1. Global Stock Markets Rally
Global markets are seeing widespread gains. Expectations of potential interest rate cuts by the U.S. Federal Reserve have led to a weakening U.S. dollar, with the dollar index dipping below 108 today. Despite two days of weakness, the three major U.S. stock indices rallied overnight, with large-cap tech stocks driving the S&P 500 to a record high. Chinese stocks listed in the U.S. also stabilized, and the Nasdaq Golden Dragon China Index rose 0.13%. European and Asia-Pacific markets joined the global upswing, marking a positive day for equities worldwide.
2. Chinese Assets Make a Strong Comeback
The renminbi (RMB) surged this morning, rising sharply by 340 points in just over an hour between 9:40 AM and 11:00 AM (Beijing time). Meanwhile, the A50 futures index saw a dramatic turnaround, going from a slight dip (-0.06%) at 9:34 AM to a strong gain of over 1% by midday. Hong Kong’s Hang Seng Index emerged as one of the strongest performers in the Asia-Pacific region, climbing over 1.6% by midday, while the Hang Seng Tech Index surged by more than 3% during trading.
3. A-Share Indices Rise Across the Board
In the A-share market, the Shanghai Composite Index opened slightly lower due to weak sentiment but quickly rebounded. By midday, the Shanghai Composite and Shenzhen Component indices were up 0.73% and 1.13%, respectively. Tech stocks led the rally, with the ChiNext Index and STAR Market Composite Index rising 1.5% and 1.48%. The breadth of the market was impressive, with 3,515 stocks advancing and only 1,636 declining. Out of 56 industry sectors, 49 posted gains, while only 7 saw losses.
4. Timing is Key in Stock Investing
Reflecting on 2024, two significant market rallies stood out. The first began in late January, as I updated my research on January 23 to capture opportunities in specific state-owned enterprise sectors. This rally gained momentum through May. The second rally occurred in September, driven by tech stocks. Following a market bottom on September 18 at 2,700 points, tech stocks led a breakout rally. Both rallies highlight the importance of timing and seizing opportunities.
5. How to View the Current Market?
With only one and a half trading days left before the Lunar New Year, the anticipated “spring rally” is still a compelling opportunity. Key areas to watch include large-cap tech stocks and core assets in the mainboard market. Opportunities like this only came twice last year, and now, another chance is approaching.
Although trading volume this morning was modest, with turnover reaching just ¥737.2 billion, this suggests the rally is not yet driven by significant capital inflows. However, regulatory assurances of pre-holiday fund injections remain in play, and both policy and liquidity factors could support further gains in the coming weeks.
6. A Notable Update from Japan
Just before midday, the Bank of Japan announced a 25-basis-point rate hike, raising interest rates from 0.25% to 0.5%. This move could impact global capital flows, as it affects low-interest-rate arbitrage opportunities in Japan. Some of this capital might find its way into Chinese markets. Let’s wait and see how this unfolds.