Investors typically gauge market breadth by observing the ratio of advancing to declining stocks. According to KraneShares data, on Monday, China's stock market saw 5,088 stocks rise, with only 4 stocks falling. The Shanghai Composite Index surged by 8.06%, reaching an 8% increase, which brought the cumulative gain for September to 17%. This marks the best performance in 16 years. Additionally, housing restrictions in Beijing, Shanghai, and Shenzhen have been lifted, further fueling market gains.
Another noteworthy phenomenon is the rush of mainland Chinese investors to buy Hong Kong stocks, while Hong Kong investors are actively purchasing mainland stocks. KraneShares noted that trade volume through the Northbound Connect (which allows Hong Kong and overseas investors to buy Chinese A-shares) is four times the usual volume, and the Southbound Connect (which allows mainland investors to buy stocks of Hong Kong-listed companies) has seen trade volumes six times the norm.
Strategist Scott Rubner stated that he received the most inquiries about the Chinese market over the weekend in his career. Rubner also mentioned, "This is a new trend; the S&P 500 index is not a worthwhile investment target this October." He advised investors to focus on bullish options for the iShares China Large-Cap ETF (FXI.US) and the iShares MSCI Emerging Markets ETF (EEM.US).
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Meanwhile, reports on Monday indicated that as of September 25th, investors have reduced their holdings in U.S. stock funds for the fifth consecutive week, primarily due to ongoing concerns about the health of the U.S. economy and caution ahead of the upcoming U.S. presidential election.
Data from the London Stock Exchange shows that investors massively sold off $22.43 billion worth of U.S. stock funds this week, marking the largest weekly net sell-off since December 2022.
Weak U.S. consumer confidence further intensified investor concerns about the labor market conditions, and the market began to worry that the Federal Reserve's unexpected 50 basis point rate cut was in response to a significant economic slowdown.
Breaking it down, U.S. large-cap stock funds suffered outflows of up to $15.23 billion, setting the largest single-week sell-off since December 2022. Additionally, small-cap funds, diversified stock funds, and mid-cap funds saw net outflows of $2.34 billion, $2.08 billion, and $998 million, respectively.
In terms of industry fund flows, investors withdrew $539 million from the consumer staples sector, ending a three-week trend of net buying. The real estate, industrial, and financial sectors also saw outflows of approximately $400 million each.Contrary to the outflows from equity funds, U.S. bond funds attracted $6 billion in net inflows during the week, marking the 17th consecutive week of inflows.
Among them, U.S. short-term to intermediate-term government and treasury funds stood out the most, attracting approximately $3.13 billion in inflows, reaching the highest level in four weeks. In addition, U.S. general domestic taxable funds and short-term to intermediate-term investment-grade funds also saw substantial inflows, with $2.21 billion and $1.17 billion, respectively.
At the same time, U.S. money market funds also received net inflows of $112.57 billion, the largest single-week inflow since December 2020.
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