China’s stock market is still going to rise after the Golden Week holiday? This has become a topic of widespread concern. Recently, Morgan Stanley has made a judgment on this matter. Experts in mainland China believe that the judgment leans towards the pessimistic side.
The A-share market in mainland China has been surging since September 24th. Many people are wondering whether the stock market will continue to rise after the Golden Week holiday.
Recently, the internationally renowned investment institution Morgan Stanley (Morgan Stanley) stated that if the Chinese government announces more stimulus measures in the coming weeks, the Chinese stock market could further rise by 10% to 15%.
LD Xiao Mao, certified as a private equity fund manager, considers this judgment to be bearish.
He analyzed that Morgan Stanley’s judgment implies three aspects. The first aspect is that if China does not announce further fiscal stimulus measures in the near future, then the stock market has already peaked in the short term. The surge since September 24th was purely driven by monetary policy easing. This means that without further fiscal stimulus, this rally has already reached its peak.
The second aspect implies that if the Chinese government introduces fiscal stimulus measures, the stock market will rise further. A strong policy could lead to a 15% increase, while a smaller stimulus may limit the upside.
The third aspect suggests that regardless of the magnitude of fiscal stimulus by the Chinese government, the maximum upside for the Chinese stock market in the near term would be 15 percentage points.
LD Xiao Mao believes that Morgan Stanley’s judgment is quite pessimistic. If the Chinese government does not introduce further fiscal stimulus, the stock market has peaked. This implies that it’s time to sell stocks and not encourage buying. Even if the Chinese government implements additional fiscal policies, the stock market will at most see a 15% increase. “Isn’t this overly pessimistic?”
He advises not to underestimate Morgan Stanley’s judgment. Many investors who have experienced multiple bear markets in A-shares will seriously consider it. In August last year, Morgan Stanley warned that A-shares were peaking in the short term, advising investors to realize profits. As a result, from 3200 points, A-shares directly fell to 2600 points. Many regret not heeding Morgan Stanley’s advice sooner and cashing out earlier.
“Now Morgan Stanley has once again made a judgment on the trend of the Chinese stock market, and their judgment makes sense. Currently, the entire rally in the Chinese stock market, both A-shares and H-shares, is purely driven by sentiment and not based on fundamental economic changes. Can we say that the Chinese economy has significantly improved? Can we say that companies’ profitability has increased? Can we say that the real estate market has truly stabilized and rebounded?… None of these have happened,” LD Xiao Mao said.
He further added, “In the absence of fundamental changes, this rally driven by expectations of policy changes should have already reached its peak. It can be said that it has already exhausted the future upside. Therefore, caution is still needed in the face of the recent rapid rise in the Chinese stock market. Genuine bull markets develop slowly, not with a sudden leap.”
Various parties are worried that after the Golden Week holiday, the stock market might decline. Some netizens share their views, believing that while the stock market will continue to rise, it may not surge as much and could experience fluctuations.
Seasoned investors generally have poorer expectations for this market surge, having experienced the battle to defend 3000 points. The sudden boost in the market, after being in a dejected state for so long, feels too “bizarre,” with higher risks, prompting many to want to quickly exit to release themselves from the quagmire.
According to the Hong Kong media “Ming Pao,” Mr. Wei bought 50,000 yuan worth of China Ping An shares nearly at the peak when the stock price was around 80 yuan per share five years ago.
“At that time, it was considered a large-cap stock with a huge market capitalization behind it, so how could it plummet so drastically? I never expected…” The price then fell for five years, and within that time, the stock price of China Ping An plummeted from over 80 yuan per share to 30 yuan. While the price stabilized later, there was no significant improvement. He initially wanted to break-even and sell, especially since he still had a mortgage to pay off, but it turned out to be a five-year ordeal.
Since September 30th this year, the A-share market has been steadily rising, with his stocks rising to 57 yuan per share. “I now just want to quickly open trading and see if I can break even,” Mr. Wei stated.
Mr. Wang, also a seasoned investor who has been trading stocks for 30 years, did not expect the recent years of stock price declines that eroded half of his fortune.
Around October last year, he bought 30,000 shares of a certain resource stock at 46 yuan per share, only to buy at its peak, leading to a continuous decline and losing half of his investment in a year. He still holds stocks worth over a million, all of which are stuck in losses.
Mr. Wang also aims to untangle himself from this situation as soon as possible. He said, “The stock market carries too much risk; I will gradually phase out and stop buying.”
China’s economy continues to struggle. On September 24th, the Chinese authorities announced a series of monetary stimulus and real estate market rescue measures, causing the stagnant stock market to rise. However, with the implementation of these policies, many major shareholders and executives of companies have taken the opportunity to reduce their holdings.
According to incomplete statistics, since September 25th, over 50 listed companies have disclosed plans for reductions involving controlling shareholders, actual controllers, shareholders holding over 5%, and company executives. Some major shareholders even completed their reduction plans during the surge in stock prices.
According to a report by “Economic Observer” on September 28th, in the five days since September 24th, more than 40 listed companies have announced reduction plans. These reductions primarily involve major shareholders, controlling shareholders, actual controllers, and concerted actors, due to personal financial needs.
Regarding the government’s efforts to support the stock market, Chinese issues expert Wang He stated that the entire Chinese economy is unstable with a bleak outlook. He warned, “This might lead to a situation where new capital comes in, and those previously trapped seize the opportunity to escape, creating a death vortex in the Chinese stock market. No matter how much additional funding is injected, it may not revive, rendering it lifeless.”