On September 30 morning, Japan's stock market saw a sudden plunge. Meanwhile, due to continuous positive policy boosts, Chinese assets are being viewed favorably, with the A50 index futures spiking before the market opened.ββββ
Nikkei Index Plummets
As of this report, the Nikkei 225 index fell by 4.48% during the day, briefly dropping below 38,000 points. Shigeru Ishiba unexpectedly won the Liberal Democratic Party presidency election and plans for fiscal adjustments may affect the yenβs volatility.βββββββββββββββ
Shigeru Ishiba was elected as the LDP president after the Tokyo market closed last Friday. NHK stated that Ishiba plans to hold a general election on October 27. According to Kyodo News, Katsunobu Kato will become the next Finance Minister, succeeding Shunichi Suzuki.
Analysts suggest that before Ishiba's policies become clear, the stock market may experience significant volatility. The yen might strengthen, negatively impacting exporters, while banks could benefit from rising interest rates.
A50 Index Futures Surge
FTSE China A50 index futures saw a swift rise, flipping from an overnight decline of 1.1% to a 1.35% increase.
The RMB central parity rate against the USD was adjusted up 27 basis points to 7.0074 from the previous day's 7.0101. China's futures market was bullish, with iron ore opening nearly 11% higher, while coke, coking coal, rebar, and hot-rolled coil all hit limit-up. Glass rose over 7%.
The Hang Seng Index opened 2.63% higher, with Longfor Group up nearly 15%, Wuxi Biologics up 9.5%, and Meituan up over 7%. The Hang Seng Tech Index rose 4.38%, with Nio increasing nearly 15% following a 3.3 billion yuan strategic investment.
Upon opening, the Shanghai Composite Index increased by 3.47%, the Shenzhen Component Index rose by 4.58%, and the ChiNext Index climbed by 5.77%. Over 5,200 stocks in the market were up, with the securities, liquor, and real estate sectors leading the gains.
Outlook for A-Shares
China International Capital Corporation (CICC) believes the market could remain active in the upcoming months, emphasizing structural opportunities. Despite the recent market surge, the valuation correction and short-term profit-taking may slow the upward trend or cause fluctuations, but current policy signals suggest a continuation of the upward momentum.
Some funds, such as private equity funds, remain at historically low levels of investment and may add to positions during this surge, potentially becoming market bulls.
The market's "bottoming out" will depend on confirming mid-term fundamentals. The strength of growth stabilization policies, especially monetary policy, could influence the stock market's pace and extent of gains. Short-term sectors to watch include non-banks, real estate, consumer sectors, and undervalued firms. Mid-term attention should be on small-cap and growth stocks, with high dividends remaining divided.
CITIC Securities noted that the adjustment in existing mortgage rates would have a minimal negative impact on annual asset yields for commercial banks. Combined with savings in liability costs and property policies, this should stabilize bank net assets. Last week's market favored growth stocks, while banks pulled back due to concerns about the dilution of current shareholder value from big bank capital injections. They believe the market is digesting negative expectations, solidifying the value of bank stock dividends, and maintaining absolute returns.
Huatai Securities remains tactically optimistic about A-shares, focusing on low-position stocks yet to rise. Last week's policy-driven market rally was strong, and investors now consider how much longer the rally will last and the best risk-reward trade-off for further participation. They observe that liquidity, sentiment, and historical patterns indicate no significant changes in the current phase, suggesting the rally may continue. They recommend focusing on undervalued pharmaceuticals, social services, and real estate-related sectors.
