Under the stimulus of macroeconomic policies, A-shares saw a significant increase in trading volume before the holiday, and foreign institutions are adjusting their allocation strategies for Chinese assets.

In its latest research report on October 7th, Goldman Sachs adjusted Hong Kong stocks to overweight and shifted its strategic preference from Hong Kong stocks to A-shares, while upgrading the insurance theme to overweight. A few days earlier, on October 5th Eastern Time, Goldman Sachs announced that it had upgraded Chinese stocks to overweight and raised the target prices for the MSCI China and CSI 300 indices; in terms of industry allocation, it upgraded insurance and securities firms, exchanges, and other financials to overweight, while maintaining an overweight position on internet and entertainment, technology hardware, and semiconductors.

For the future market performance, Goldman Sachs estimates that there is still potential for further gains in Chinese stocks, with an expected increase of 15% to 20%. However, it also mentioned that there is currently insufficient information to determine whether a structural bull market has begun, as China's macro challenges in real estate, population structure, and debt levels remain significant, and details such as the scale of fiscal policy have not yet been announced.

Recently, UBS also announced an increase in the target price for the MSCI China index, tactically shifting from H-shares to A-shares. UBS Global Financial Markets Head of China, Fang Dongming, stated that under the impetus of recent strong policy signals, market expectations have changed quite clearly, and investor confidence has significantly recovered.

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The implementation of macroeconomic policies, whether there will be further intensification, and the efforts on the fiscal front have become the focus of foreign attention. Fang Dongming believes that the key going forward is the follow-up in fundamentals. In addition to the implementation and stabilization of existing policies, it is crucial to introduce new policies and continue to effectively convey positive signals.

Foreign capital continues to be bullish.

In its report, Goldman Sachs stated that the Chinese market is changing the "rules of the game," with coordinated and strong policies triggering a significant rebound in the stock market.

Regarding the recent rise in Chinese stocks, Goldman Sachs believes it is driven by two main factors: decisive policy measures as a catalyst, and an oversold, undervalued, and under-positioned market backdrop as the starting condition.

"These policies contrast sharply with the sporadic and moderate easing measures of the past few years and are expected to collectively form a larger scale of policy stimulus," Goldman Sachs estimates.

"The rebound in A-shares this time may have more support," the Goldman Sachs Equity Strategy team believes that if subsequent policy commitments and earnings are realized, the rebound is expected to last longer.Recently, Goldman Sachs has adjusted its allocation to the Chinese market. Specifically, taking into account valuations, earnings, and positioning, the bank has raised its target price for the MSCI China index from $66 to $84 and its target price for the CSI 300 index from 4,000 points to 4,600 points. From the current level, there is approximately a 15% to 18% upside potential in total returns.

In terms of sector allocation, Goldman Sachs has moved insurance and other financial companies (such as brokers, exchanges, investment companies) to overweight, upgraded metals and mining to neutral, and downgraded telecommunications services to underweight. In addition, Goldman Sachs maintains its overweight stance on several major industries, including internet and entertainment, technology hardware and semiconductors, consumer goods retailing and services, and daily necessities.

At the end of September, UBS also announced adjustments to its allocation of Chinese assets. Specifically, it raised its year-end target price for the MSCI China index to $70, continuing with a barbell strategy but replacing some defensive stocks with selected small consumer stocks.

Focusing on policy expectations

How do foreign investors view the market after the A-share market opens after the holiday?

Goldman Sachs believes that there is still room for further increases in the Chinese stock market. Combining data calculations, the current rebound has brought the forward price-to-earnings ratio of MSCI China to 11.3 times. With policy support, valuations may expand to 12 times.

However, Goldman Sachs also mentioned that if fiscal support is implemented in areas such as consumption, bank capital restructuring, and local government refinancing, this could further support the domestic economy.

UBS believes that looking ahead, after a typical rebound of 20% from the bottom, there will be a certain amount of market consolidation, with some taking profits and some sector rotation.

Fang Dongming analyzed that at the end of September, the three major financial regulatory authorities and the Politburo meeting issued a series of favorable policies that exceeded market expectations in both form and content, and the market also responded positively.

"Overall, this marks a clear inflection point for the entire Chinese A-share market," he mentioned.Landlord Ming further mentioned that for the market, in addition to the implementation and stability of existing policies, it is very important to further introduce new policies and continue to effectively convey positive signals. There is an expectation for follow-up fiscal policies, as well as substantial support and care for private enterprises and entrepreneurs.

Regarding macro policies, UBS believes that further policy support is necessary.

"After the introduction of this round of policies, we believe that it is still necessary to further intensify policies in the coming months to alleviate the downward pressure on the real estate market and stabilize economic growth," said Wang Tao, Head of Asian Economic Research and Chief China Economist at UBS. In order to promote significant progress in real estate inventory reduction, the government and the central bank need to significantly increase financial support and reduce the cost of funds. At the same time, it is necessary to accelerate the pace of treasury bond issuance and fund allocation, and support local governments by relaxing local implicit debt control to a certain extent.

The role of fiscal policy is expected. Wang Zonghan, Head of UBS China Equity Strategy Research, mentioned that the key factors to watch in the future are the scale and type of fiscal measures.

Ni Yixiang, Co-Chief Investment Officer and Fund Manager of Fidelity Fund (China), believes that, in general, monetary policy has exceeded market expectations, real estate policy is basically in line with market expectations, and the liquidity support for the market has far exceeded expectations.

"Monetary policy has exceeded expectations, and whether the subsequent market performance can continue mainly depends on whether fiscal policy is synchronized," he analyzed, saying that if the overall profitability of enterprises cannot be improved, after interest rates continue to decline, the asset shortage may intensify, and stable high-dividend and high-liquidity large-cap stocks will have more investment and allocation value.

Before seeing further efforts from the fiscal side, continue to be optimistic about high-dividend stocks and large-cap high-liquidity stocks; remain cautious about the consumer and real estate sectors. Looking forward to the future market, we look forward to subsequent fiscal policy efforts and the end-of-year Politburo meeting to make a positive tone for next year's economy.

Zhao Yaoting, Global Market Strategist for Invesco Asia Pacific (excluding Japan), said that more fiscal support is likely to be introduced soon, which may help boost the economy and promote economic recovery. He also mentioned that for the rest of this year, it is expected that government spending is likely to increase.