Within just one week, global macro markets have been abuzz with significant events!
First, the Federal Reserve boldly cut interest rates by 50 basis points, igniting market risk sentiment.
Following this, China released a long-awaited policy package, boosting international market confidence and sparking optimism towards Chinese assets.
On Tuesday, China's three major financial regulatory authorities met before the holiday and announced a series of policies, including a 50bp reserve requirement ratio cut, a 20bp policy interest rate reduction, a decrease in the existing housing loan interest rates, the creation of a securities fund insurance company swap convenience tool, and the establishment of a special re-lending facility for share buybacks and increases, among others.
That night, the China Securities Regulatory Commission (CSRC) took further action, issuing policies related to mergers and acquisitions (M&A) and market value management.
The M&A policy encourages listed companies to strengthen industrial integration, significantly simplifying the M&A review process, while the market value management guidelines require listed companies to improve their quality, operational efficiency, and profitability, thereby driving an increase in the investment value of listed companies.
Amid the coordinated efforts of China and the US, Chinese assets ranging from A-shares and H-shares to the renminbi, as well as overseas-listed Chinese concepts, ETFs, and options, have been aggressively purchased by investors.
Emerging markets have also been greatly stimulated, and expectations for another significant interest rate cut by the Federal Reserve have propelled gold to a new historical high.
On Tuesday, after China's stimulus policy was officially announced, the three major A-share indices saw a significant increase in trading volume and rose sharply, with the Shanghai Composite Index surging 4.15%, marking the largest single-day gain in more than four years.
The Hang Seng Index broke through the 19,000 mark, closing up 4.13%, its largest single-day gain in a year and a half.
Chinese concept stocks that had already taken the lead saw another significant increase overnight.
The Chinese concept index shone throughout the day, closing up over 9%, marking the largest increase since 2022 and the highest in four months.
Pinduoduo, XPeng, NIO, and Li Auto all rose by more than 11%, Bilibili rose by 17%, JD.com rose by nearly 14%, and Alibaba rose by nearly 8%.
The iShares China Large-Cap ETF (FXI) and KraneShares CSI China Internet ETF (KWEB) both surged by about 10%, with KWEB trading far above all major moving averages.
The renminbi continued to strengthen.
On Wednesday, according to Bloomberg data, the offshore renminbi against the US dollar broke through the 7.0 mark for the first time since May last year.
In the options market, the volume of call options on FXI soared to the highest since February.
The premium for a one-month contract that bets on a 10% increase jumped to the highest since 2015, compared to a contract that bets on a 10% decline, which was deeply discounted at the beginning of August.
According to a Bloomberg report, the largest trade of the day saw an investor spend $6.75 million to buy FXI options, giving them the right to purchase 15 million shares at $33 before mid-November, betting on at least a 12% increase.
Optimism also spread throughout the emerging markets.
Emerging market stocks rose to their highest level in two and a half years on Tuesday, with the MSCI Emerging Markets Equity Index up 1.9% for a fourth consecutive day, and the MSCI Emerging Markets Currency Index up 0.2%, with the Brazilian and Chilean currencies seeing the largest gains.
The market expects that China's economic growth will support the prices of Latin American commodity exports.
The iShares MSCI Emerging Markets ETF (EEM) closed at its highest level since April 2022, breaking through significant resistance.
Meanwhile, poor US economic data overnight has boosted expectations for another significant interest rate cut by the Federal Reserve, sending gold prices soaring to a new record high.
The US Conference Board released a report on Tuesday showing that US consumer confidence in September unexpectedly fell by 6.9 points to 98.7, the largest drop since August 2021, due to concerns about the labor market and the overall economic outlook.
Christian Lawrence, a cross-asset strategist at Cooperatieve Rabobank, said these data triggered expectations that the Federal Reserve may cut interest rates by another 50 basis points this year, which would support demand for higher-yielding assets.
Overnight, the COMEX December gold futures rose by 1.11%, closing at $2,682 per ounce, having reached a record high of $2,689.40 during trading.
Spot gold rose by nearly 1.4% at the end of the day, breaking through $2,660, continuing to set a new historical high, and has risen by 29% year-to-date.
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