1. The U.S. Dollar Takes a Deep Dive!

Amid rising trade tensions, the U.S. dollar has suffered a sharp decline. Since March 3, when the U.S. announced new tariffs on Mexico, Canada, and China, the dollar has dropped for three consecutive days, with a total loss exceeding 3%. Last night alone, it plunged over 1%.

This drop is significant—historically, a 10% decline in the dollar is enough to offset the impact of a 10% tariff on global trade.

2. What Happens Next?

Such a sharp short-term decline in the dollar is rare. In the past five years, similar events have only occurred twice:

• March 25-27, 2020: The U.S. Dollar Index fell 3.45%, triggering a bull market in both U.S. and Chinese equities—the largest A-share rally since 2015.
• November 2022: The A-share market bottomed at 2,886 points, and U.S. stocks entered a major tech-driven bull run.

Could history be repeating itself?

3. Chinese Stocks Are Soaring!

Last night, U.S. stocks found support after reports surfaced that the U.S. may temporarily lift auto tariffs on Mexico and Canada for one month. The Nasdaq, S&P 500, and Dow Jones all rebounded by over 1%.

However, Wall Street is growing cautious about the tech sector, fearing a potential bubble burst. As a result, investors are shifting their focus to Chinese stocks. The Nasdaq Golden Dragon China Index skyrocketed 6.46% overnight, reflecting a surge in interest.

4. A-Shares Follow Suit!

Riding the momentum from Wall Street, China’s A-share market opened higher and continued climbing throughout the morning session:

• Shanghai Composite Index: +1.06%
• Shenzhen Component Index: +1.75%
• ChiNext Index: +2.15%
• STAR Market Composite Index: +3.03%

Technology-heavy stocks led the charge, with the STAR 50 Index jumping 3.52%, fueled by explosive gains in the AI and computing power sectors.

5. Capital Floods In!

Investor enthusiasm is back. By midday, total market turnover surged past ¥1 trillion ($1.17 billion), an increase of ¥223.7 billion from the previous day. Funds are rushing in, positioning ahead of a potential breakout beyond 3,400 points.

Market breadth was overwhelmingly positive:

• 4,407 stocks gained, while only 833 stocks declined.
• Just 99 stocks fell more than 3%, while 856 stocks surged at least 3%.

Spring Rally Incoming?

The Chinese financial regulator recently approved an additional ¥60 billion in insurance funds to enter the market on March 4, bringing the year-to-date total to ¥112 billion. This is just the beginning of long-term capital inflows.

With a major policy meeting set to conclude next week, a fresh wave of pro-growth measures could be on the horizon. The market is poised for a spring rally—will A-shares ride the tailwind?

1. U.S. Tech Stocks Decline

Overnight, U.S. technology stocks saw a significant decline, with semiconductor and hardware sectors leading the losses. Broadcom dropped by 4.91%, Nvidia fell 3.19%, while Tesla and Meta declined 2.15% and 2.26%, respectively. Other major tech players, including Amazon and Microsoft, also experienced losses.

By market close, the Dow Jones Industrial Average remained steady, while the Nasdaq Composite Index, which heavily features tech stocks, dropped 1.21%, marking a 3.38% decline over two days.

2. Chinese Stocks in the U.S. Face a Sharp Drop

Chinese companies listed on U.S. stock exchanges were among the biggest losers, with the China Index falling 5.63% overnight. This comes after a strong rally in previous weeks—Alibaba’s U.S. stock, for instance, had surged nearly 80% recently before dropping over 10% in one night.

Given that many Chinese companies, like Alibaba, are dual-listed in the U.S. and Hong Kong, investors worried that this decline could negatively impact Hong Kong and mainland Chinese markets. As a result, market sentiment was cautious at the opening of Asian trading.

3. Hong Kong Tech Stocks Recover Losses Quickly

Despite early concerns, Hong Kong’s Hang Seng Tech Index made a strong recovery. Alibaba’s Hong Kong shares opened 7.81% lower, but by 11:30 AM, the decline narrowed to just 2.6%.

The Hang Seng Tech Index initially dropped 4.3% but fully recovered by midday and even turned positive. This shows the resilience of tech stocks in the region.

4. Mainland China’s Market Shows Strength

China’s stock markets also opened lower but quickly regained ground:

• The Shanghai Composite Index, Shenzhen Component Index, and ChiNext Index opened down 0.81%, 1.34%, and 1.72%, respectively.
• By midday, losses had narrowed to 0.14%, 0.29%, and 0.32%.
• The STAR Market Index (focused on tech and innovation stocks), which initially dropped 1.57%, ended the morning session up 0.92%—showing strong momentum in the tech sector.

5. Market Sentiment Remains Resilient

Despite the initial concerns, the broader A-share market remained stable, with only 113 stocks out of 5,400 dropping more than 3% by midday.

Additionally, the total trading volume in the morning session was 1.14 trillion yuan, a decline of 280.1 billion yuan compared to the previous day. The lack of significant capital outflows suggests that investors were holding onto their positions rather than selling in panic.

If the market maintains this momentum in the afternoon session, it would further reinforce confidence in the resilience of Chinese equities.

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%.

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.

1. Strong Performance in European Markets

Yesterday, U.S. stock markets were closed for Washington’s Birthday, but European markets showed impressive strength. Germany’s stock market, in particular, surged 1.26% overnight, bringing its year-to-date gains to 14.51%. The recent Munich Security Conference (Feb 14-16) drew global attention, highlighting growing policy differences between the U.S. and Europe. These shifts in international relations could have significant long-term effects on global markets.

2. Hong Kong Stocks Continue Their Upward Trend

Despite the U.S. market holiday, Hong Kong stocks remained strong. After a slight pullback yesterday, today’s session saw continued gains. By midday, the Hang Seng Index was up over 2%, the Hang Seng China Enterprises Index rose 2.2%, and the Hang Seng Tech Index climbed nearly 3%. Since January 14, the Hang Seng Tech Index has surged approximately 34%, while Alibaba’s Hong Kong shares have jumped over 63% during the same period.

3. A50 Futures See Strong Gains

A50 futures had been underwhelming in recent weeks, rising only 4.72% since January 14—lagging behind the Shanghai Composite Index. However, today saw a sharp turnaround, with A50 futures climbing over 1.2% since the market opened. Global investment banks remain optimistic about Chinese stocks, with Goldman Sachs projecting $200 billion (approximately RMB 1.45 trillion) in capital inflows this year.

4. China’s Financial Sector Gathers Strength

While the overall A-share market showed mixed performance, the financial sector started gaining traction. Banking stocks, with a total market cap of RMB 9.4 trillion, helped lift the Shanghai Composite Index from negative territory. Large-cap stocks played a stabilizing role, while previously high-flying stocks saw some pullback.

5. Market Divergence in A-Shares

By midday, financial stocks were leading the market, while high-growth stocks experienced declines. This resulted in a divergence among the major indices:

• The Shanghai Composite Index edged up 0.29%, and the Shenzhen Component Index gained 0.13%.
• Meanwhile, the ChiNext Index and the STAR Market Index fell by 0.09% and 0.32%, respectively.
• Market breadth was weak, with 1,763 stocks rising versus 3,487 declining.
• Trading volume contracted sharply, reflecting cautious investor sentiment.

Key Takeaway: Financial Stocks Could Drive the Next Market Move

Despite a volume decline of RMB 225.3 billion compared to yesterday’s morning session, A-share markets still recorded RMB 1.05 trillion in turnover within the first two hours of trading. The financial sector’s momentum signals potential market strength ahead. Additionally, policy support measures have yet to be announced, meaning further catalysts could emerge. Investors will be watching closely for upcoming developments.

1. U.S. Inflation Higher Than Expected in January

The latest data from the U.S. Department of Labor shows that the Consumer Price Index (CPI) rose to 3% in January, exceeding market expectations. This marks the largest increase since June of last year. The core CPI, which excludes food and energy costs, increased by 3.3% year-over-year, with rising housing prices being the main contributor to inflation.

2. Will the Fed Still Cut Interest Rates This Year?

The stronger-than-expected inflation data has led to concerns that the Federal Reserve may delay or even reconsider cutting interest rates in 2024. In response to the report, U.S. stock markets experienced volatility, with the Dow Jones falling 0.5%, the Nasdaq rising slightly by 0.03%, and the S&P 500 declining by 0.27%.

3. Chinese and Hong Kong Stocks Surge Despite Market Weakness

Despite a weaker U.S. stock market, Chinese companies listed in the U.S. saw significant gains, rising 2.84% overnight. Since January 14, these stocks have surged by 23.74% over 21 trading days, adding nearly a quarter to their market value. Meanwhile, Hong Kong’s Hang Seng Index also climbed by 1.5% at midday, with the Hang Seng Tech Index gaining almost 27% since mid-January.

4. A-Shares Tech Stocks Show Weakness

Unlike the strength seen in U.S.-listed Chinese stocks and Hong Kong stocks, China’s A-shares market showed a more subdued performance. The Shanghai Composite Index remained largely flat, dipping 0.12% by midday, while the Shenzhen Component Index, ChiNext Index, and STAR Market Composite Index fell by 0.47%, 0.3%, and 1.49%, respectively. Across the market, more stocks declined than advanced, with 1,486 stocks gaining and 3,748 stocks falling.

Some speculative tech stocks that previously surged due to market hype have started to pull back. Certain companies saw significant stock price increases without strong fundamentals, leading to profit-taking by major shareholders. For example, QingCloud Technology (青云科技)’s stock rose nearly 200% in just six trading days before experiencing a sell-off today. This has triggered concerns among investors, affecting broader technology stocks in the A-share market.

However, while short-term corrections are normal, the long-term outlook for major tech companies remains strong. Investors should be cautious about chasing speculative stocks but may find opportunities in well-established technology leaders that have pulled back to key support levels. The broader technology market remains in an uptrend, though fluctuations are expected along the way.

1. The Federal Reserve Holds Steady on Interest Rates

During a congressional hearing last night, Federal Reserve Chair Jerome Powell stated that the U.S. economy is in good shape and that current interest rate levels are appropriate. He noted that there is no urgent need for further rate cuts. Given that the Fed has already lowered rates three times last year by a total of 100 basis points, the market now expects that this phase of rate cuts has ended, making another cut in March unlikely.

2. Mixed Performance in U.S. Markets, but Hong Kong Stocks Continue to Rise

U.S. stocks showed a mixed performance overnight, with overall momentum appearing weak. This followed a minor pullback in the Hong Kong market yesterday, where stocks briefly dipped to test the five-day moving average. As a result, the index tracking U.S.-listed Chinese stocks fell by 1.77%.

However, Hong Kong’s Hang Seng Index rebounded strongly today, opening 1.09% higher and continuing to climb throughout the morning, at one point gaining over 2%. Since January 14, the Hang Seng Index has surged by more than 14%.

3. A-Shares Remain in a Consolidation Phase

In the A-share market, technology stocks continued to lead, but overall trading remained within a narrow range. The Shanghai Composite Index initially moved higher but later retreated, closing the morning session at 3,317 points, down slightly by 0.01%. The Shenzhen Component Index, ChiNext Index, and STAR Market Index saw modest gains of 0.07%, 0.09%, and 0.36%, respectively, reflecting a largely stable market trend.

4. Market Liquidity Remains Strong

Trading activity remained high, with total turnover in the two mainland stock exchanges reaching 999.9 billion yuan by midday—only slightly lower than the previous day. While the broader market remained range-bound, individual stock performance was mixed, with 1,894 stocks rising and 3,268 stocks declining in the morning session. However, the number of stocks experiencing sharp declines was relatively low, suggesting the potential for further market movement in the afternoon.

5. Technology Stocks Continue to Lead

Sector-wise, technology stocks remained the strongest performers, led by software services, which rose 2.3%. Other sectors, including media and entertainment, mineral products, internet, and electronic components, also showed strength. On the other hand, the non-ferrous metals sector saw a slight decline of 1.38%, though it has still recorded a 6.95% gain so far this year, ranking seventh among 56 industry groups.

The Shanghai Composite Index tested its 60-day moving average again today, briefly breaking above it before retreating. Market sentiment appears to be turning more positive, with growing optimism among institutional investors. Additionally, while major policy support measures have yet to be introduced, expectations are building that they may be on the way.

The U.S. has announced tariffs of 25% on imported steel and 10% on imported aluminum. How significant is this for the Chinese market? Will it impact A-shares’ upward trend?

1. Strong Performance of U.S.-Listed Chinese Stocks

Last night, major U.S. stock indices rebounded, ending their recent decline. The Dow Jones rose 0.38%, the Nasdaq gained 0.98%, and the S&P 500 increased by 0.67%. Meanwhile, Chinese stocks listed in the U.S. performed even better, rising 2.69% overnight. Since the beginning of the year, these stocks have gained a total of 22.53% over 19 consecutive trading days, compared to the Nasdaq’s 3.28% increase in the same period.

2. New U.S. Tariffs on Steel and Aluminum

The U.S. government announced new tariffs: 25% on imported steel and 10% on imported aluminum. China remains the world’s largest producer of both materials, accounting for 53.7% of global crude steel production and 58.3% of global primary aluminum production in 2022.

3. Limited Impact on China’s Market

However, due to existing trade policies, the U.S. does not import large quantities of steel and aluminum from China. In 2024, the largest supplier of steel to the U.S. is Canada (25%), followed by Brazil and Mexico (12%), with additional imports from South Korea and Vietnam. For aluminum, Canada supplied 79% of the U.S.’s primary aluminum imports in the first 11 months of 2024, followed by Mexico, Australia, and Jamaica.

4. Tariffs Unlikely to Affect China via Indirect Exports

There has been speculation that countries like Canada and Mexico might be re-exporting Chinese steel and aluminum to the U.S., but data suggests otherwise. Canada is the world’s fourth-largest aluminum producer and a key player in steel production and exports. Mexico ranks 15th globally in steel production and is the second-largest producer in Latin America. Their exports to the U.S. primarily come from domestic production rather than Chinese imports.

5. Global Markets Rally While A-Shares and Hong Kong Stocks Adjust

Despite the tariff announcement, global stock markets saw gains, including those in the U.S. and Europe. Canada and Mexico’s markets also moved higher. The decline in A-shares and Hong Kong stocks today appears to be a normal technical correction after recent gains rather than a reaction to the tariffs. The Hang Seng Index fell around 0.6% this morning, while the Hang Seng Tech Index dropped 1.76%, but overall, the market remains stable.

6. A-Shares Show Signs of Stabilization

A-shares experienced some volatility in the morning session, with the Shanghai Composite Index dropping up to 0.53% before recovering. By midday, the decline narrowed to 0.16%, with similar small losses in other key indices: the Shenzhen Component Index (-0.44%), the ChiNext Index (-0.91%), and the STAR Market Composite (-0.56%).

Looking at the broader trend, the Shanghai Composite is currently testing its 60-day moving average. Since mid-January, it has been approaching the 3,400-point resistance level, which may require stronger trading volume to break through. While a long-term technology-driven bull market is taking shape, short-term fluctuations and corrections are expected.

As the market enters its seasonal rally, investors should remain cautious, particularly with highly speculative themes. Risk management should be a priority to navigate potential market shifts effectively.