The market experienced a volatile session today, with the Shanghai Composite Index closing down 0.70% at 3,873.32 points, while the Shenzhen Component Index fell 1.27%. The ChiNext Index retreated after an early rally, ending 1.41% lower, and the STAR 50 Index dropped 1.55%. Total turnover across Shanghai and Shenzhen markets reached 1.86 trillion yuan, up 78.6 billion yuan from the previous session. Market sentiment remained weak, with over 4,300 stocks declining. Sector-wise, ultra-high voltage and commercial aerospace concepts gained, while real estate, retail, and communication equipment sectors saw notable corrections.
Gold ETFs showed resilience, with the Gold Fund ETF (518800) edging up 0.18% and the Gold Stock ETF (517400) rising 0.07%.
The Federal Reserve cut interest rates by 25 basis points as expected on December 10, lowering the federal funds rate target range to 3.50%-3.75%. This marks the third 25-bps cut this year, following moves in September and October. While the decision was widely anticipated, market focus shifted to the Fed's guidance on future policy. The median dot plot projection maintained just one rate cut in 2026, and Chair Powell noted rates are now at a "favorable level," suggesting a higher bar for further easing.
However, the Fed simultaneously announced plans to restart balance sheet expansion, with $40 billion in short-term Treasury purchases beginning December 12. This liquidity injection is expected to remain substantial in coming months. Powell's term ends in May 2026, and potential policy shifts under a new chair could emerge in late 2026.
Historically, Fed easing has supported gold prices, which currently hover around $4,200/oz. Structural drivers—including sustained central bank gold purchases and geopolitical risks—remain intact, making gold ETFs (518800, 517400) attractive for investors.
Domestically, November CPI rose 0.7% YoY (core CPI +1.2%), driven by surging food and gold jewelry prices, though household appliance costs declined post-subsidy. PPI fell 2.2% YoY, with coal and nonferrous metals gaining but downstream sectors remaining weak. Policymakers reiterated proactive fiscal and accommodative monetary policies at the December Politburo meeting, supporting expectations for gradual economic recovery. The CSI A500 ETF (159338), a diversified broad-based index tool, dipped 0.86% today but remains well-positioned for China's long-term "slow bull" market transition.
The Grid ETF (561380) initially rose 1.3% before closing 1.0% lower. Catalysts include approval of Zhejiang's 293-billion-yuan ultra-high voltage (UHV) grid project (scheduled for 2029 completion). China has greenlit five major UHV lines this year, addressing urgent needs for efficient power transmission and renewable integration. Global electricity demand—particularly from AI—is surging, with China's data center power consumption up 43% YoY (Jan-Oct). Grid modernization and overseas expansion opportunities favor related equities.
Investment Risks: ETFs carry higher risk/reward profiles than mixed, bond, or money market funds. Performance data cited reflects short-term trends and does not guarantee future returns. Investors should assess risk tolerance and suitability before investing.
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