To The Moon

I. Performance of Global Equity Indices (in US dollars)

Data source: Bloomberg, 2024/09/30-2024/10/13, compiled by Tiger Brokers

II. Key Market Themes

i. China's mainland stimulus policies continue to increase, and Greater China assets have become more volatile. Is this a good time to increase positions?

• Recently, mainland China's economic stimulus policies have continued to intensify and accelerate. Since the policy direction was set by top leaders in late September, monetary policies such as interest rate cuts, reserve requirement ratio reductions, and lowering of mortgage rates on existing loans have been successively introduced. On October 12, Minister of Finance Lan Fo’an attended a press conference at the State Council Information Office, introducing measures related to “increasing the counter-cyclical adjustment of fiscal policy and promoting high-quality economic development.”

• The press conference focused on two main aspects: “how to reduce debt burdens for local governments” and “how to ensure people’s livelihood by breaking real estate constraints.” The wording and content reflect relatively positive policy trends. Although no specific scale of stimulus was announced, it was emphasized that "the central government still has considerable space for borrowing and deficits" and that "the forthcoming policies will be the most significant measures for debt reduction introduced in recent years."

• The performance of the capital market has been largely in line with our expectations from late September. Greater China assets surged rapidly and then quickly corrected, with the Hang Seng Index now returning to its late September level. We believe that the first wave of emotional market release is essentially over. Going forward, the key will be whether unexpected policies are introduced and whether the effects of the stimulus are realized. Overall, the cost-effectiveness of Greater China assets remains high, and the risk-reward ratio is still favorable. Participating now may be more appropriate than waiting on the sidelines.

Data source: IMF, CSC Financial, compiled by Tiger Brokers

ii. Did the U.S. September economic data exceed expectations, signaling a shift from recession to no landing?

• Recently, U.S. economic data has repeatedly surprised. The September services PMI recorded 54.9, the highest since February last year, reflecting that the U.S. service sector is still accelerating its expansion. Both the output index and new orders showed significant improvements, indicating strong current and future demand.

• Interestingly, although the employment index dropped by 2.1, the report suggests that this was not due to increased layoffs by companies but because employees were voluntarily leaving, and companies found it difficult to quickly find replacements. In other words, employees are leaving voluntarily, indicating confidence and optimism in future employment opportunities.

Data source: Bloomberg, compiled by Tiger Brokers

• At the same time, the U.S. added 254,000 non-farm jobs in September, far exceeding the previous market expectation of 140,000. Moreover, the figures for July and August were revised upwards, meaning the actual increase in non-farm jobs in September was even higher than initially reported. The unemployment rate also fell to 4.1%, again better than market expectations.

• Following the release of employment data, the market significantly revised its expectations for Federal Reserve rate cuts. Currently, the probability of a 50bps rate cut in November is almost 0, and a consensus has formed around the likelihood of 1-2 more rate cuts this year. As a result, U.S. Treasury yields surged, and Treasury prices fell somewhat.

• We believe that markets tend to overinterpret and rush to conclusions. While recent economic data has been surprising, it remains within normal ranges. There was no need to be overly pessimistic last month, and there is no need to be overly optimistic now. Every instance of market overpricing could present a short-term trading opportunity. In the coming weeks, U.S. stocks will enter a dense earnings season for tech companies, and if profits surprise once again, it may support further highs in U.S. stocks.

Data source: Bloomberg, compiled by Tiger Brokers

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