A50 bulls make a comeback – London Business News | Londonlovesbusiness.com

After two days of declines, A50 bulls have made a comeback today. I believe the index has further upside potential if positive developments arise from the Ministry of Finance’s press conference on October 12 and the upcoming National People’s Congress (NPC) Standing Committee meetings later this month.

The aggressive short-selling of A50 is largely due to the absence of detailed stimulus measures from the National Development and Reform Commission (NDRC) on the real estate sector and the stock market.

This lack of clarity has dampened market optimism, compounded by a recalibration of expectations for China’s economic recovery.

Additionally, the A50 saw a near 44% surge after the monetary easing announcement on September 24, likely triggering profit-taking by investors still reeling from losses dating back to 2022.

Given that fiscal budget approvals typically occur in March, expecting immediate clarity on government bond issuance or fiscal spending is unrealistic. However, the People’s Bank of China’s surprise move this morning—introducing a 500 billion yuan Securities, Funds, and Insurance companies Swap Facility (SFISF)—has revived bullish sentiment.

Looking ahead, I believe if the Ministry of Finance provides concrete updates on expanding counter-cyclical policies or hints at additional bond issuances during the October 12 press conference, we could see a strong rebound in the A50.

Further, any significant stimulus announcements from the NPC’s Standing Committee at the end of October will be critical. A supplementary budget aimed at boosting consumer spending through trade-in programs or addressing local government debt would likely reinvigorate bullish sentiment in the A50, potentially driving the index back towards its October 7 high of 16,351 points.