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.

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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.

China’s A-shares and Hong Kong stocks are surging, with the ChiNext Index soaring 3.63% in just half a day today. In the first two hours of trading, the total turnover in Shanghai and Shenzhen markets reached a massive ¥1.15 trillion. Could this be the start of a bull market?

1. Chinese Stocks Surge in the U.S. Market

Last night, global stock markets were anything but calm. The U.S. stock market saw mixed performance:

• The Dow Jones slipped slightly by 0.28%
• The Nasdaq and S&P 500 gained 0.51% and 0.36%, respectively

Meanwhile, OpenAI is pressing forward with its ambitious AI infrastructure projects, helping NVIDIA’s stock recover. But the real stars were Chinese stocks listed in the U.S., which rallied strongly. The Nasdaq Golden Dragon China Index, which tracks major Chinese companies listed in the U.S., surged 2.69%.

2. Bank of England Cuts Rates, European Markets Rally

The Bank of England cut interest rates by 25 basis points to 4.5%, triggering a strong rally in European stocks. Major indices in the UK, Germany, France, Italy, and Spain all jumped around 1.5%, while the Euro Stoxx 50 Index gained 1.62%.

In contrast, the Bank of Japan signaled a more hawkish stance, hinting at an interest rate hike later this year, which led to weaker stock market performance in the Asia-Pacific region—except for China’s A-shares and Hong Kong stocks, which continued to climb!

3. Hong Kong Stocks Are on Fire

Hong Kong’s Hang Seng Index surged nearly 1.4% this morning, but the real excitement came from tech stocks. The Hang Seng Tech Index jumped more than 2.6%, marking an impressive 23% gain over the past 16 trading days.

Investors are rushing to grab Chinese tech stocks. Even Deutsche Bank has acknowledged this trend, stating that it’s becoming hard to buy Chinese stocks at low prices anymore!

4. A-Shares Rally Across the Board

The Chinese A-share market continued its strong upward momentum from yesterday. After opening slightly lower, stocks steadily climbed higher:

• Shanghai Composite Index: +1.33%
• Shenzhen Component Index: +2.52%
• ChiNext Index: +3.63%
• STAR Market Composite Index: +2.63%

Out of nearly 5,000 stocks, 4,933 gained, while only 382 declined. A whopping 1,167 stocks surged over 3%, while only 13 stocks fell more than 3%!

5. Investors Rushing In—A Huge Wave of Capital

The most shocking part? In just two hours, trading volume reached ¥1.15 trillion, up ¥203 billion from the same period yesterday. At this pace, today’s turnover could exceed ¥1.8 trillion.

Trading volume is one of the most difficult metrics to fake in the stock market. When big money flows in, it leaves traces that can’t be hidden. A strong and sustained inflow of capital naturally fuels market momentum.

1. U.S. Stocks Mixed, Chinese Stocks in the U.S. Declined

Last night, major U.S. stock indices saw modest gains of 0.71%, 0.19%, and 0.39%. However, tech stocks showed a mixed performance. Google shares dropped sharply due to higher-than-expected AI investments—Google A fell by 7.29% and Google C by 6.94%. AMD (Advanced Micro Devices) lost 6.27%, while Tesla declined by 3.58%. Meanwhile, U.S.-listed Chinese stocks struggled, falling by 1.97%.

2. Hong Kong Tech Stocks Show Strength

Despite the drop in U.S.-listed Chinese stocks, Hong Kong’s stock market remained resilient. Normally, Hong Kong stocks closely follow the performance of Chinese stocks in the U.S., but today, they moved in the opposite direction. The Hang Seng Index and the Hang Seng China Enterprises Index climbed by over 0.5% by midday, while the Hang Seng Tech Index surged over 1.5%.

3. China’s Stock Market Sees Broad Gains

While China’s stock indices fell yesterday, tech stocks actually performed well. Today, the market fully rebounded, driven by strong tech sector gains. By midday, the Shanghai Composite Index rose 0.76%, the Shenzhen Component Index gained 1.43%, while the ChiNext Index and the STAR Market Composite Index jumped 2.09% and 2.59%, respectively.

4. Market Sentiment is Picking Up

Trading volume continues to surge. Yesterday, the market saw a sharp increase in trading activity, with an additional ¥171.7 billion ($24 billion) in volume. Today, morning trading alone added another ¥79.3 billion ($11 billion), bringing total morning turnover to ¥944.4 billion ($130 billion). This massive increase in liquidity suggests that investors are actively buying the dip, signaling renewed confidence. It also aligns with recent regulatory promises to attract long-term capital into the market before the Lunar New Year.

5. Tech Stocks Lead the Rally

Out of over 5,000 stocks traded, 4,070 saw gains, while only 1,095 declined. Only 55 stocks fell more than 3%, whereas 879 stocks gained over 3%. Tech stocks dominated the top-performing sectors—11 out of 56 industry groups were led by tech, each rising more than 2%. The electrical equipment sector led the way with a 4.56% gain, followed by semiconductors at 3.52%.

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With strong capital inflows and government support, the market is preparing for a spring rally. The upcoming 2025 policies are expected to be even more favorable than in 2024. As these policies take effect, investors can look forward to a more optimistic market in the months ahead.

With the Lunar New Year holiday, China’s A-shares market will only see trading today.

Besides, the spotlight is on the U.S. Federal Reserve, which will hold its first policy meeting of the year this week. Early Thursday (Beijing time), the Fed will announce its interest rate decision. Markets widely expect a pause in rate cuts for now.

In addition to the Fed, several other central banks, including the European Central Bank, Sweden’s Riksbank, the Bank of Canada, the Central Bank of Brazil, and the South African Reserve Bank, will also reveal their rate decisions in the coming days.

On top of that, U.S. earnings season is heating up. Major tech giants like Apple and Tesla are set to release their quarterly reports this week, drawing significant market attention.

A-shares: The Only Trading Day This Week

Due to the Lunar New Year holiday, today marks the only trading day for A-shares this week. Historically, the market tends to be quiet before the holiday as some investors adopt a cautious approach. However, after the holiday, the market often rebounds as these funds return.

According to Wind data, over the past decade (2015–2024), A-shares have shown a high probability of rising around the Lunar New Year:

• 5 trading days before the holiday: The market gained in 7 out of 10 years, with the largest increase of 3.92% in 2021.
• 5 trading days after the holiday: The Shanghai Composite Index rose in 70% of those years, with the biggest jump of 4.85% in 2024.
• 10 trading days after the holiday: The index continued to rise 70% of the time, with the highest increase of 7.10% in 2019.

Market Outlook and Opportunities

A report by Ping An Securities suggests that, with supportive domestic policies and easing external concerns, the market is expected to maintain an upward trend, with more structural opportunities emerging. Key areas to watch include:

1. Growth sectors such as advanced manufacturing and industries driven by new productivity.
2. High-quality companies benefiting from policies to expand domestic demand.
3. State-owned enterprise (SOE) reforms and opportunities in mergers and acquisitions.
4. Dividend strategies for long-term value.

Key Events to Watch

As the Lunar New Year holiday approaches, the following events could influence the market in the coming weeks:

• China’s January Purchasing Managers’ Index (PMI) data.
• Travel and consumer spending during the holiday.
• The U.S. Federal Reserve’s interest rate meeting in January.
• Updates on U.S. policies under Trump’s administration.

Spring Rally in Sight

A report by Haitong Securities notes that the “spring rally” is likely to unfold gradually. With policies taking effect throughout the year, the market could enter a new phase driven by fundamentals. Structurally, sectors like technology and manufacturing appear promising:

• Technology: Supported by favorable policies, technological advancements, and an upturn in the industry cycle.
• Mid-to-high-end manufacturing: Strong domestic supply and stable demand from both domestic and international markets suggest continued growth.

Meanwhile, consumer, pharmaceutical, and real estate sectors may experience shifts in expectations:

• Real estate fundamentals and property prices are expected to stabilize, thanks to stronger fiscal support.
• As household balance sheets improve and fiscal policies provide a boost, the consumer and pharmaceutical sectors could see upward momentum this year.

By monitoring these trends, investors can position themselves for opportunities during and after the holiday season.