中国市场观察-A 股市场挑战十年高位；我们的观点-China Market-Wise-A-Share Market Testing 10-Year High; Our Thoughts

Summary of Key Points from the Conference Call Industry Overview - The focus is on the A-share market in China, specifically the Shanghai Composite and CSI300 indices, which are experiencing significant upward momentum, testing 10-year highs as of August 2025 [2][10]. Core Insights and Arguments 1. Market Performance: - The Shanghai Composite has delivered an 11% return year-to-date (YTD), while the CSI300 has returned 8%. The Shanghai Composite officially crossed the 3,700 level on August 15, 2025, a level not seen since late 2015 [2][10]. - The CSI300 index surpassed 4,200, a level briefly reached in late September 2024 and January 2023 [2]. 2. Bond Yield Trends: - Onshore long-term bond yields have increased, with the 10-year yield at 1.78% and the 30-year yield at 2.11%, reflecting a more constructive macro outlook among investors [3][11]. - This contrasts with previous periods in September 2024 and early 2023, where bond yields indicated skepticism towards the macro outlook [3]. 3. Liquidity and Economic Indicators: - The MS Free Liquidity Indicator turned positive in June 2025 for the first time since early 2024, indicating improved onshore liquidity driven by strong government bond issuance [4]. - The anti-involution initiative is gaining momentum, positively impacting market sentiment and expectations for domestic price stabilization [5]. 4. Policy Expectations: - The State Council's recent meeting reaffirmed a pro-growth stance, emphasizing consumption, infrastructure projects, and urban renewal as key policy levers [8]. - There is anticipation of localized housing market easing measures in response to a broad-based slowdown [8]. 5. Investment Rotation: - Rising bond yields may lead to a rotation from bonds and term deposits into equities, as current deposit options become less attractive [9]. 6. Future Outlook: - The A-share market is expected to continue outperforming the offshore market through the summer, with a target for the CSI300 to reach 4,700 in the near term [10]. - Key indicators to monitor for sustainability of the rally include onshore bond yields, policy catalysts, 2Q earnings results, and potential government intervention regarding margin financing [11]. Additional Important Insights - The margin financing balance has exceeded RMB 2 trillion (approximately USD 290 billion), a level last seen in 2015, indicating increased leverage in the market [11]. - The current margin financing balance is 4.8% of free float market cap, slightly below the 10-year average of 4.9% [11]. - Analysts suggest that immediate government intervention due to over-leverage concerns is unlikely unless both margin financing measures increase rapidly [11]. This summary encapsulates the key points discussed in the conference call regarding the A-share market's performance, macroeconomic indicators, policy expectations, and future outlook.