Which aspects should be focused on for A-shares after the holiday?

With the continuous strong performance of Chinese assets during the National Day holiday, the market also has optimistic expectations for the performance of A-shares after the holiday. Today, Goldman Sachs trader William Chan issued a research report, pointing out the top five issues that investors are most concerned about at present:

How is the current market opening situation?

On the eve of today's A-share market opening, various signs in the futures and fund markets indicate a high level of optimism:

The premium of the main contract of the FTSE China A50 index futures reached 14%;

The trading price of the Huaxia CSI 300 Index ETF increased by 17% compared to the closing price on September 30;

The net asset value premium of Chinese ETFs reached 12%.What are the highlights of the press conference held by the State Council Information Office on Tuesday?

On Sunday, the State Council Information Office announced that a press conference will be held at 10 a.m. on Tuesday, October 8, 2024. At that time, Zheng Shanjie, the director of the National Development and Reform Commission (NDRC), and his deputies Liu Sushe, Zhao Chenxin, Li Chunlin, and Zheng Bei will introduce the situation related to "systematically implementing a package of incremental policies to solidly promote the economy to move upward in structure, and the development momentum to continue to improve."

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Goldman Sachs stated that the configuration of "the director of the NDRC presiding over + four deputy directors attending together" is rare in recent years, predicting that the meeting will provide support measures for the following areas:

Further increase policy support to promote consumption and investment, including promoting large-scale equipment updates and trade-in work, both of which are supervised by Zhao Chenxin, the deputy director of the NDRC.

Increase support for major national projects ("two heavy", that is, the implementation of major national strategies and the construction of safety capabilities in key areas). The projects may focus on areas such as high-tech manufacturing and green transformation (decarbonization), and also include potential loose policies for private enterprises and low and middle-income families.

The report points out that a series of fiscal stimulus policies are worth focusing on in terms of scale.

What stage are we at now?The rebound in the A-share market may still be in its early stages.

Previously, the research report released by Kinger Lau, the former Chief Strategist of Goldman Sachs China, indicated that in previous instances of significant policy turnarounds leading to repricing, stock market gains rarely stopped at 30%, and the duration was more than 150 days. In comparison, this round of increase has only been less than 20 days since it began.

The report suggests that if there are further fiscal stimulus measures introduced in the future, the Chinese stock market may respond more positively, with an estimated 14%-15% upside potential for A-shares over the next year.

What is the latest situation regarding capital allocation?

According to data from Goldman Sachs' prime brokers, hedge funds' net allocation to China has returned to the 55th percentile, with the capital scale currently exceeding that of Japan, and most of it flowing out from India.

Focused mutual funds in the Chinese stock market saw a significant inflow of $14 billion last week.

On the individual investor front, on one hand, a large number of account opening applications have flooded into securities platforms during the holiday period. On the other hand, the balance of margin trading has rebounded from its low point and still has a lot of room for growth (data is delayed by one day), indicating that more investors are using margin trading to "leverage up".What is the value of the derivatives market?

A-shares: The dynamics of funds and fluctuations in A-shares may make stock options difficult to promote/trigger until the market becomes stable.

H-shares: H-shares are open as usual during the National Day holiday. The report points out that considering the surge in volatility of the three times long options of the Hang Seng China Enterprises Index, its price is no longer cheap, and subsequent plans will consider bullish options superimposed on futures long positions, etc.

Goldman Sachs also compiled a basket index of beneficiaries of China's easing policy, "GSXACBEN", which is highly correlated with the MSCI China Index and includes stocks listed in Hong Kong, Australia, South Korea, Taiwan, and Singapore. Data shows that the daily trading volume of this index has reached $700 million.