1. Chinese, European, and Asian Markets Struggle; Hong Kong Stocks Drop

Last night, U.S. stock markets saw slight gains, with the Dow Jones rising 0.16%, Nasdaq up 0.07%, and the S&P 500 up by 0.24%. However, Chinese stocks in the U.S. dropped slightly by 0.04%. European markets were generally down, with some declines exceeding 1%. The Asian market followed suit, with Hong Kong’s Hang Seng Index and Hang Seng China Enterprises Index both falling around 1.7%. The Hang Seng Tech Index saw a sharp drop of 3%, while Japanese stocks fell about 1.5%.

2. February Interest Rate Cut Not Happening

On February 20, China’s central bank announced that the 1-year Loan Prime Rate (LPR) remains at 3.10%, and the 5-year LPR stays at 3.60%. This marks the fourth consecutive month with no change in rates. The anticipated rate cut did not happen, but this was expected given that the central bank had already kept the Medium-term Lending Facility (MLF) rate unchanged on February 15. Last year’s rate cuts were significant, with the 1-year LPR dropping by 35 basis points and the 5-year LPR falling by 60 basis points.

3. A-Shares See Slight Adjustments

In response to various market factors, A-shares saw a modest pullback today. By midday, the Shanghai Composite Index and Shenzhen Component Index fell by 0.16% and 0.2%, respectively. The ChiNext Index dropped by 0.72%, while the STAR Market (Sci-tech innovation board) held steady. Despite the dip in the major indices, there were more stocks rising than falling, with 2,949 stocks up and 2,249 down. Market sentiment remains positive, with trading volume reaching 1.13 trillion yuan, up by 75 billion yuan compared to the previous day.

4. Encouraging Foreign Investment in Chinese Stocks

On February 19, the Ministry of Commerce and the National Development and Reform Commission released a significant document, the “2025 Action Plan to Stabilize Foreign Investment.” The plan aims to encourage foreign investment in Chinese stocks, expand pilot programs in sectors like telecommunications, healthcare, and education, and implement the “Foreign Investor Strategic Investment Management Measures for Listed Companies.” This policy is expected to benefit the A-share market and attract foreign capital, especially in these key sectors.

5. Sector Performance

The new policy benefits sectors such as telecommunications, education, and healthcare. The telecommunications sector has already seen significant growth, with the index rising from around 1,300 points to 1,600 points. However, due to technical resistance at 1,600 points, the sector declined by 1.75%. On the other hand, healthcare and education stocks saw strong performance, with the healthcare sector rising by 2.14% and education up by 1.74%.

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The overall trend in A-shares shows a shift in market structure, with even previously bearish analysts like Morgan Stanley now raising their outlook for Chinese stocks. Morgan Stanley upgraded its rating on the MSCI China Index, predicting a more sustainable upward trend. As March approaches, a series of favorable policies are expected to roll out, providing new opportunities for A-share investors.