On Wednesday, the final trading day before the National Day holiday, the A-share market experienced a relatively mild oscillating rebound. While real estate stocks fluctuated significantly, they largely maintained their recent strong momentum. Meanwhile, traditional consumer sectors such as baijiu also became increasingly active, indicating that market participants continue to actively anticipate follow-up incremental growth-stabilizing measures. In addition, bank stocks and the innovative drug sector also rose in tandem, further boosting the trading sentiment of optimists. It appears that A-shares may continue a moderate recovery trend after the holiday.
Positive Information Arrives in Succession
Recently, the trading environment for the A-share market has undergone relatively positive changes compared to the past. Regarding the external environment, the previous trend of continuously rising US Treasury yields has shown signs of being curbed this week, with the 10-year US Treasury yield already showing a declining trend during Asian trading hours on Wednesday. At the same time, international oil prices have also continued to fall, indicating that global inflationary pressure has somewhat eased, thereby reducing the impetus for the Federal Reserve to further raise interest rates. This has also been corroborated by related information. According to reports, New York Fed President Williams stated in a speech at the University at Buffalo in Buffalo, New York, that after the September rate hike, there is no rush to take further action. This has brought the probability of a 25 basis point Fed rate hike in October, as anticipated by global capital markets, down to 47%. It is worth noting that not long ago, the probability of a Fed rate hike in October was once close to 70%. Driven by this multitude of information, global risk assets have all experienced varying degrees of recovery, with the Nikkei 225 index surging 1.94% on Wednesday.
In terms of internal momentum, the growth-stabilizing measures anticipated by market participants have continued to materialize, including not only the central bank's recent lowering of the pledged supplementary lending (PSL) rate but also interest subsidy policies for real estate loans. More importantly, there are expectations for further growth-stabilizing measures to be introduced, including various measures to expand consumption and interest subsidies for loans to small and micro enterprises. This means that the future macroeconomic environment will become increasingly friendly, and the balance sheets of various market entities such as households and enterprises are expected to continue recovering, which will also bring more positive and far-reaching effects on the balance sheet repair of banks and other financial institutions. Therefore, capital from various sources quickly responded, boosting risk appetite in the A-share market. This may also be the source of momentum driving the A-share market's continued rise over the past two trading days.
A-Shares Still Expected to Continue Recovery After the Holiday
More importantly, as the efforts of major global economies to manage differences have achieved preliminary results, new opportunities have emerged for the development of certain industries in China, which could even be described as removing the stones that were previously weighing on valuations. For example, in the innovative drug sector, recently, as the direction of trade negotiations became clearer, the export pressure on the pharmaceutical industry has gradually been eliminated, and BD business has also shown strong growth signals recently. As a result, the innovative drug sector has continued to rise recently. Similar sectors also include textiles, machinery, and many others, where the stock prices of leading companies in these fields have strongly recovered recently, becoming the core driving force behind the A-share index recovery.
It can thus be seen that the environment for A-shares is indeed becoming increasingly friendly, not only due to the improvement in the global financial environment but also due to improvements in domestic industrial sectors, including the repair of corporate and household balance sheets, as well as the lifting of industrial export restrictions and the weakening of valuation-suppressing factors. Therefore, the rebound in the A-share market on Wednesday was not only a result of reduced selling pressure but, more importantly, moderate replenishment by various funds under positive expectations for continued improvement in the future trading environment. It appears that the short-term trading environment for the A-share market is expected to gradually improve, and the possibility of continued recovery in the A-share market after the holiday cannot be ruled out.
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