The financial landscape in late September was notably marked by a surge in activity, primarily prompted by foreign hedge fundsHowever, the post-holiday scenario tells a different tale; these funds have rapidly retracted their investmentsCurrently, the prevailing sentiment among foreign capital investors is one of caution—the adage "Don't show the hawk until you see the rabbit" rings especially trueTrue stimulus in the real estate and consumer sectors will be necessary to attract long-term investment capitalData from Goldman Sachs suggests that despite foreign capital inflows hitting 1.2 times the volume of purchases yesterday, the scale and nature of these investments substantially differ from pre-holiday levelsMuch of this recent activity seems primarily aimed at covering short positions rather than investing for the long haul.

For domestic institutions, the situation is equally challenging

Many are grappling with increased redemptions from retail investors, leaving them with little cash to pursue equity positionsWhile banking wealth management products and insurance funds are well-capitalized, their operators remain hesitant; they perceive a lack of clarity regarding economic recoveryThe expectation of "moderate easing" implies that interest rates are likely to be cut, thereby boosting the bond market, which explains the rush towards purchasing government bondsIndeed, the yield on China's 10-year treasury bonds is closing in on 1.8%, and the futures for 30-year treasury bonds have reached new highs.

I've consistently pointed out that regardless of the underlying logic, the realization of potential gains necessitates fresh capital entering the marketIf the A-share market aspires to reclaim its pre-holiday heights, it requires additional funds to commit—either convincing foreign investors or reassuring domestic financial institutions.

It’s intriguing to note why the micro-cap stock index, often associated with speculative trading, continues to hit new highs while larger market indices struggle to break through established resistance levels

This disparity arises from ongoing leverage increases in financing, while institutions are caught in a bind of either having funds but hesitating to act or lacking funds entirely.

On a positive note, exchange-traded fund (ETF) flows appear to maintain a net buying trendRecently approved, the third batch of A50 ETFs is on the horizon, alongside a bond market that is increasingly pricing in expectations for interest rate reductions in the coming yearHowever, it seems that optimism regarding stock market recovery is relatively scant'Bond bull' investors, currently enjoying a bonanza, might be overstretching their tenure in this fieldAs the yield on treasury bonds declines, the capital gains can dry up quickly, leaving them with only marginal coupon returns.

Reflecting on Japan's experience, we see a pattern: when Japanese interest rates approached zero, numerous ordinary bond and money market funds gradually became obsolete

The returns after management fees on these bond investments dwindled to near insignificance, sometimes even less than the already meager deposit rates.

In contrast, the equity market stands as an increasingly appealing alternative as market rates and returns from tangible asset investments declineWhen risk-free rates fall indefinitely, investors initially swarm toward bonds in pursuit of price differential earningsYet, when rates dip beneath a certain threshold (internationally recognized to be below 2%), a shift occurs: while rates may continue to fall, interest in bonds wanes, in favor of equities and stocksThis makes intuitive sense—when rates bottom out, available earnings from differentials shrink, compelling a pursuit of broader revenue sources, leading to sustained influxes into equities and a transition of household assets into the stock market.

There’s optimism if we can maintain our resolve; eventually, these funds will arrive to bolster the market

alefox

Reports suggest that state-owned banks have received notifications indicating that the personal pension system may soon be fully openedSuch a development would surely steer A-shares towards a more mature capital market trajectory.

Shifting focus to today’s significant announcements: Google has unveiled its latest quantum chip, dubbed “Willow,” marking a groundbreaking advancementAs a result, Google's stock surged over 5%, showcasing the influence of this tech giant valued at $2 trillionIn tandem, A-share quantum communication stocks skyrocketed in response, with Guo Dun Quantum jumping by 14%. Other companies like Shenzhou Information and Dahua Intelligent faced trading halts due to significant stock price increasesStill, we must remain cautious, as commercial viability for quantum chips is likely still far on the horizon.

Today also witnessed a surge in the “Soybean Package” sector, driven by a tidal wave of enthusiasm for AI computation, AI toys, and edge computing

Three major catalysts contributed to this spike: the release of monthly active user (MAU) data in October, which placed ChatGPT at the forefront with 258 million users globally, while ByteDance’s Soybean positioned itself second with 51.3 million users, incrementing by 9.10% month-over-monthNotable competitors, including Nova, are lagging.

ByteDance has entered the AI toy space, launching AI headphones and attention-grabbing AI toysConcurrently, Baidu revealed Xiao Du AI glasses, and Looktech rolled out AI smart glassesOther companies like FIIL and Rokid have also introduced AI headphone and AR glasses innovations respectivelyFurthermore, ByteDance, Volcano Engine, and Soybean’s AI model are set to showcase new developments at the FORCE2024 Power Conference in Shanghai on December 18-19, complete with a dedicated 2,000-square-meter AI exhibition area and over ten thematic forums.

The AI application explosion has resulted in significant speculation around the Soybean model

Companies involved in communication and SOC chips, such as E-COM and Luxin Technology, have seen their stocks soarAdjacent sectors, including Hitec and Yakang, have similarly experienced surges due to related speculative activities.

New Yiseng’s stock jumped over 6% today, attributed to two primary catalysts: unexpected customs data far exceeding projections and securing an Amazon order for copper cables through a subsidiary of Wole, amidst talks regarding potential partnerships with NV for factory verification, all leading to today's surge pushing the stock close to limits.

As the trading day closed, the offshore yuan experienced a sudden depreciation of nearly 300 pips, faltering below the 7.28 markThe dynamic here reflects a stronger US dollar index and anticipations of potential depreciation, which may have contributed to downturns in Hong Kong stocksTraders are poised for tonight’s US CPI data release, which could have ramifications for the Federal Reserve’s slated interest rate cuts in December.

Summarizing today’s market performance, by the end of the trading session, the Shanghai Composite Index recorded a mere 0.29% increase, while the ChiNext board fell by 0.11%. The Hang Seng Index saw a 0.74% decline and a 1.35% drop in the Hang Seng Tech Index

Trading volumes plummeted to 17.9 trillion yuan, with more than 3,800 stocks advancing and 156 hitting the limit up.

Current dynamics within the A-share market primarily feature speculative capital and retail investors driving prices, with a flurry of speculation surrounding thematic tradingFor entities involved in speculative trading, such as those within the quantum communication and soybean sectors, substantial profits have emerged due to a lack of institutional momentumDespite ongoing discussion around price hikes in the lithium battery industry, staggeringly, interviews with Industry leaders like Ningde Times confirm their recent joint venture with Stellantis to invest 40.38 billion euros in a battery factory in SpainThe unexpected market movements today raised questions, especially given the generally weak performance of institutional stocks, prompting retail traders to avoid established capabilities for more lucrative opportunities offered by concepts like Huawei’s robotics.

High-risk engagement in the stock market calls for prudent investment considerations