Institutional Market Watch: Geopolitical conflicts only disrupt A-share market sentiment; awaiting the arrival of Fed QE.

Ask AI · How Can the Fed’s QE Open Up Room for Domestic Debt-to-Cash Policy in China?

Recently, market sentiment in both the A-share and Hong Kong-share markets has been significantly suppressed by external geopolitical risks. Under the gloom of overseas “stagflation trade,” the Shanghai Composite Index has fallen below the 120-day moving average, and trading volume across the whole market has declined. Oil prices and the U.S. dollar trend have become the visible indicators of geopolitical risk.

Zhang Yidong of Haitong International believes that the truly TACO (Trump Always Chickens Out) could happen as soon as April, or at latest by June. The signs will be the U.S. aircraft carrier withdrawing or a ceasefire agreement being reached—at which point investors’ risk appetite could improve.

Zhang Qiyao, a strategy analyst at Industrial Securities, is relatively cautious. He believes: The risks that the market is worried about, such as ground warfare and the Red Sea blockade, are still present, but the probability of further escalation in the intensity of the conflict is lower; in the medium term, there may be a downgrade.

Cao Liulong, a strategy analyst at Western Securities, analyzes from a long-term perspective: Current geopolitical conflicts have caused some disruption to capital sentiment, but the trend of RMB appreciation will not change. The foundation of the A-share bull market brought by the return of cross-border capital will not be shaken. Excessive concern about the fundamentals of the A-shares and China is unnecessary; 4000 points may just be the starting point of the A-share “long bull.”

Cao Liulong also mentions: Simply wait for the Fed’s QE to open up room for domestic debt-to-cash policy. Then, as residents’ balance sheets are rapidly repaired, China’s economy is expected to return to the prosperity of 2019–2021, and the A-shares will also enter a new round of core-asset bull market.

Buy core assets in dips in China—CSI 300—where quality blue-chip stocks are gathered. With stable fundamental operations and a high dividend yield, it is not only a bottom-fund allocation tool that long-term institutions at home and abroad hold, but also the preferred asset for providing support to capital in “quasi-open-market” ways during extreme market conditions.

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Daily Economic News