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the world is changing too fast!

this week, overseas investors' sentiment towards the chinese market reversed sharply.

it is understood that goldman sachs prime brokerage data shows that,on september 24, overseas investors’ net purchases of chinese stocks hit a new record since march 2021.. scott rubner, managing director of global markets at goldman sachs and an expert in tactical strategy, wrote in a note to clients that "almost all of this comes from long buying." on september 25, overseas funds still had a strong sentiment towards long positions. goldman sachs prime broker data shows that as of september 26, chinese stocks have been net bought for eight consecutive trading days. scott rubner believes that behind this are mainly macro funds, quantitative traders and long funds, mainly short-term traders.

at present, overseas funds are still significantly underweight china, which creates more room for funds to cover their positions later.

scott rubner said that as of the end of august, the allocation ratio of global mutual funds (public funds) to chinese stocks was 5.1%, which is the first percentile in the past 10 years and is at an absolute low (0 is the lowest). on an asset-weighted basis, actively managed public funds' allocation to chinese stocks is still 310 basis points lower than the benchmark index. according to data from goldman sachs prime brokerage, hedge fund china net positions are at the 14th percentile over the past five years, a historically low level.

the reporter learned from interviews that some overseas fund managers had full positions in advance, while fund managers who did not have full positions had buying operations.

goldman sachs: the signal of easing is clear and loud

on september 27, the goldman sachs research department issued another report stating that this month’s politburo meeting gave a clear and resounding signal of easing.

goldman sachs research made predictions on subsequent policies.

goldman sachs expects that the policies announced by the people's bank of china in the early stage will gradually be implemented, and it is expected that there will be more easing policies in the rest of this year and next year.

in terms of monetary policy, goldman sachs predicts that the central bank will also lower the deposit reserve ratio by 25 basis points in the fourth quarter. if the fed cuts policy rates more aggressively than expected in the coming months, that would open room for the central bank to lower policy rates. in 2025, goldman sachs expects two 25 basis point reserve requirement ratio cuts and two 20 basis point policy rate cuts. goldman sachs had previously expected two 25 basis point reserve requirement ratio cuts and two 10 basis point policy interest rate cuts.

in terms of fiscal policy, goldman sachs expects policymakers to approve additional government bond issuance quotas on the basis of this year's budget to support fiscal spending. this could be done by approving additional quotas for the issuance of very long-term government bonds, increasing the official fiscal deficit, or using unused bond issuance quotas accumulated in previous years. according to goldman sachs estimates, as of the end of 2023, the total unused bond issuance quota accumulated in the previous period will be 2.2 trillion yuan, including 0.8 trillion yuan for the central government and 1.4 trillion yuan for local governments.

in terms of consumption, goldman sachs expects the government to increase financial support for consumer goods trade-in and equipment upgrade programs. in addition, policies aimed at increasing social benefits for low-income groups are expected to be introduced.

“signal significance is more important than policythe body is more important”

the person in charge of a private equity institution with a management scale of tens of billions of yuan said, "although history does not repeat itself, it has similar rhymes. investors don't need to worry too much about what policies are issued and how to implement them. the timing and signals are more important than the policies themselves. more important". the agency’s clients include overseas family offices, large sovereign funds, large overseas pension funds, etc.

steven luk, ceo of fang ying research and investment, an asset management institution headquartered in hong kong, china, said that this time the policy is very different. previously, overseas investors were relatively pessimistic about market expectations. against this backdrop, any surprises can move the market. currently, both hedge funds and traditional mutual funds (public equity funds) are underweight china. before the end of the year, if the market continues to rebound, these funds will get on board, otherwise they will face the risk of underperforming the market.for chinese stocks, an upward spiral is forming.

"we neither increased nor reduced our positions because our positions were always full." steven luk said.

he said that as of now, overseas customers are still gradually digesting the policy. some customers are waiting to see the pace and effectiveness of policy implementation. however, given that global expectations for china are currently low, favorable policies can easily ignite the market. "this time the government not only solved the problem, but also paid attention to communicating with the market and managing expectations. this is very worthy of recognition. this is worthy of praise." he pointed out.

opportunity to seize high-quality chinese assets

aberdeen china equity investment head yao hongyao"what is unique and encouraging about the latest measures is that they not only provide support to the economy, but also support the market in the form of an injection of liquidity." this comes against the backdrop of the federal reserve beginning a rate-cutting cycle that will ease monetary and fiscal pressures in emerging markets, including china. china plans to use fiscal and monetary policies to strengthen countercyclical adjustments, and more measures are expected to be introduced to boost the real estate market and promote the development of private enterprises. china's consumer sector stocks have rallied in recent days as measures targeting household income and consumption are set to be introduced.

he said that currently, there is a serious disconnect between the valuation of most chinese stocks and corporate profits, and high-quality chinese stocks lack liquidity. the swap facilities announced by the central bank coupled with the repurchase support policy are expected to solve this problem. chinese stocks trade cheaply relative to history and other markets. also,most investors' positions in china are at a low level, and chinese stocks may be significantly revalued.

at present, investors have a good opportunity to gradually increase their allocation of high-quality chinese assets. aberdeen focuses on companies that can gain market share domestically and internationally, have good earnings visibility and continue to improve shareholder returns through buybacks and dividends.

have chinese stocks quietly entered the “long bull” trend?

the head of the greater china region of a foreign-funded institution that was the first to be bullish on china in august said,at the current position level,any catalyst has the potential to ignite the market, not to mention such a large-scale stimulus measure (policy bazooka). she said there was "buying activity this week."

"many clients have been surprised by the government's determination to solve problems in the economy, real estate market and stock market. the policies introduced are related to the confidence of consumers and private enterprises, as well as its impact on consumption and investment willingness." founder of aps, a singapore-based asset management institution wang guohui said.

wang guohui said that in the past few days, clients have asked him questions including "whether the chinese stock market has 'quietly' entered a bull market that will last for many years." he further explained that generally speaking, the qualified foreign institutional investor (qfii) investment process is long and cannot make asset allocation decisions within a few weeks. "nonetheless, i expect qfii to return in the coming weeks or months, and there should be massive inflows next year," he said.