Afternoon Surge in A50 and Hong Kong Markets: What's Behind the Move?

In the afternoon session, markets experienced a fresh shift. Technology stocks had generally weakened in the morning of April 21 due to disappointing earnings reports from Invic and Tianfu Communication. However, the A50 index suddenly surged sharply in the afternoon, and Hang Seng Index futures in the Hong Kong market also strengthened rapidly. The three major A-share indices briefly turned positive across the board. So, what exactly happened? Analysts suggest the movement may be linked to developments in U.S.-Iran negotiations. According to initial announcements, U.S. President Trump declared a two-week ceasefire on the evening of April 7, Washington time, meaning the agreement was set to expire on April 21, U.S. Eastern Time (Wednesday, Beijing time). However, in an interview with Bloomberg on Monday, Trump updated his stance, indicating the ceasefire would end on Wednesday evening, Washington time (Thursday, Beijing time). At the same time, White House Press Secretary Levitt stated in an interview with Fox News Channel on the evening of the 20th that the U.S. and Iran are on the "brink" of reaching an agreement. Notably, attention may also be focused on the statements made by Kevin Warsh, President Trump's nominee for Federal Reserve Chair, during his nomination hearing before the Senate Banking Committee.

During the afternoon session on April 21, the three major A-share indices briefly turned positive. The ChiNext Index had previously fallen by over 1.5%. At one point, nearly 1900 stocks advanced across the Shanghai, Shenzhen, and Beijing exchanges. Coal, power sectors, PET copper foil, and photolithography machine concept stocks led the gains. However, it is important to note that the overall market sentiment remained weak. The force driving the A-share rebound likely originated from the A50 index and Hang Seng Index futures. The A50 index surged sharply in the afternoon, rebounding nearly 0.5% from its decline, while Hang Seng Index futures rebounded over 0.5%. Market movements suggested positive news regarding the U.S.-Iran negotiations. However, according to a report by Al Jazeera journalist Tohid Asadi, there was no official confirmation yet on whether Iran would participate in the talks scheduled for Islamabad. Iran has consistently attempted to leave a door open for diplomatic mediation, so the possibility remains. Yesterday, on April 20, Iranian Foreign Ministry spokesperson Bagheri stated that a final decision had not been made regarding Iran's participation in the talks. Iranian Parliament Speaker Mohammad Bagher Ghalibaf conveyed conflicting messages, stating that Iran is prepared for negotiations but will absolutely not accept terms imposed by the U.S. The atmosphere remains clouded with uncertainty. Reports indicate that even if talks proceed, the process will be challenging due to several complex sticking points. Both sides have lengthy lists of demands involving the Strait of Hormuz, sanctions, war reparations, ballistic missiles, and Iran's regional relations. Currently, both parties appear to be attempting to resolve these complex issues through diplomatic channels, but success remains uncertain. Information from the U.S. side suggests that the U.S. and Iran are on the "brink" of an agreement. Additionally, Trump seems intent on creating space and time for negotiations. On the evening of the 20th, Trump mentioned that the U.S. attacked Iranian nuclear facilities last year, and extracting enriched uranium from those damaged sites would be a "long and difficult" process.

From the perspective of U.S. stock markets, despite ongoing geopolitical uncertainty from the U.S.-Iran conflict, Goldman Sachs maintains an optimistic outlook, suggesting the current market rally is not surprising. According to a Business Insider report, Goldman Sachs analyst Dominic Wilson recently published a research note stating that as long as market confidence in a peaceful resolution is sustained, even significant delays in oil supply restoration, or larger supply shortages and economic impacts, may not have a lasting effect on stock prices. Regarding Chinese stock markets, this conflict may once again test the resilience of "Made in China." Song Xuetao of Guojin Securities believes that amid global geopolitical disturbances, energy security and supply chain stability have become core competitive factors for manufacturing. China demonstrates stronger shock resistance due to four comparative advantages: lower reliance on Middle Eastern oil and gas, high energy self-sufficiency, substitution capabilities in coal chemical processes, and leading penetration rates of new energy vehicles. The 2021 supply chain crisis validated delivery capabilities, the 2022 Russia-Ukraine conflict reinforced cost advantages, and the current Middle East shock will further reassess the comprehensive resilience of China's industrial chain. China is poised to achieve industrial re-division of labor by exporting new energy solutions (electric vehicles, photovoltaic storage) to Southeast Asia and taking over high-energy-consumption segments (high-end resins, electronic chemicals) from Japan and South Korea. Coal chemical processes remain profitable within an oil price range of $50 to $75, supporting stable chemical supply. With new energy vehicle penetration exceeding 50%, the exposure to refined oil demand is significantly reduced. Against a backdrop of rising global manufacturing costs, China stands as the only manufacturing system possessing complete production capacity, energy buffers, and end-market adaptation capabilities. Recent events also highlight that Kevin Warsh, nominated by Trump for Fed Chair, could again become a key market influencer. He is scheduled to attend a nomination hearing before the Senate Banking Committee shortly. A previous research report from Zhongtai Securities suggested that Warsh opposes reliance on high-frequency data and forward guidance for expectation management, plans to reduce the frequency of dot plots, and restrict official communications, which would diminish market reliance on perceived "Fed rescues," weaken the boosting effect of rate cut expectations on risk assets, and lead to a systematic rise in the volatility center.