Before the long holiday, a package of policies was quickly introduced to ignite market sentiment, leading to consecutive days of significant gains in the A-share market, with capital rushing in to grab shares and both trading volume and the number of stocks hitting their upper limits reaching new historical highs. During the holiday, securities firms worked overtime, the number of new accounts increased, and various institutions frequently released reports on the review of the market, all pointing to a rapid warming of market sentiment. At the same time, during the National Day holiday, "Chinese style" assets swept the globe, with Chinese assets outperforming U.S. stocks, U.S. bonds, commodities, and the Asia-Pacific stock market.

On October 7th, the Hong Kong stock market rose again, with its performance over the past week being eye-catching, leading many investors to believe that the A-share market's rise on the 8th was almost a "foregone conclusion." The National Development and Reform Commission will hold a press conference on October 8th to introduce the situation related to "systematically implementing a package of incremental policies to solidly promote the economy to move upward in structure, to be superior, and to maintain a continuous positive development trend," further speculating on the possibility of the introduction of subsequent fiscal stimulus policies.

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On October 8th, the A-share market will welcome its first trading day after the holiday. As the disclosure of the performance for the third quarter of 2024 begins, while the stock market trend is influenced by factors such as the policy and capital sides, performance will once again become a key factor affecting the stock price performance of listed companies.

Three types of funds are the main buyers

On the eve of the A-share market opening, securities firms collectively expressed a bullish outlook for the future market. For example, CITIC Securities stated that the market expectation has undergone a major reversal, and the market trend is about to reach an inflection point. Industrial Securities, on the other hand, stated that they firmly believe in a bull market mentality, with no limits set on time and space for now.

In addition to the optimistic sentiment, it is worth reviewing the role and layout direction of the funds that entered during the sharp rise before the holiday. According to a research report by Caitong Securities on October 6th, foreign capital, inflows through ETFs, and two-way financing are the main buying funds. The report shows that from September 16th to September 30th, domestic and foreign investors placed bets on Chinese assets, with foreign investors seeing a net inflow of $6.8 billion, and from September 26th to October 2nd, the scale of foreign capital inflows reached a historical high.

Equity ETFs have become one of the important channels for investors to layout and get on board. The report shows that from September 16th to September 30th, ETFs saw a net inflow of over 120 billion yuan, with the CSI 300 ETF (net inflow of 50.4 billion yuan), the CSI 1000 (net inflow of 32.7 billion yuan), and the STAR Market (net inflow of 12.1 billion yuan) related ETFs becoming the priority choice for funds to seek elasticity. On September 30th, the A-share market saw a huge surge, with nearly 50 billion yuan of funds net inflow into Shanghai ETFs that day. In addition to mainstream broad-based ETFs, in the industry ETFs, those related to securities firms, consumer goods, and real estate saw significant inflows, with baijiu and medical ETFs seeing a batch of daily limit-ups, and the STAR Market chip ETF surged by "20cm". Caitong Securities' research report pointed out that funds have flooded into the market through ETFs to buy at high premiums, with about 36% of the current ETFs having a premium of more than 1%; compared to the market rebound period in July 2015, at most 60% of ETFs had a premium rate of more than 1%.

Margin traders are one of the buyers in this round of sharp rises. Statistics show that as of September 27th, the margin balance of the three major exchanges in Shanghai, Shenzhen, and Beijing was 1.38 trillion yuan, a new high in nearly a month; the margin purchase amount on September 27th was as high as 151.799 billion yuan, a new high in nearly four years; the net purchase amount was 18.533 billion yuan, an increase of four times compared to the previous trading day. The A-share two-way financing balance increased by 23.3 billion yuan from September 23rd to September 27th, and the current two-way financing balance is only at the 14th percentile level since 2020, with still a large room for improvement.

In terms of individual stocks, according to Wind data statistics by reporters, from September 23rd to the present, the top 10 stocks with the highest margin purchases in the Shanghai and Shenzhen markets are Oriental Fortune (300059.SZ), Kweichow Moutai (600519.SH), CITIC Securities (600030.SH), Ping An Insurance (601318.SH), WuXi AppTec (603259.SH), Sailist (601127.SH), Agricultural Bank of China (601288.SH), Wuliangye (000858.SZ), Huatai Securities (601688.SH), and Vanke A (000002.SZ). During this period, Oriental Fortune's net margin purchase was the first, reaching 1.24 billion yuan, with a cumulative increase of 88.66% over the period, and the stock price reported 20.30 yuan, setting a new high since August 2022. Ping An Insurance's margin purchase amount also exceeded 1.1 billion yuan.

The A-share market has entered the trading time for the third quarter report.During the holiday when A-shares were suspended, Hong Kong stocks' main indices repeatedly hit new highs for the phase. Since October, the Hang Seng Index has risen by about 8.62%, and the Hang Seng Technology Index has increased by over 12%, with real estate, finance, semiconductors, and other sectors taking turns to gain momentum.

On October 7th, Hong Kong stocks opened higher in the morning session, with the main indices rising significantly at the start but then retreating somewhat. The Hang Seng Technology Index remained strong, and semiconductor stocks rose rapidly. SMIC H-shares (00981.HK) saw heavy trading throughout the day, with transactions exceeding 10 billion Hong Kong dollars, closing up about 20% at 32.6 Hong Kong dollars per share, setting a new high since mid-July 2020. "The second wafer" Hua Hong Semiconductor (01347.HK) rose by more than 14%, having accumulated a 50% increase this month. ETFs closely related to A-shares also saw a significant rise, with the Southern K-chip 50 listed on the Hong Kong Stock Exchange surging by more than 30% at one point during the session, and Bosera K-chip 50 rising by more than 26%.

As a representative of growth style, Hong Kong semiconductor stocks have played the role of vanguard in the market trend. In fact, A-share investors' preference for growth style has already been reflected before the festival. Data shows that since September 23rd, CITIC's five major style indices have all risen to varying degrees, with the growth style increasing by 12.21%, while the consumption, cyclical, and financial styles rose by 9.06%, 8.39%, and 7.64% respectively, with the stable style performing relatively weaker, up by 6.90%. Looking further at the ETF gain rankings on September 30th, the Sci-Tech 100 ETF, Sci-Tech Chip ETF, Sci-Tech 50 ETF, Dual Innovation Leaders ETF, and Sci-Tech New Materials ETF, among others in the dual innovation sector, swept the top ten gains.

Due to the eye-catching performance of Hong Kong stocks in the past week, many investors believe that a significant opening high for A-shares tomorrow is almost a "foregone conclusion."

"Future fiscal policy still has room for intensification, and if the policy is implemented, it is expected to continue to significantly improve market risk preference. In addition, the non-farm and service industry PMI data released in the United States during the holiday were both higher than market expectations. The further refutation of the recession expectation also reduced the risk of significant fluctuations and drawdowns in U.S. stocks, creating a more stable external environment for A-shares after the holiday." A private fund manager analyzed to First Financial: "After the semiconductor industry experienced price reductions and inventory reduction in 2023, the entire industry chain is in the lowest historical valuation range. The revenue and net profit in this year's mid-year report have shown a clear recovery. We believe that driven by the upward cycle, the valuation repair of the industry chain is expected to continue."

Furthermore, the disclosure of A-shares' Q3 report for 2024 is about to begin, and for many industries, the operating performance in the first three quarters will determine the full-year performance. "Investors are advised to focus on industry sectors mentioned by policies, as well as those that have seen significant increases before the festival. The Q3 report may be an important catalyst for the market trend to evolve from a general rise to a structural one, with funds potentially returning to industry prosperity and fundamental aspects for valuation pricing," the aforementioned private individual added.