estate sector rose by 9.30% today, with an increase of over 40% in the past nine trading days. The Hong Kong stock market has also continued to rise, with domestic real estate stocks (Hong Kong real estate company stocks) experiencing a collective outbreak. By the close of the market, Sunac China's stock price increased by more than 55%, while Hopson Development Holdings' stock price increased by more than 40%;富力地产 and Shimao Group recorded gains of over 20%.

Technology stocks are also at the center of the capital storm. Data shows that the sectors of Huawei Euler, software development, semiconductors, and AI chips have seen the largest increases in the past three trading days, with increases of 34.84%, 29.72%, 29.64%, and 29.14%, respectively.

In addition, the broad consumer goods sector is one of the main themes of the market, such as pharmaceuticals and liquor.

According to Wind data, as of August 31, 2024, the CSI Pharmaceutical Index reported at 6977.45, a decrease of 60.62% compared to the historical high of 17,718.23 in February 2021. This index is currently at a near-decade low.Big consumption is no different. As of the end of August, the rolling PE of the CSI Main Consumer Index (referred to as: 800 Consumption) is 21.19, which is at the 0.59% percentile level over the past decade.

Now, under the catalysis of policy, the rebound of these two sectors is very obvious.

Data shows that the CSI Pharmaceutical Index rose by 10.68% today, with a gain of more than 29% in the past five trading days; the CSI Consumption Index rose by 8.83% today, and the index has risen by more than 34% in the past 5 trading days.

It should be noted that over the past year, CPI and PPI have continued to fluctuate at low levels, and according to the latest data, the growth rate of M1 has decreased to -7.3%, reaching a historical low in more than 20 years, and the growth rate difference (scissors difference) between M1 and M2 has also decreased to -13.6%. The unsatisfactory data mentioned above implies an increased possibility of deflation. This is also the factor that led to the long-term downturn of the consumption sector.

Now, the policy package has stimulated consumption investment, reversed the expectation of deflation, and made the consumption sector act as the "pioneer" of the rebound.

The policy-induced reversal from the brink

Major positive policies have always been the core factor affecting the market, such as the stock reform in 2005, the "four trillion" in 2008, the "nine national articles" in 2014, the supply-side reform in 2016, and the special treasury bonds for epidemic prevention in 2020, all of which are the core factors driving the rise.

Similarly, this unprecedented surge in A-shares cannot be separated from policy support.

On the morning of September 24, the "one line, one meeting, one bureau" made a significant statement, introducing a number of major policies, including interest rate cuts and reserve requirement ratio reductions, as well as lowering the interest rates of existing mortgages, increasing the intensity of monetary policy regulation, and further supporting economic stable growth. A package of major favorable policies will undoubtedly effectively boost investors' confidence in economic recovery and strengthen confidence in the capital market.

In the following days, the policies introduced by the central bank have been implemented one after another.On September 27th, the central bank announced a reduction of the reserve requirement ratio for financial institutions by 0.5 percentage points. After this adjustment, the weighted average reserve requirement ratio for financial institutions is approximately 6.6%. Concurrently, a public market operation announcement was issued, lowering the interest rate for 7-day reverse repurchase operations by 0.2 percentage points, from the previous 1.70% to 1.50%.

It is understood that the magnitude of this policy interest rate cut is the largest in nearly four years. The central bank also indicated that it would lower the reserve requirement ratio by 0.5 percentage points in the near term, providing approximately 1 trillion yuan in long-term liquidity to the financial market, bringing more "living water" to the real economy.

On September 29th, the central bank, in conjunction with the Financial Regulatory General Administration, issued four policies to stabilize the real estate market. These included guiding banks to reduce the interest rates on existing mortgages, unifying the minimum down payment ratio for mortgages to 15%, extending the duration of some real estate financial policy documents, and optimizing the re-lending policy for affordable housing.

Especially on the issue of reducing the interest rates on existing mortgages, the central bank responded to the market's concerns about "when, how, and by how much" the rates would be lowered.

Specifically, the central bank requires that commercial banks should, in principle, uniformly adjust the interest rates on existing mortgages (including first and subsequent sets) in batches by October 31, 2024. For existing mortgages with an added margin higher than -30BP based on the LPR, the added margin should be adjusted to no less than -30BP, and not lower than the current minimum added margin for newly issued commercial personal housing loans in the city.

In other words, except for second and subsequent sets of existing housing in Beijing, Shanghai, and Shenzhen, the interest rates on other existing mortgages can be reduced to the level of LPR-30BP.

Pan Gongsheng estimated that this reduction in the interest rates on existing mortgages will benefit 50 million households and 150 million people, reducing the total annual interest expenditure of families by approximately 150 billion yuan. This will help promote increased consumption and investment, reduce the behavior of early loan repayments, and also compress the space for non-compliant replacement of existing mortgages, protecting the legal rights and interests of financial consumers and maintaining the stable and healthy development of the real estate market.

In addition, the robust progress of the stock market is also inseparable from the "tone-setting" of the Central Political Bureau meeting.

In the past two years, the capital market has increasingly become a focus of attention for the highest leadership. Last July's Political Bureau meeting proposed "to invigorate the capital market and boost investor confidence," the April meeting this year pointed out "to promote the healthy development of the capital market through multiple measures," and the July meeting emphasized "to boost investor confidence and enhance the inherent stability of the capital market."

On September 26th, the Political Bureau meeting once again specifically pointed out the need to strive to invigorate the capital market, vigorously guide medium and long-term funds into the market, and unblock the points of entry for funds from social security, insurance, and financial management.In response to this, institutions generally believe that today's meeting of the Political Bureau of the CPC Central Committee has sent a very strong signal of fully revitalizing the economy. It is expected to have a dual benefit of profits and valuation for the stock market, and the trends of A-shares and Hong Kong stocks are expected to reach a higher level.

Confidence is more important than gold.

Several A-share indices have refreshed their historical records, indicating the market's bullish sentiment.

Due to the excessive trading volume, during trading hours, some APPs under the brokerage firms were temporarily unable to log in, and the market display showed blank pages. In response, Guoxin Securities customer service stated that the trading software crashed due to the large number of orders, and investors can call to place orders.

In fact, the market boom started from the account opening. CITIC Construction Investment stated that its brokerage business customer account opening, investment trading, and fund inflow data all showed a rapid upward trend, and since the 24th, the account opening volume has increased by about double compared to the daily average in September.

At the same time, many brokerage firms, including Guotai Junan, Capital Securities, China Galaxy, GF Securities, Dongwu Securities, Xiangcai Securities, and Bank of China Securities, have quickly launched APP download and account opening promotion posters.

The "crazy influx" of investors is also reflected in the data. According to Tonghuashun, as of the close on September 30, the net inflow of retail investors reached a record high of 56.2 billion yuan.

In addition, foreign investors are also attracted by the soaring A-shares. Data shows that several Chinese ETFs listed in the United States have set records for single-day net inflows of funds in the past week. For example, the largest Chinese internet ETF (KWEB) listed in the United States. On September 26, the ETF received a net inflow of $378 million, setting a record for single-day net inflow in more than three years.

Furthermore, from the transaction situation of the Northbound funds, since September 24, the transaction volume of the Northbound funds has obviously increased. Data shows that on September 24, 25, 26, and 27, the transaction amount of the Northbound funds was 165.315 billion yuan, 188.167 billion yuan, 190.278 billion yuan, and 182.572 billion yuan, respectively. From September 1 to September 23 this year, the average daily transaction amount of the Northbound funds was 93.451 billion yuan.

At the same time, in the past half month, the offshore RMB has generally been in an upward channel, especially after Pan Gongsheng emphasized that "the RMB exchange rate has a relatively stable solid foundation", the offshore RMB once recovered the "7" integer point, further strengthening the confidence of foreign capital.Several major foreign institutions have also shown a significant shift in their attitude towards Chinese assets. For instance, Goldman Sachs, which had just lowered its forecast for China's GDP growth for this year in the middle of this month, clearly stated in its research report on September 25th that the recent series of policies, which can be described as unprecedented policy emphasis and action, coupled with the decline in global risk-free interest rates, suggests participating in the Chinese market investment. Additionally, UBS has also shown a clear change in attitude. As recently as May this year, UBS's Chief Investment Office believed that there was limited room for China's stock market to rise and did not believe that A-shares could outperform their emerging market peers. However, on September 24th, the bank's daily report stated that China's monetary policy has become more accommodative, and this series of stimulus measures will provide support for China's stock market in the short term. Renowned hedge fund magnate David Tepper even shouted out "buy everything related to Chinese assets." It can be said that with the active participation of domestic and foreign investors, the A-share market has shown a prosperous scene of both volume and price increases. However, whether the policy effects introduced by the country can further release and reverse the current economic situation still needs to be tested by time.