Happy Weekend Everyone!
Here is a quick recap of top news in China market this week.
While mainland China was off celebrating its National Day holiday, Hong Kong stocks rallied as Beijing’s stimulus continued to drive market sentiment.
Securities brokers were among the strongest performers, as the stock market’s trading turnover hit a record high. Many brokers reported a sharp rise in investor inquiries about opening securities accounts, with numbers multiplying in recent days.
Foreign investors are also pouring into the Chinese market. Data from EPFR Global showed that China’s stock market attracted a massive $13.9 billion in inflows last week, the second highest on record. Goldman Sachs said global hedge funds posted their strongest weekly buying in Chinese equities. China’s weighting in MSCI’s emerging market indices hit its highest point since November 2023, just before the holiday closure.
In real estate, developers surged after all four tier-one cities announced policy easing, in response to the central government’s call for stabilizing the housing market. Beijing city relaxed social insurance and tax payment requirements for non-local buyers for the first time in 13 years.
Even though September saw the housing market remain weak, with home sales falling further, and second-hand home prices dropping for the 29th month straight, industry insiders are optimistic that sales will start to stabilize in October, thanks to the new stimulus. In fact, during Golden Week, home viewings picked up a lot, and many regions reported increased property sales, according to the housing ministry.
Semiconductor stocks had a great run as top foreign institutions like Temasek, Sequoia Capital, and BlackRock conducted intensive research on Chinese chipmakers, showing strong interest in the sector.
Carmakers faced a bit of a setback after the EU voted to impose duties on imports of Chinese-made electric vehicle. But there was some good news—auto sector inventory pressures eased in September, signaling better demand ahead.
The commodity market received a boost from property policy easing, with iron ore futures surging over 10% on the last trading day before the holiday. Steelmakers also showed signs of recovery, with production activity rebounding as several mills resumed operations, sending the sector’s production index to its highest level in nearly four years.
In macroeconomic news, China’s manufacturing activities contracted at their slowest pace in five months in September, but services shrank for the first time this year, according to official data. A private survey painted a grimmer picture, showing that manufacturing returned to contraction in September, shrinking at its fastest pace since August 2023, and the service sector expanded at the slowest rate in nearly a year.
As Beijing’s bold stimulus measures take effect, many analysts are upgrading their outlook on the Chinese economy and market.
HSBC has upgraded China from Neutral to Overweight, noting that the mainland market is undervalued by 15%. They expect a turnaround for homebuilders as early as 2025, ahead of earlier forecast of 2026.
Citi Research expects Chinese developers to see a turning point in October, with more expansionary fiscal measures on the horizon. UBS raised its target for the Hang Seng Index by 7.3% to 22,100, while Standard Chartered raised its baseline target to as high as 22,500, citing reasonable valuations even after the recent rally.