A-share markets have seen a sustained surge, with the Shanghai Composite Index rising by 12.81% last week, marking the largest single-week increase since November 2008, nearly 16 years. Overseas market sentiment has also undergone a V-shaped reversal.

"The sentiment among foreign investors now can be summarized by the acronym 'ABC'—'All-in Buy China'. This shift has been very evident in the past week, with hedge funds rushing in first, and long-term capital may also have to increase their positions subsequently," said a hedge fund professional to a journalist.

Overseas A-share trading desks have seen record capital inflows.

First Financial Daily reporters have learned that during a client call, Goldman Sachs' overseas traders mentioned that as the total transaction volume of the A-share market exceeded 1.1 trillion yuan for two consecutive days—the last time this happened was on May 6—it suggests that market sentiment may have reached its highest level in the past year.

"Our A-share trading desk capital flows also hit a historical high on Wednesday. From September 24th to September 26th, the A-share trading desk overall had a 1.6 times bias towards buying (long-term capital 1.3 times, hedge funds 1.8 times). Overall, the buying was more driven by hedge funds, and some long-term investors who have not been active in China for a while have also returned to chase the uptrend," Goldman Sachs stated.

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The capital inflow was mainly focused on three themes—high dividend stocks, primarily banks and non-ferrous metals: Hedge funds significantly flowed into bank stocks, mainly small and medium-sized banks. Long-term capital had less inflow into banks, focusing more on non-ferrous metals (Aluminum Corporation of China, China Minmetals); growth stocks, mainly battery and ChiNext weighted stocks, among which Contemporary Amperex Technology Co. Limited (CATL) has been the most purchased stock since the press conference on September 24th, with significant contributions from both long-term capital and hedge funds; consumer stocks, mainly liquor/appliances: The capital inflow into Moutai was more due to short covering rather than long-term capital. Over the past three days, this has been the most purchased stock by hedge funds on the A-share trading desk, while long-term capital has not yet bought in.

The market热度 temporarily weakened on September 26th, but the net purchase volume for the day was still above average. "Morning trading was relatively light, but after the news of the Politburo meeting at noon, hedge funds reacted quickly, followed by domestic institutions chasing higher, and later long-term fund orders were also seen. The most purchased were securities firms, new energy, hardware, and liquor, while logistics and retail were sold," the aforementioned trader stated.

On the afternoon of September 26th, the Central Politburo meeting undoubtedly further boosted market sentiment. The meeting proposed "to promote the real estate market to stop falling and stabilize," which institutional insiders believe is the first time in many years that the Politburo meeting has explicitly put forward policy requirements related to the operation of the real estate market, further stimulating the market to surge, with the Shanghai Composite Index breaking through the 3000-point mark, with a daily increase of 3.61%.

In addition, two specific measures proposed by the meeting are also worth noting. First, the meeting clearly demanded "adjusting housing purchase restrictions," and second, the meeting emphasized "increasing the loan allocation for 'white list' projects," intending to encourage commercial banks to expand credit to real estate companies. To date, commercial banks have approved more than 5,700 "white list" projects, with approved financing amounts reaching 1.43 trillion yuan, supporting the timely delivery of more than 4 million housing units.

Orient Securities Investment Research Institute stated, "We believe that Chinese stocks—especially A-shares and some Hong Kong stocks—will benefit the most from these policy shifts. The significant gap between stock returns and bond returns provides an attractive opportunity for stock investors. If the real estate market can gradually stabilize, coupled with improved household expectations, it may provide further support for stocks.""We hold a particularly positive view on consumer goods and financial stocks, especially securities firms, as they are expected to benefit from increased market activity. At the same time, we recommend reducing short positions in the Chinese yuan to neutral, as speculation about higher growth and inflation is increasing under the expectation of fiscal stimulus, which helps stabilize the currency. Although the market response has been generally positive, the key will still be whether a strong fiscal stimulus package can be introduced."

Pay attention to the follow-up policy implementation.

In the view of institutions, China still needs to introduce well-considered policies to address a series of structural issues, especially on how to stabilize the real estate market, which has been contracting for four consecutive years.

BlackRock's Chief China Economist, Song Yu, told Yicai: "The pace of policy introduction is very critical." He believes that the Standing Committee of the National People's Congress in October is quite critical. "If there is a need to increase the issuance of national bonds and raise the deficit ratio, this process must be passed, and in the future, fiscal efforts will be needed to reverse economic expectations."

UBS's Head of Asian Economic Research and Chief China Economist, Wang Tao, told reporters that the Politburo meeting clarified the necessity of "counter-cyclical fiscal policy." The institution estimates that the overall fiscal contraction in the first half of 2024 will account for about 0.4% of GDP, while the annual fiscal expansion implied by the March National People's Congress is 0.8% to 1%.

Regarding the most critical real estate, Lu Ting believes that ensuring the delivery of houses should take precedence over the collection and storage. Nomura's previous research mentioned that the central bank announced the launch of a 300 billion yuan affordable housing reloan in mid-to-late May this year to support local state-owned enterprises in purchasing existing housing and transforming it into affordable housing, but the usage of this quota is only at the level of tens of billions of yuan, and the fact that many houses have not been completed remains the main issue.