Tuyere financial reporter Tian Liang
India's highlight moment is over. From glory to downhill, it is often just a moment, and the retreat of foreign capital is marking the advent of a new trend.
Elsewhere in Asia, Japan's stock market began to retreat yesterday. Last week, markets such as Korea, Indonesia, Malaysia and Thailand also saw net outflows. The logic behind this is not complicated: Asia-Pacific markets cannot afford greater risk, and investors have found a better place to go.
This "go" is obvious: China.
1
Japan stocks retreated
Multinational stock markets collectively "bleed"
India's stock market suffered its biggest weekly sell-off on record.
In the past, India's stock market was a global emerging market and was regarded as a "sweet spot" by investors.
However, the situation has changed! Last week (September 30 to October 4), foreign institutional investors sold about US$4.5 billion (about 31.6 billion yuan) of India stocks, the largest weekly sell-off in the India stock market. On October 3 alone, Global Funds sold a net $1.85 billion in India equities, the highest level on record.
Bombay Stock Exchange, India. Source: Visual China
India's stock market also continued to fall, with the India Nifty 50 Index falling 4.45% last week, its worst weekly performance since June 2022.
India's government bonds and equities rose this week as the central bank of India eased its hawkish monetary policy stance, signaling a future interest rate cut. The Reserve Bank of India adjusted its policy stance to neutral. The yield on 10-year India government bonds fell 7 basis points to 6.74%, the biggest drop since Feb. 1. India stocks extended gains, with the NSE Nifty 50 up 0.6% to 25,160.80 at press time.
In stark contrast to the rise in China's stock market, India's stock market suffered outflows for a reason↓↓↓
■ Global risk appetite declined, and emerging markets came under pressure. Rising Fed rate hike expectations, geopolitical tensions and other factors have put pressure on global risk assets, and the pressure on emerging market capital outflows has increased.
■ India's economic growth has slowed, and corporate earnings have come under pressure. The global economic slowdown and high inflation have hit India's economy, with corporate profitability declining and market confidence frustrated.
■ High valuations bring pullback pressure. India's stock market has continued to rise in recent years, with high valuations and diverging from economic fundamentals, leading to greater correction pressure in the market.
Last week, markets such as Korea, Indonesia, Malaysia and Thailand also saw net outflows.
The Japan stock market was an important target of this net outflow. Over the past year, Japan's stock market has gone from being one of the world's best-performing markets to the epicenter of the global financial crisis, and investors are hoping that strong earnings will help Japan hold on to gains in the final stages of the year.
The Nikkei 225 index has experienced volatility due to the Bank of Japan's monetary policy, causing panic among investors. The recent weakness in Japan's stock market has caused investors to revisit other options, with more than $20 billion flowing out of Japan in the first few weeks of September.
In Tokyo, Japan, citizens ride their bicycles past an electronic board displaying the Nikkei index in front of a securities company. Source: Visual China
On October 5, Japan's stock market suddenly soared, and the words of the new Japan Prime Minister Ishiba Shigeru sent the Nikkei 225 index straight up: Japan's economy is not ready for further interest rate hikes. This is a clear departure from his previous stance of supporting the end of monetary stimulus by the Bank of Japan, and the yen exchange rate has plummeted as a stronger-than-expected jobs report highlights the resilience of the United States economy. Tokyo financial stocks rose sharply as Japan government bond yields climbed.
After rising for three consecutive trading days, the two major stock indexes of the Tokyo stock market retreated on October 8. At the end of the day, the Nikkei Stock Average fell 395.20 points to close at 38,937.54, while the Topix fell 40.24 points to close at 2,699.15.
The Nikkei 225 Stock Average closed down 1.00%, and the Tokyo Stock Exchange's stock price index fell 1.47%. From the perspective of sectors, most of the 33 industry sectors of the Tokyo Stock Exchange fell, with securities and commodity futures trading, transportation machinery, wholesale, insurance and other sectors leading the decline; The precision machinery, mining, electricity and gas sectors rose slightly.
Analysts hope Japan's stock market holds on to its 2024 gains after the turmoil. Analyst forecasts show that while the Nikkei 225 is unlikely to regain its July record, it could end the year up 1.3% from current levels. A senior strategist at Okayama Securities in Tokyo said: "There are a lot of things that worry investors, but this has not completely ruined investor sentiment." He said the outlook for strong corporate earnings could help boost Japan's stock market heading into December.
2
International investment banks have been singing long A-shares
Why China
"No one wants to miss an opportunity"
The upside potential of the Chinese market is already obvious, and Hong Kong's Hang Seng Index has risen by nearly 30% in a month.
First, strong bullish sentiment on China's stock market has become the consensus of Wall Street institutions.
Goldman Sachs sang long A-shares twice in a week. On October 5, Goldman Sachs raised its price targets for the MSCI China and CSI 300 indices to 84 and 4,600 points respectively over the next 12 months.
On October 7, the last day of the National Day holiday, Goldman Sachs published a research report entitled "Don't Take Advantage of Now, When to Wait", listing ten reasons to buy Chinese stocks. These reasons include: there are still reasons to buy Chinese equities from a valuation perspective; After the Fed cut interest rates, China's policy space opened up further, and so on.
Citibank raised the target for China's major stock indexes by more than 20% by the end of June 2025, expecting the Hang Seng Index to reach 26,000 points, the CSI 300 Index and the MSCI China Index to 4,600 and 84 points, respectively. Citi said it may raise its 2025 earnings forecast for China-listed companies in the future, which will provide further upward momentum for the stock market.
A team of JPMorgan analysts led by Lai Chase & Co. released a report last week saying that opportunities still exist in China's large financial sector, and brokerage stocks are expected to continue to lead the bull market. JPMorgan Chase & Co. believes that Chinese financial stocks still look cheap despite several rounds of sharp gains. Chinese financial stocks as a whole are trading at a 39% discount to their 2020/2021 peaks and 65% to their 2015 peaks.
Wall Street, New York, United States. Source: Visual China
In fact—
Foreign investors are not only long Chinese assets, but also long Chinese assets with real money.
A trader at Goldman Sachs India said the most common question asked by clients over the past two weeks was, "Are we seeing money flowing from India to China?" His answer was yes.
Eric Yee, investment manager at Atlantis Investment Management in Singapore, said they were trimming their long positions in the rest of Asia to buy into China: "
We are trimming our long positions across Asia to fund purchases of Chinese equities. Everybody is doing it. This is a good policy-driven recovery. No one wants to miss an opportunity."
Jason Lui, a strategist at France Paribas, believes that some foreign investors are reducing their holdings in Japan and reallocating funds back to China.
According to media reports, although China's stock market was closed last week for a long holiday, Japan investors began to scramble to buy "Chinese assets", leading to a record increase in Chinese equity-related exchange-traded funds (ETFs) in the Tokyo market.
In addition to the Asia-Pacific market, in the United States market, there was a large influx of funds into Chinese concept stocks, and the Nasdaq Golden Dragon China Index rose 11.9% last week.
Overseas-listed Chinese ETF assets are also highly sought after. In the week ended Oct. 3, KraneShares China Overseas Internet ETF (KWEB) received net purchases of more than $1.4 billion, and iShares China Large Cap ETF (FXI) received net purchases of $1.251 billion, according to data from ETF tracking websites. Chinese ETFs are among the top five net inflows, something that has rarely happened recently.
Dong Shaopeng, a senior researcher at the Chongyang Institute for Financial Studies at Renmin University of Chinese and a member of the advisory committee of the Securities Association of China, believes that the valuation advantage and China's successive favorable policies have made it obvious for global capital to adjust asset allocation and "buy China", which may lead to the redistribution of funds in different emerging market countries. However, Dong Shaopeng also believes that although it is a trend to increase the amount of capital in China, the scale of foreign capital entering China needs to be further observed because of the management system of China's capital market. Dong Shaopeng believes that China is an important engine of global economic growth, especially with Asian countries in the industrial chain is closely integrated, China's continued favorable economic policies under the sharp rise of the stock market, will also drive the collective rise of Asian markets, which is a win-win situation.
Industrial Securities Research Report said that with the recovery of China's stock market and the stabilization of the economy, it is expected to set off a new round of allocation of China's stock market. "We have seen that foreign investors have been actively going long recently, which has become the main force driving the sharp rise in Hong Kong stocks. In recent years, the inflow of foreign capital into A-shares has slowed down significantly, and even outflows, with the annual net inflow far less than the average of more than 300 billion yuan from 2018 to 2021. In addition, foreign investors' allocation positions in A-shares have also fallen to a historical low, and in the medium and long term, the replenishment of foreign positions will drive funds to continue to flow back to China. ”
Foreign investors have reached a consensus: they see the huge potential of China's economy, and China has become an ideal choice for capital hedging and appreciation.
3
A-share market adjustment
A-shares have adjusted sharply.
On October 9, A-shares opened, and the three major indexes all opened sharply lower, with the Shanghai Composite Index opening at 3427.22 points, down 1.79%. The Shenzhen Component Index was reported at 11158.99 points, down 2.92%; The GEM index was reported at 2426.75 points, down 4.84%.
On the afternoon of October 9, the three major A-share stock indexes strengthened and narrowed their declines. As of press time, the Shanghai Composite Index, the Shenzhen Component Index, and the ChiNext Index fell by 3.52%, 3.64%, and 4.02% respectively, and the turnover of the Shanghai and Shenzhen markets exceeded 2 trillion yuan.
On the news side, the Information Office of the State Council will hold a press conference at 10 a.m. on October 12 (Saturday), inviting Minister of Finance Lan Foan to introduce the relevant situation of "increasing the counter-cyclical adjustment of fiscal policy and promoting high-quality economic development" and answer questions from reporters.
Today, millions of new accounts are "running into the market" and new investors are entering the market.
According to ChinaClear's arrangement, newly opened securities accounts that apply between October 1 (Tuesday) and October 8 (Tuesday) will be available for trading from October 9 (Wednesday), that is, today.
During the National Day holiday, the number of account opening applications skyrocketed compared with previous days, and the post-80s and post-90s generations were the main force in this round of account opening tide.
Finally, I hope that everyone will remain optimistic but not impatient, and that the investment road will be steady.