If I said that foreign investment is bullish about the Chinese stock market in the second half of the year, would you not berate me?

The common reason these international banks are bullish about the Chinese stock market is that the Fed's interest rate cut is coming closer.

According to the latest non-farm payroll data in June, it seems that the Fed really can't hold on any longer and the end of the rate cut is imminent.

1

Non-farm payroll data boosts interest rate cut expectations.

In June, the United States added 0.206 million non-farm jobs, slightly higher than the market's expectation of 0.19 million, but the unemployment rate rose from 4.0% to 4.1%, higher than the market's expectation of 4.0%, reaching this level for the first time since November 2021, indicating that the U.S. labor market is further cooling. Hourly wage growth also slowed down. In June, hourly wages in the United States rose 0.3% month-on-month and 3.9% year-on-year, both in line with market expectations, but the year-on-year growth rate was the smallest increase since 2021.

At the same time, the U.S. Department of Labor continued its routine work of downgrading non-farm payroll data, with May's non-farm payroll data of 0.272 million revised downwards to 0.218 million and April's 0.165 million revised downwards to 0.108 million, for a total downward revision of 0.111 million. After the data was released, gold and U.S. stocks rose while U.S. bond yields fell, and CME's Fed observation tool showed a probability of more than 70% of a rate cut in September.

Unlike the previous data fights, recent U.S. economic data have shown a slowing inflation and a cooling labor market in the United States.

After the data was released, gold and U.S. stocks rose while U.S. bond yields fell, and CME's Fed observation tool showed a probability of more than 70% of a rate cut in September.

Recent U.S. economic data have shown a slowing inflation and a cooling labor market in the United States.

In May, the number of JOLTS job vacancies in the United States was 8.14 million, unexpectedly better than the expected 7.95 million. June's small non-farm ADP data and last week's initial jobless claims numbers both showed a cooling of the U.S. labor market.

Even Fed Chairman Powell admitted on Tuesday that the United States was returning to a 'deflationary trend', but stressed that more data was needed before interest rates could be cut to verify whether recent declines in inflation rates accurately reflected economic conditions.

Friday's June non-farm payroll data further confirmed the view that the U.S. labor market is cooling, and market expectations for a rate cut quickly heated up. CME data as of July 6 showed that the market expected the Fed to cut rates in September with a probability of more than 70%, and expected two rate cuts this year.

When the world's largest liquidity anchor is finally pried loose, how will global asset pricing be transformed?

2

Are Asian stock markets better than US stock markets in the second half of the year?

A Bloomberg survey shows that Chinese and Indian stocks are considered the two markets that have the potential to outperform in Asia in the second half of the year, as investors flock to emerging market themes.

About a third of the 19 Asian strategists and fund managers surveyed said they believed China's stock market would lead the market in the next six months, with a similar proportion selecting the Indian stock market.

Joseph Little, HSBC Global Asset Management's chief strategist, wrote in his mid-year outlook: 'We believe that the valuation discount and the expansion of global economic growth provide opportunities for emerging markets, especially those in Asia, to lead the market in the second half of the year.'

Data from Goldman Sachs' bulk brokerage business shows that emerging market Asia was the largest nominal net buyer in June, while the net selling speed of global stocks was the fastest in two years.

Hedge funds had the largest decline in net leverage in the U.S. stock market, as they exited tech stocks. Hedge funds sold stocks for a third consecutive month globally, at the fastest pace in two years, with net selling in North America reaching its largest since September last year.

Thai exchange data shows that global funds bought a net $36 million of the country's stocks on July 3, the highest since May 16.

HSBC is bullish on the Chinese stock market and expects that the "very negative sentiment in the Chinese stock market will slowly change," according to Herald van der Linde, an Asian stock strategist. Given that the "improvement in Chinese economic activity is slow," he will increase his position in the second half of the year.

Despite the increasing probability of a rate cut by the Fed in the second half of the year, the U.S. presidential election in November is also one of the risks that cannot be ignored.

Although more than half of the respondents in the survey believe that the performance of Asian stock markets may outperform the U.S. stock market by the end of 2024, the reason is the rate cut by the Fed and the low valuations. However, most of them believe that the return space may be 10% or less.

3

What should ETF funds buy this week?

This week, A-shares have experienced a rare three consecutive trading days below the 600 billion mark, overlaid with frequent actions of the central bank's reverse repo of the bond market. What will the active ETF funds buy?

Apart from the well-known four CSI 300 ETFs, the funds are more significantly allocated to bond ETFs, ChiNext ETFs and Sci-Tech Innovation 50 ETFs.

Haitong Fund's HFT CSI Short-Term Financing ETF had a net inflow of 2.473 billion yuan this week, while GF Fund's Policy Financial Bond ETF had a net inflow of 0.921 billion yuan and PY Fund's 30-Year Treasury Bond ETF had a net inflow of 0.32 billion yuan.

Huaxia Fund Science and Technology Innovation 50 ETF, E Fund Management's GEM ETF, Guolianan Fund Semiconductor ETF, and E Fund Management's Science and Technology Innovation Board 50 ETF had net inflows of 0.71 billion yuan, 0.671 billion yuan, 0.554 billion yuan, and 534 million yuan respectively this week.

(The content of this article is a list of objective data and information and does not constitute any investment advice)

The recent core issue in the market is the decline in trading volume, which has been persistently low for three consecutive trading days below the 600 billion mark. It is indeed rare. However, it also indicates to some extent that as the market falls to a certain extent, there are fewer people willing to sell. As the selling pressure decreases, the downward momentum of the market also declines.

At the same time as the selling pressure decreases, from the funds flow of the four CSI 300 ETFs in the past three trading days, it can be seen that the attitude of the mysterious force is defensive, and they are waiting to counterattack.

From a short-term perspective, the market may hope that important meetings can bring about changes, while from a medium-term perspective, it depends on changes in the stock market ecology and whether listed companies can achieve significant improvements in their profits, or if the Fed can cut rates and increase liquidity.