Image source: Visual China
The three yang candles convert the faith.
After a violent rise on Friday (April 26), A-shares continued to rebound today (29th), with the Shanghai Composite Index up 0.79% as of the close, back above 3,100 points, the Shenzhen Component Index up 2.22%, and the ChiNext Index up 3.5%. And as of today, A-shares have risen for four consecutive days.
Surprisingly, the real estate sector led the rise, especially Vanke A, as the leader of the sector, after 156 days, a huge number of daily limits were blocked, and its last daily limit was on November 29, 2022. Hong Kong stocks are even crazier, with Vanke, Kaisa Group, China Aoyuan, Sunac China, Zhenro Real Estate, etc. once rising more than 20%, and Shimao Group rising more than 50%.
This past weekend, there was a flurry of headlines in the real estate market. On April 27, Nanjing Anju Construction Group issued an announcement on carrying out the pilot activity of "trade-in" for stock housing, with a pilot limit of 2,000 units in the first batch, from the date of the announcement to December 31, 2024, until the quota is full. On the 28th, the relevant departments of Chengdu announced the complete cancellation of housing purchase restrictions: the city's housing transactions will no longer review household registration, social security and other housing purchase conditions, and no longer limit the number of units purchased.
In addition to the second-tier cities that have played their cards, the first-tier cities are also surging. Today, the news that Shenzhen "is about to optimize the purchase restriction policy", the Shenzhen Housing and Urban-Rural Development Bureau not only did not deny the relaxation of purchase restrictions in response, but also said that "it will make good use of the policy toolbox to better meet the needs of residents for rigid and improved housing, and promote the steady development of Shenzhen's real estate market", and the market speculates that Shenzhen will also fully relax the purchase restrictions.
Whether it is real estate or the stock market, it is the "duck" prophet of Chunjiang plumbing.
Back on April 23, the day before A-shares rose for four days, UBS upgraded Chinese mainland and Hong Kong stocks to "overweight". Sunil Tirumalai, chief strategist for global emerging markets equities at UBS, mentioned at the time that earnings were still strong despite concerns about China's property and macro conditions. And in August 2023, UBS downgraded Chinese equities to "neutral" on the grounds that the country was waiting for policy stimulus and the property market to stabilize. Since then, Chinese assets have ushered in a wave of major corrections, so UBS's upgrade of Chinese mainland and Hong Kong stocks has made the market more concerned.
In addition, China's high-frequency economic data showed a stable trend in the first quarter, and many foreign institutions such as Morgan Stanley and Goldman Sachs have recently raised their forecasts for China's economic growth this year. Bloomberg's latest forecast is that China will be the largest contributor to global economic growth over the next five years, with its contribution exceeding that of all G7 countries combined and almost twice that of the United States.
From this point of view, northbound funds bought a net of 22.4 billion yuan last Friday and hit a new high since the opening of the cross-border connect, which is also the trend of foreign investors in using positions to express their views. Today's northbound funds bought a net of 10.9 billion yuan, indicating that foreign investors are still continuing to increase their positions.
There is no doubt that as a valuation depression in the global equity market, there is a momentum for valuation repair at a time when the construction of the capital market system is accelerating and the economic fundamentals are stabilizing, which is equally attractive to domestic and foreign investors. At the same time, it should not be ignored that the sharp depreciation of the yen exchange rate is also promoting foreign capital to increase the allocation of Chinese assets.
Over the past three years, the yen's benchmark interest rate has been much lower than the dollar's benchmark interest rate, leading to the prevalence of "carry trades", which have pushed the yen down, and the yen's exchange rate against the dollar has fallen by about 30% in three years. Despite the Bank of Japan's interest rate hike announced in March this year, the yen has not appreciated but has depreciated sharply, falling by 11% since the beginning of 2024.
On Friday, the yen depreciated about 1.7% against the dollar to 158 amid a surge in Chinese assets, a one-day depreciation rarely seen among major currencies. This is mainly due to the fact that the Bank of Japan said that it would not raise interest rates for the time being, and the "lying flat" attitude contributed to the yen shorts, while the high government debt ratio of 260% is undoubtedly a constraint on Japan's interest rate hikes, and the US interest rate hike is also subject to this. However, Japan's policy space is narrower.
The latest example is that despite the recent U.S. macro data disclosures that exceeded expectations, leading to greater depreciation pressure on the yen, U.S. Treasury Secretary Janet Yellen said last Friday when asked how she sees any moves Japan might take in response to the yen's decline against the dollar, "We hope that this scenario is rare and that such intervention will only occur if it is excessively volatile, and that they will consult beforehand." ”
It is clear that Japan cannot intervene in the foreign exchange market at will, and the yen exchange rate continues to fall sharply. To this day, the yen has fallen below 160 against the dollar, hitting a new low since April 1990, and there are many rumors that the yen has collapsed.
While a sharp depreciation of the yen will not lead to an immediate collapse of the Japanese economy, but may improve export competitiveness and tourism, it will put Japan under huge inflationary pressures, as Japan is highly dependent on food and resource imports, and a weaker yen will greatly increase its import costs. If Japan wants to intervene in foreign exchange, although Japan has nearly 1.22 trillion US dollars in foreign exchange reserves, 1.17 trillion of which are US bonds, and can only sell US bonds in exchange for US dollars, and then buy yen and sell US dollars in the foreign exchange market to curb the pace of yen depreciation. As long as the dollar continues to appreciate, the Bank of Japan will continue to sell US bonds, and what kind of ripple effects will this trigger?
It is worth mentioning that foreign media quoted sources as saying that the Bank of Japan sold the dollar against the yen today, prompting the yen exchange rate to rise directly from around 159.50 to around 155.00, but Japan is on holiday today, and the Japanese Ministry of Finance did not immediately comment, so it is difficult to judge the actual situation of the foreign exchange market.
What is certain is that due to the rising economic and market uncertainty in the United States and Japan, foreign capital has begun to flow into the Chinese market, pushing up A-shares and Hong Kong stocks, which have benefited more from their international market status. While the support for the long-term rally in Chinese assets is not strong enough from a fundamental point of view, and more evidence is needed for investors to completely "change their faith", the sky has indeed changed. (Fortune Chinese Network)
The 2024 Fortune China 500 list will be launched, using the same method as the Fortune Global 500, including both listed and unlisted companies. Based on this list and its data, one can get an idea of the latest trends in China's largest companies.
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