After opening lower, the indices quickly rebounded, with morning turnover nearing 1.5 trillion yuan. Cailian Press says the medium-term rebound outlook for tech stocks is unchanged, while noting that gains in new energy have a thematic-trading component.
Applications for the third swap facility exceeded 100 billion yuan, while the interest rate on relending for share buybacks was cut and the program was made a long-term arrangement. JPMorgan believes that, although no additional quotas were announced for either tool, policy signals and state-backed buying could support Chinese equities, with onshore technology stocks potentially benefiting more.
China and Hong Kong equities fell for a third consecutive month, pressured by unwinding of AI-related trades and weak domestic demand; inflows into A-share ETFs rose markedly at month-end, while local Hong Kong stocks showed relative resilience.
Guangdong has rolled out a plan to expand consumption, construction machinery exports grew faster than domestic sales in the first three quarters, and a commercial space agreement covers the overseas delivery of an entire constellation; earnings and order conversion timelines differ across the relevant sectors.
The MSCI China Index’s forward price-to-earnings ratio has fallen to 9.3 times, and central government-backed funds resumed buying in the second half. JPMorgan favors A-shares and large caps, but earnings estimate cuts, weak domestic demand and external trade restrictions remain constraints.
Morgan Stanley believes both Hong Kong stocks and A-shares have room for further valuation declines, but the funding and policy signals supporting the onshore market are clearer, so it continues to prefer A-shares.
Barclays maintains its cautious view of Chinese growth, but CTA short positions are near their limits and option volatility is relatively low, creating a trading window for near-term short covering. Its FXI options structure needs to rise by approximately 9.9% at expiry to break even; a modest rebound could instead widen losses.
