Goldman Sachs, Nomura, Morgan Stanley have all spoken out, "A-share valuations are at historic lows, pay attention to next year's market oversold opportunities." What information is worth paying attention to?

Recently, many mainstream foreign institutions, including Goldman Sachs, Nomura, and Morgan Stanley, have made outlooks for the A-share market in 2024. After more than two years of adjustment, A-shares are expected to usher in oversold opportunities, which is a common view among some foreign institutions. For example, Nomura Oriental International Securities' Chief Strategy Analyst, Gao Ting, stated yesterday that the current valuation of the A-share market is lower than that of early 2016 and the end of 2018. In such an extreme situation, future valuation recovery is worth paying attention to. Goldman Sachs believes that the improvement in the economic situation is expected to drive corporate profit recovery, and because A-share valuations are at historic lows, they maintain a “high allocation” stance on A-shares. Even Morgan Stanley, which has been cautious about A-shares this year, believes that A-shares will rebound next year. Recently, Morgan Stanley set the target for the Shanghai and Shenzhen 300 Index at 3850 points by the end of 2024. In addition, historically, there has been a strong correlation between the performance of the MSCI China Index and the exchange rate between the Chinese yuan and the US dollar. Recently, UBS raised its forecast for the RMB to USD exchange rate. Goldman Sachs, Nomura, Morgan Stanley have all spoken out, “A-share valuations are at historic lows, pay attention to next year’s market oversold opportunities” | Every Economy Net

The provided paragraphs are written in Chinese. Here is the translation in English:

The valuation of A-shares is indeed at a historical low, and everyone knows that.


The most critical issue is this “however.” You don’t know how deep this bottom is, and you don’t know how long it will take to grind through it.

The extent of fluctuations and the time it takes to erode at the bottom can directly bury ordinary investors.

I will tell you a real case to illustrate that even if your long-term trend analysis is correct, it doesn’t necessarily guarantee profits.

In the third quarter of 2020, the company I worked for had a product that used Huawei HiSilicon’s main chip. However, at that time, TSMC could no longer manufacture chips for Huawei, so Huawei’s chips were in short supply, and it was expected to run out by the end of the year.

Our team urgently searched for alternative chips, and if you’ve been following my articles, you might have read about this story before.

For the main chip from Huawei, the alternative we found was Beijing Junzheng’s T31.

At that time, I was the project manager, and I had a good sense of some sales figures. Our product had a minimum annual shipment of 600,000 units, and it was still growing.

At the same time, I knew that in the industry, many other companies were also looking for alternatives because the shortage of Huawei chips was not just their problem; it was an industry-wide issue. During Huawei’s peak, it held a 70% market share in this industry, and now that part of the market share was up for grabs, everyone wanted a piece of the pie.

So, I paid attention to Beijing Junzheng’s stock. There were several occasions when I thought about buying, but for various reasons, I never acted on it. I even recommended it to two or three good friends, but they didn’t buy it either.

Then, I watched its stock price drop from 90 when I first started paying attention to it to 50 in just six months.

I was puzzled. Even though I had access to information because I was in the industry, shouldn’t the investors have some inside information? Don’t fund companies have insiders in every listed company? Even if external investors didn’t know the situation, didn’t the people at Junzheng know that their company’s performance had skyrocketed? Why didn’t they buy?

In any case, I couldn’t figure it out. I was relieved that I didn’t buy it back then. If I had bought it at 90 and it dropped to 50 in six months, I would have regretted it. Or maybe I would have panicked and sold it along the way.

Finally, I discussed with my classmates and concluded that in the Chinese stock market, stock prices may not have much to do with performance.

The moment I said that, Junzheng’s stock price skyrocketed from 50 to 200.

My friends, I really had access to first-hand information, but if I had acted on it, I would probably have ended up losing money.

So, when you talk about A-share valuations being at historical lows, this vague, ambiguous, seemingly obvious information, what impact can it really have? It’s better for everyone to protect their wallets, be cautious, and then be even more cautious.

Allow me to translate: We still intend to operate in China, but we have a negative outlook on the fundamentals of A-shares, so we can only take advantage of sharp declines for oversold rebounds.

The above is a literal translation and does not represent my own views. I firmly believe in a bright future for the Chinese economy.

Cancer Stocks are certainly undervalued, but the problem is that the undervaluation of Cancer Stocks has been going on for a while. The core issue is why Cancer Stocks can’t rebound.

Because Cancer Stocks are inherently controlled by bears, unlike other markets where institutions pave the way and retail investors load up. The core mechanism of Cancer Stocks is designed for a bear market for harvesting, euphemistically called financing but essentially is the taxation and cost-sharing for the entire populace.

Cancer Stocks are a highly controlled tax market, and the harvesting in the secondary market is fierce and repetitive, not a one-time event. Only when the secondary market is truly devoid of retail investors, will the reapers be willing to enter and push it to new highs. After reaching the peak, they flood the market with propaganda, create new stories to lure in those who regretted selling after the previous harvest and those who haven’t entered yet to take the bait.

China is one of the world’s heaviest taxed countries, and this taxation extends from real estate to Cancer Stocks to surplus labor. It’s all a form of taxation, just with different methods, and the harvesting techniques in Cancer Stocks far surpass real estate.

Take Baijiu stocks like Moutai, for example. Do they really have such a huge market? Clearly not, but why do Baijiu stocks collectively have such a strong performance year after year?

The stock markets of major global economies are dominated by leading companies in technology, energy, pharmaceuticals, and finance, which are closely related to the general population. Yet, in our unique industrial chain nation, with superior industrial production capacity compared to the G7, we have world-leading enterprises in lithium batteries, coal, chemicals, shipbuilding, telecommunications, defense, and more. However, our largest market cap sector has always been the mere Baijiu industry. Is this reasonable? Of course not, but Moutai represents the essence of Cancer Stocks, which is why it’s at the top. Many major shareholders of Baijiu companies are state-owned enterprises at the provincial level, and the problem is that even with substantial debt, land sales, and financial transfers from developed provinces and cities, they still can’t cover it all. Now that land can’t be sold, they need to find other ways to extract resources.

Retail investors can’t even understand some small listed companies, and going up against the manipulators behind those giant corporations, thinking you can win is wishful thinking.

The central bank’s subsidiary institutions, social security, insurance, securities firms—how many companies are entangled with these big players? The probability of retail investors blindly buying and getting buried is naturally higher, and the institutions' rat holes are countless. How many do you think they’ve captured? Only when they’ve gathered enough blood-stained chips will the market go up, and it will only happen when most people are disheartened, give up, and have cut their losses.

A/H shares are a paradise for manipulators and hell for retail investors. There’s no other way around it. If you want to win, you can only buy courageously when manipulators are pushing the market down to its lows and sell slowly when others are euphoric.

Until the mechanisms of Cancer Stocks are thoroughly modified in China, investing in Cancer Stocks is merely speculation. Various institutions may find the current levels appealing, as they are indeed overly discounted and within the range of entry. Those who can tolerate some chip fluctuations can enter and make gains. But you should also be ready to take your profits when you can because when it comes to taxes, it’s difficult for most people to even have a taste. When you become one of the few who have tasted it, and you want more, you might end up being consumed, which is the norm.

Controlling desires and fears is more important than anything else.

On December 12th, Morgan Stanley hosted a podcast discussing their outlook for the Chinese economy in 2024, including their perspective on the Chinese stock market in 2024[1].

The podcast featured two individuals:

  • Laura Wang, Chief China Equity Analyst at Morgan Stanley, a graduate of Harvard Business School.
  • Robin Xing, Chief China Economist at Morgan Stanley, a graduate of Peking University.

Their outlook for the Chinese stock market in 2024 is generally neutral, without making any remarkable predictions for A-shares. The key points of their outlook are as follows:

  1. Index Levels: It is expected that the Chinese stock market will exhibit relative stability in terms of index levels.
  2. Target Price: The target price for the MSCI China Index by the end of 2024 is $60, while the current MSCI China Index stands at around $54.5. This implies an expected target increase of approximately 10%, with limited upside potential.
  3. They believe that over the next 3-6 months, certain Asian markets, especially the CSI300, will outperform the MSCI China Index.

Therefore, neither of them has overly optimistic expectations for A-shares in China.

On the other hand, let’s take a look at the performance of Morgan Stanley’s China A-Share Fund over the past three years:

The performance has indeed been challenging, with the net asset value peaking at $24 in 2021 and now declining to approximately $12, almost half of its peak value. The one-year return rate is -12.7%, and the five-year return rate is surprisingly -32.98%.

Among the disclosed 31 institutional investors, their holdings increased by only 0.25% in the previous quarter, as of September 29, 2023.

London City Investment Management Limited, holding the largest number of shares, increased its holdings by $2.34 million, while Ozun Global Investment, the second-largest holder, sold $2.08 million.

Hence, looking at the actions of institutional investors in investing in this A-share fund, there is no significant increase in holdings, indicating that foreign institutions are not rushing to increase their A-share investments.

I acknowledge that A-shares are indeed at a historical low, but lows can persist for a long time. Being excessively pessimistic is also not appropriate. The future is likely to be a volatile market with limited upside potential.

Supporting A-shares with real investments will ultimately depend on the actions of key players~

Once again, I dedicate this article to the A-share market.

My friends who are familiar with me know that I have been advising caution regarding A-shares on the Zhi Shi Xing Qiu platform. Just a few days ago, I shared a Bloomberg report reiterating the need for caution.

This Bloomberg report, titled “Wall Street’s China Bulls,” is intriguing. It doesn’t analyze A-shares; instead, it revisits history when A-shares gave Wall Street a tough time, punishing Wall Street’s capital with the relentless downturn of A-shares.

The report begins by stating, “Around this time last year, global investment banks were almost unanimously optimistic about the market’s performance, but were troubled by A-shares' sharp decline.”

Then, Bloomberg throws in some witty sayings like “Once bitten by a snake, one is afraid of well ropes for ten years.” Next, Bloomberg presents a comparative chart to ridicule A-shares.

As you can see, the blue part represents global indices, the red part represents emerging market indices, and the black part represents China’s indices.

Following that, Bloomberg goes on to expose how foreign investment banks got it wrong one by one, revealing the dramatic scenes of A-shares defying capital giants. First, at the end of 2022, as China relaxed controls, Goldman Sachs, JPMorgan, and Morgan Stanley were all bullish on A-shares, expecting an annual return of 10%.

I have to say that Wall Street’s capital was quite arrogant. Did they really think they could easily manipulate A-shares? Did they really expect a 10% return? How naive!

What’s even more naive is that at that time, Bank of America conducted a survey, which Bloomberg quotes as saying, “Due to expectations of a strong economic reopening, funds are increasingly pouring into Chinese stocks.”

However, they quickly returned to reality. “Despite gains in U.S., Japanese, and Indian stock markets this year, the Chinese stock market has performed poorly, making it the worst-performing major market globally.”

In despair, foreign capital began to withdraw. Bloomberg states, “In December, the domestic stock market is expected to see a fifth consecutive month of record foreign capital outflows.” Bloomberg then summarizes the many reasons for the foreign capital’s misjudgments. Due to strong language and derogatory terms, I won’t quote them directly, but you get the idea.

Foreign capital, true to their reputation as seasoned speculators, made a mistake but quickly turned things around.

The first to betray their early optimism was JPMorgan. They noticed that China’s economy did not perform as expected after the opening up, and the stimulus plan didn’t have the desired effect. So, they changed their tune, began to spread pessimism, and even withdrew their investments.

What a stir JPMorgan’s betrayal caused! Following JPMorgan’s change of heart, Morgan Stanley also shifted away from their initial stance and downgraded China in August. Influenced by these two, Goldman Sachs also downgraded their ratings for Chinese stocks listed in Hong Kong. Of course, Goldman Sachs was a bit more lenient compared to the others, as they still maintained a relatively positive view of A-shares.

I remember having dinner with a friend who works in trading at a foreign bank. I complained at the time that I couldn’t trust domestic research reports; they always painted a rosy picture. He said that even research reports from foreign banks were unreliable because many of their businesses were in China, so they had to say things would get better.

Bloomberg quotes a JPMorgan A-share strategist as saying, “We indeed called for risk-taking in April. Unfortunately, it didn’t work. So, it was a wrong decision… Since May 2023, we have become more cautious.”

Morgan Stanley was in a similar boat. Bloomberg quotes their Chief Asia Economist, who said that for most of 2021, the bank was “cautiously constructive” on China. However, at the end of 2022 and the beginning of 2023, they also expressed optimism about A-shares. If your performance is subpar, admit it; don’t keep saying you’re cautious. If you’re so cautious, why did you invest blindly?

One guy was even funnier. Bloomberg says that this strategist foresaw China’s economic slowdown and real estate issues. Thus, he was cautious, but he still stepped on a landmine. Why? Because this guy realized that there were a bunch of unpredictable issues that “unexpectedly” emerged. What kind of issues? Well, once again, the language is too harsh to quote directly.

What’s even more comical is that some foreign investors who stumbled in A-shares did not recognize their own shortcomings. They attributed A-shares' underperformance to the lack of “revenge consumption” by Chinese consumers. Seriously, did you really expect “revenge consumption” when people have no money?

Now, it’s that time of the year again for annual outlook reports. Once again, “most Wall Street banks remain optimistic about the Chinese stock market, although many have lowered their forecasts and expect only single-digit gains in the MSCI China Index.”

Seeing these guys issuing reports again, Bloomberg can’t help but make a sarcastic remark, “Ironically, their arguments this time look very similar to last year: further policy support, improving earnings momentum, and low valuations.”

They said the same things last year: policies are supportive, earnings will improve, and valuations are low. Still, you didn’t buy in? If not now, when? As a result, A-shares slapped them hard last year, saying, “I told you not to be overly optimistic!”

Hey, guess what? In less than a year, they’re saying the same things again. Even Bloomberg can’t help but remind everyone, “It’s hard to guarantee they will be right this time…”

Of course, some A-share investors express disappointment, saying, “The significance of analyzing the Chinese market through fundamentals is not as it used to be…” and “I think many Westerners are no longer paying attention to the profitability of Chinese stock companies.” A-shares “are largely driven by the news, and most investors don’t have the time or energy to truly study them.”

I won’t say much more. I want to emphasize: I believe the difficulties in China’s economy are temporary, and everything will pass. Tomorrow will definitely be better.

I won’t say much, just share two images for you to appreciate.

The first image.

The second image.

If there are any highlights, it’s purely coincidental. Please don’t overthink it.

Currently, it may be the debt restructuring phase of 1997, but the final scale will depend on the developments. It’s still in progress.

Currently, apart from bonds, almost all asset-class products are close to default. No one dares to invest, including real estate and stocks, among other major categories. In the industrial sector, except for a few industries like shipbuilding and electric vehicles, most are contracting. Currently, the profits in the real industrial sector are almost zero, and investments yield no returns. This is exacerbated by the large number of public projects built in recent years, such as high-speed railways. From public to private, how many are profitable nationwide?

People may blame the so-called evils of capitalism, but in reality, it’s the wealthy who are suffering first. Besides a few who might escape, the 40 billion estimated to have been invested in domestic assets by the village and town banks that burst is now controlled by others. The actual controlling shareholders can only take away a few billion. Then there are the many wealth management companies that have been constantly defaulting this year. In reality, the wealthy are the ones who suffered the most initially.

Due to the widespread defaults in various asset classes, even though the central bank is continuously injecting liquidity, nobody dares to borrow money. Funds are piling up within the banking system, and lending rates are very low.

Basically, any type of asset you can access in the market results in losses once you invest.

Many problems in the stock market are systemic. For example, continuous IPOs and major shareholders reducing their holdings are, in essence, to repay debt.

To put it simply, there are currently numerous start-up companies queuing up for IPOs, and the investors in these start-up companies are massive risk investment funds worth trillions. These investment funds are essentially stocks dressed as bonds. They go public and then sell, and if they can’t go public, they force the founders to repay the debt.

Major shareholders reducing their holdings are also aimed at this. In the first half of the year, large funds reduced their holdings in SMIC, and the money went to invest in new semiconductor companies. In fact, many companies, for the sake of presenting better financial statements and corporate structures, will undergo some restructuring to increase gross profit. For example, if a company owns an office building as a fixed asset, and the rental income from the office building is not high, to improve the gross profit margin and make the financial statement look better, they will separate the office building from the parent company and transfer all the profits to the listed company. It looks good on the surface, but the cost is still within the company; it’s just moved away, making it look good, but it has to be repaid sooner or later.

The same problem has occurred in the real estate industry, as everyone knows. The real estate industry is also related to local government debt.

Regarding the real industrial sector, the total global demand is shrinking this year, leading to poor overall exports. Our production capacity is configured based on global demand, and it cannot be absorbed domestically, resulting in the real industrial sector also performing poorly. These assets are not doing well.

So, if you are a wealthy individual or a middle-class person, there are no suitable investment targets for you, and that’s why people are not investing.

But for those who have already borrowed and invested, what can they do? They must desperately squeeze forward, and the stock market is one of the places to find funds.

This is actually a chain reaction because everyone is financially strained, and they flock to wherever there’s money.

This has led to an oversupply of assets but a contraction in demand.

So, this year, you’ll find that buying a house results in losses, investing in stocks results in losses, and if you have some money to start a business or build a factory, it also results in losses.

You’ll find that every industry has its own reasons for why they’re losing money, and why prices are falling. But if all industries are facing these conditions simultaneously, it will lead to an overall debt restructuring.

Such a thing has only happened in 1997 in China. The solution at that time was massive layoffs.

This time, the large-scale debt restructuring has already been prepared since 2015. Measures include stricter reporting requirements, the restructuring of bank wealth management companies to dismantle shadow banking funding pools, the establishment of comprehensive financial supervision, and the opening up of the entire regulatory chain.

You will find that all of these regulatory measures have been laid out to deal with the current wave of defaults. The debt is too heavy to bear, and this is the only way out.

There may be a rebound, but it’s hard to say for sure, and even if there is, the consequences may not be good. We may have to break before we can rebuild.

Currently, there is an effort to control public opinion, hoping for more people to take over the debt. For A-shares, the goal is to convert debt into equity. However, the quantity is too large for the A-share market to absorb.

As for how long the restructuring will take, it’s unknown.

As for what will happen in the future, it’s also uncertain. At least after the 1997 restructuring, there was nearly 20 years of prosperity. But today, we don’t know.

But there is still a development path because most of our population has already moved to urban areas, and agricultural productivity may increase significantly. Mechanical production will gradually become widespread. The migration of rural residents to cities also has the advantage of reducing consumption. Environmental methods like those advocated by Chai Jing are unreliable. Large-scale heating, centralized use of public facilities may reduce overall energy consumption. The energy structure still needs adjustment, such as a shift towards new energy sources like solar power. If artificial intelligence (AI) can develop, labor productivity will further increase.

In other words, seeking productivity and profit from technology is reliable. In the future, we may develop in this direction, and there is still great potential for growth. If we think from this perspective, we have significant economic potential. To unlock this potential, we need to develop it, and society will move forward.

But where is the problem? Looking at the current situation, labor productivity has increased significantly, which has led to a large number of people losing their jobs. Fully utilizing economic potential should result in a significant increase in labor productivity, and the people who were freed up should find new employment, achieving full employment. However, the current situation is not right; productivity is high, but the people who were saved by the increased efficiency have not been re-employed in new industries. They are unemployed. So, currently, there is significant economic potential, but how to tap into it? Nobody knows. Adjustments will be made, but when will they end? We don’t know.

And then, as society advances, profits are made, but whether these profits will reach the people is also uncertain because the population is aging. I’ve read an interview with former Minister of Finance Lou Jiwei. According to her, how can we address the problem of an aging population? Raise the cost of compulsory education up to high school and university. This reduces the education period by four years. Provide public projects for the elderly, but where will the money come from? She believes that value-added tax should naturally be a national tax, and local taxes should be property taxes.

This is the problem; what she says makes sense. There is an issue with what we did with VAT before; business tax was originally

Don’t pay attention to what they say; focus on what they actually do.

Northbound funds reduced holdings of A-shares by 89.6 billion yuan in August, 37.4 billion yuan in September, 44.7 billion yuan in October, 1.7 billion yuan in November, and so far, in December, they have reduced holdings by 30.2 billion yuan.

Furthermore, many foreign institutional investors are optimistic about the A-share market in 2023, believing it may outperform most global markets.

Many foreign institutional investors have specialized departments dedicated to investing in Asia, including China, and these departments are staffed by Chinese nationals. While they are considered foreign institutions, their assessments of the A-share market are consistently positive as they specialize in these markets.

Foreign institutional investors have various departments, each with different perspectives and goals. In any case, each investment institution has specialized departments for both bullish and bearish assessments, and their reports are tailored to their specific mandates, often leading to differing opinions.

So, if you want to see forecasts from a particular direction, you can focus on the reports written by that specialized department. They may be bullish every year, or bearish every year; it’s part of their job.

Since the beginning of this year, the A-share market has had very few positive trends, and the index has recently fallen below 3,000 points.

Of course, many individual stocks and sectors have performed even worse than the Shanghai Composite Index, with some trading at prices lower than when the index was at 2,400 points. Foreign investors previously criticized the A-share market, saying it couldn’t make money, and spoke negatively about it while consistently withdrawing funds. Now, they claim to be optimistic.

However, the future trend of the market will depend on how things progress and whether they buy back substantial amounts. In the world of capital markets, words alone won’t suffice. What matters is the flow of funds, and genuine capital injection is a sign of true optimism.

Below 3,000 points, long-time investors know that the A-share market is at a historic low, but we don’t know what domestic investors are thinking or if they are buying.

In any case, many experienced investors are actively protecting the 3,000-point level and working hard to support the market.

Especially in recent months, many global stock markets are reaching historic highs, and valuations are moving towards historic highs. This is a choice made by funds; they invest where they see value. Major markets in Europe, the United States, Japan, South Korea, India, Southeast Asia, and even in places with weaker economies, have performed well. So, why is there an issue in markets that are perceived as undervalued?

I won’t dwell on foreign investors because they have been consistently bearish and are therefore not reliable. However, their scale is substantial, and if they gradually reduce their positions while domestic investors don’t cooperate, a slight push from domestic investors can certainly drive the market up.

This is why the news has always talked about “domestic investors needing to show backbone.” It has been consistently encouraging long-term funds to enter the market, and the news reports daily about various large funds buying index funds.

However, the impact has been minimal. The valuations are low, that’s certain. But to break out of this extreme trend in the short term, to deviate from global capital markets, even with reduced stamp duties and controls on major shareholder reductions, despite many efforts, we haven’t seen much of a response so far. This is the biggest problem at the moment.

It’s certain that valuations are low, but in the short term, breaking free from this extreme trend, diverging from global capital markets, even with reduced stamp duties and controls on major shareholder reductions, despite many efforts, we haven’t seen much of a response so far. This is the biggest problem at the moment.

In any case, there isn’t much active buying, and daily trading volumes are weak, with moderate profit potential. No matter what they say, if the market had a lot of active buying, it would have taken off a long time ago.

If it hasn’t risen and is still falling, it means that most of the funds have similar views, and they are all waiting for lower levels to appear.

Many foreign institutional investors are now optimistic about the A-share market in 2024, believing there is an opportunity for an oversold rebound.

They say that the current A-share market’s valuation is lower than in early 2016 and late 2018. A-share valuations are at historic lows, and they maintain a “high allocation” stance towards A-shares. The PB ratio of the CSI 300 Index is the lowest in the past decade, and Morgan Stanley has set a year-end target for the CSI 300 Index at 3,850 points.

Currently, the CSI 300 is at 3,297 points.

Moreover, they also believe that a potential interest rate cut by the U.S. Federal Reserve coupled with the appreciation of the Chinese yuan will be positive for A-shares next year.

These factors are well understood and seen as positive. Global stock markets are already reaching historic highs due to expectations of a U.S. interest rate cut.

So why is the A-share market, with its historically low valuations, still diverging from global markets and falling? What funds are selling and causing panic?

Without understanding this issue, short-term trends will remain complicated. Once various funds agree on a genuine low point, valuation recovery will naturally begin. Whether the capital market is optimistic about itself can be seen by observing sector performance, individual stock profit potential, and trading volumes. If there is no buying pressure but the market remains optimistic, it means we haven’t reached the buying point in their minds. This is not a good sign, and it may lead to further selling and panic.

Old rules, let’s get to the point at the end.

Previously, I analyzed data for everyone (major shareholders, foreign investors, individual investors, and mutual funds – who is really causing the sell-off?). Currently, the top three forces driving the bearishness in the A-share market are individual investors, foreign investors, and retail investors.

This is also why new energy and consumer sectors have suffered the most. These two sectors are heavily weighted in public funds and foreign investment portfolios.

Today, I’ve calculated some more interesting data - when will individual investors, foreign investors, and retail investors finish selling?

First, let’s talk about individual investors.

I compiled the share data of all equity-based funds, a total of 7,456 funds. In the third quarter of 2023, these funds decreased from 3.43 trillion shares to 3.34 trillion shares, a decline of 2.5%. On average, this translates to a weekly redemption rate of about 0.2%.

Here, I’ve based this on statistics from the quarterly fund reports. And Citic Securities conducted a survey on distribution channels, and the result? 0.2%, completely consistent, mutually verified.

The fourth-quarter report has not yet been released, so I can’t calculate further here. However, Citic Securities' channel statistics can be tracked in real-time. What is the weekly redemption rate of public mutual funds in the fourth quarter? 0.6%, three times that of before.

Of course, I’m using more polite terms here, calling it a redemption rate, but it’s essentially a “cut-loss rate.”

Knowing the cut-loss rate, we also need another piece of data

I remember in August when Goldman Sachs was bearish on the A-share market, advising investors to sell, they were quickly announced to be under investigation.

They were criticized by a bunch of experts.

In a market where they couldn’t afford to play, what else could they do besides saying something nice?

However, they continued to sell real money without hesitation.

Consistency expectations often require reverse thinking,

For example, the expectation of going from 5000 points to 10000 points,

And the expectation of a crash when it’s at 2900 points.

However, the process can be uncomfortable,

Look at the quant guru, Renaissance’s Simmons, even though he’s into quantitative investing, sometimes he can’t resist making discretionary moves, which often don’t meet expectations (From “Market Wizards”).

Now, let’s take a look at Michael Burry during the subprime crisis, how much he lost when he shorted before the market downturn, and how investors had to withdraw their capital, basically facing bankruptcy and liquidation. Then, during the subprime crisis, how much did he earn?

So, experiencing discomfort at the bottom is a process both for the big shots and ordinary people,

The only difference is that the discomfort at the bottom is something the big shots can endure; they will objectively analyze, vent, break down, and even bleed, but they will wait.

Ordinary people, when they reach the bottom, will be in a hurry to sell because it’s easy to “overestimate existing trends.

Tonight, a topic with a hotness of 10 million, ranking first, disappeared from the trending list in just a few minutes.

It didn’t even make it to the top 50. (With 400,000 hotness, you can make it to the top 50, but this one with 10 million just disappeared.)

Now, let’s make “Collective Singing of Economic Brightness” a trending topic, shall we?

On December 20th, all three major indices fell more than 1%, hitting new lows for the year. The Shanghai Composite barely held on to the 2900-point mark. How do you view today’s market performance?

So, what you see, what you think, and what you hear, are all formatted by someone else.

I understand. It seems that the A-share market always offers opportunities for oversold rebounds but lacks the potential for long-term upward trends.

Providing More Information for Our Friends:

Goldman Sachs, Nomura, Morgan Stanley: A-shares Valuation at Historic Lows, Focus on Next Year’s Market Oversold Opportunities

Every Economic News Reporter Wang Haimian Every Economic Editor Peng Shuiping

Recently, mainstream foreign institutions including Goldman Sachs, Nomura, and Morgan Stanley have made outlooks for the A-share market in 2024. After more than two years of adjustment, A-shares are expected to usher in oversold opportunities, which is a common view of some foreign institutions at present.

For example, Nomura Orient International Securities' Chief Strategy Analyst Gao Ting said yesterday that the current valuation of the A-share market is lower than at the beginning of 2016 and the end of 2018. In such an extreme situation, future valuation repair is worth watching. Goldman Sachs believes that the improvement in the economic situation is expected to drive corporate profit recovery, and because A-share valuation is at historic lows, they maintain a “high allocation” position in A-shares.

Even Morgan Stanley, which has held a cautious view of A-shares this year, believes that A-shares will rebound next year. Recently, Morgan Stanley set the target level of the Shanghai and Shenzhen 300 Index at the end of 2024 to 3850 points.

In addition, historically, there has been a strong correlation between the performance of the MSCI China Index and the Renminbi exchange rate. Recently, UBS raised its Renminbi to US dollar exchange rate forecast.

Foreign Institutions Focus on A-shares Valuation Repair

Recently, mainstream foreign institutions, including Goldman Sachs, Nomura, and Morgan Stanley, have mostly believed in the A-share market in 2024. A common view among them is that A-shares are expected to rebound next year, with valuation repair factors receiving much attention.

Regarding the current A-share market, Gao Ting, General Manager and Chief Strategy Analyst of Nomura Orient International Securities Research Department, said yesterday that the current valuation of the A-share market is even lower than at the beginning of 2016 and the end of 2018. The price-to-book ratio of the Shanghai and Shenzhen 300 Index is the lowest in the past ten years.

In his view, A-share valuation has now reached an extreme point, and future valuation repair will be crucial. Investors should pay attention to oversold opportunities from the A-share market after three years of continuous adjustment. It is expected that in the next 12 months, there will be room for an upward trend in the market, driven by both valuation repair and profit improvement. Although there is some uncertainty, the overall positive factors outweigh the negative ones. In addition, close attention can be paid to real estate data; if it stabilizes, economic growth expectations will be more optimistic.

The Gao Ting team has summarized three medium-to-long-term investment themes for investors to focus on: 1) Three main lines of consumption upgrade under the new domestic demand (modern urban consumption, quality upgrading of mass consumer goods, and consumption upgrading of population structure); 2) Value-added upgrade in the external cycle (consumption output, entertainment output, and capacity output); 3) Repair opportunities in oversold sectors. In addition, if overseas interest rates continue to decline, the food and beverage, electronics, and pharmaceutical industries, which are heavily invested by foreign capital, are expected to benefit from the return of foreign capital.

Goldman Sachs recently released its outlook for the Chinese stock market in 2024. Liu Jinjin, Chief Chinese Stock Strategy Analyst of Goldman Sachs Research Department and his team, maintain a cautiously optimistic view of the Chinese stock market, believing that the improvement in the economic situation is expected to drive corporate profit recovery, and because A-share valuations are at historic lows, they maintain a “high allocation” position in A-shares. Goldman Sachs Research Department predicts that in 2024, MSCI China Index and Shanghai and Shenzhen 300 Index component stocks will achieve profit growth of 10% and 11%, respectively, similar to this year’s performance.

Liu Rui, Chief Multi-Asset Investment Officer of Bel Air Building Credit Co., Ltd., a subsidiary of Bel Air, recently stated in an interview with the media that there are relatively good allocation opportunities for A-shares and Hong Kong stocks in the first half of 2024. Both markets currently have low valuations, both horizontally and vertically. Structurally, high-tech and high-dividend assets are more competitive.

Since the beginning of this year, Morgan Stanley has held a relatively cautious view of A-shares. However, when looking ahead to next year, Morgan Stanley also believes that A-shares are expected to rebound.

In Morgan Stanley’s recently released 2024 China Stock Strategic Outlook, Morgan Stanley set the target level of the Shanghai and Shenzhen 300 Index at the end of 2024 to 3850 points. As of today’s closing, the Shanghai and Shenzhen 300 Index closed at 3297.5 points.

UBS Raises Renminbi Exchange Rate Forecast

The Renminbi exchange rate is an important variable affecting the market. Historically, there has often been a strong negative correlation between the performance of the MSCI China Index and the Renminbi exchange rate. Recently, UBS raised its Renminbi to US dollar exchange rate forecast.

Wang Tao, Head of Asian Economic Research and Chief Chinese Economist at UBS, recently stated that due to the weakness of the US dollar, UBS has raised its Renminbi to US dollar exchange rate forecast.

Wang Tao pointed out that since November, the Renminbi has appreciated somewhat against the US dollar, partly due to the weakness of the US dollar. In line with the latest trend of the US dollar, UBS has adjusted its Renminbi to US dollar forecast to around 7.1 by the end of 2023 (previously forecasted at 7.3). Fluctuations in the China-US interest rate spread, US Treasury yield, and the US dollar index may still bring about phased fluctuations in the Renminbi exchange rate.

Looking ahead to next year, Wang Tao said that given the possibility of further monetary policy easing by the central bank, the Renminbi may depreciate again in the first quarter of next year. It is expected that China’s economic growth will stabilize, and the central bank will no longer cut interest rates after the spring of next year. At the same time, it is expected that the US economy will slow down in 2024, and the Federal Reserve will begin to cut interest rates. The China-US yield spread is expected to narrow, the US dollar is expected to weaken, and confidence in the Chinese economy will be restored. This will jointly drive a slight appreciation of the Renminbi against the US dollar by the end of 2024. Therefore, it is expected that the Renminbi exchange rate at the end of 2024 will be 7.0 (previously forecasted at 7.15).

In addition, the Gao Ting team believes that in 2024, the global economy will gradually converge, and the weakening of the US economy will drive the Federal Reserve to gradually initiate an interest rate cut cycle, which will benefit the overall performance of emerging markets. Due to the urgent need for total stimulus policies in the current economy, domestic low inflation pressure, and the potential downward space in overseas interest rates, China has the opportunity to introduce more powerful stimulus policies in 2024 to boost economic growth

[Morgan Stanley Expects China’s Stock Market to Perform Best Globally in 2023, Raises MSCI China Index Year-End Target by 13%] Caixin, January 10th - Morgan Stanley has become more optimistic about the Chinese stock market, further raising its target and expecting China’s stock market to perform best globally in 2023. The brokerage firm maintains an overweight rating on the MSCI China Index and has once again raised the year-end target for the index, from 70 points to 80 points (a 13% increase from the latest closing price). In December of last year, Morgan Stanley upgraded its rating on Chinese stocks from neutral to overweight and raised the year-end target for the MSCI China Index from 59 points to 70 points.

Financial World: What Will China’s Capital Markets Look Like in 2023? Which Areas Are Worth Watching?

Shan Hui (Chief China Economist, Goldman Sachs): Looking ahead to 2023, with China’s GDP growth picking up and policy conditions remaining relatively loose, our stock strategy team is bullish on domestically and overseas-listed Chinese stocks in the Asia-Pacific region. We maintain an overweight recommendation for A-shares and H-shares.

In terms of investment strategy, the reopening of the economy after the pandemic will benefit sectors that are sensitive to epidemic prevention measures, such as tourism, catering, entertainment, and aviation. In terms of industry allocation, Goldman Sachs' stock strategy team believes there are two main themes for next year: on the one hand, we will look for sectors that benefit from the trend of reopening due to the pandemic, and on the other hand, we will maintain a high allocation to online retail and consumer goods. Beyond consumer goods, improving growth momentum may drive the recovery of sectors that are still suppressed in terms of fundamentals and valuations relative to historical periods, such as some cyclical stocks in construction, real estate, and financials.

We believe that after the policies are introduced, the tail risk in the real estate sector has been significantly reduced, so we have also raised our allocation to real estate stocks from underweight to neutral.

Nomura Orient International Securities Research Department Chief Strategy Analyst Gao Ting predicts a 9.2% and 7.1% net profit growth rate for the Shanghai and Shenzhen 300 in 2023/2024. In the short term, the main opportunities to drive excess profits in the first quarter come from valuation elasticity. Industries such as household appliances, media, pharmaceuticals, and agriculture are the most worth watching in the first quarter.


What’s the difference between the 2023 and 2024 forecasts? Just keep singing praises all the way. Or does the media think that the real gold and silver stamp duty reduction, coupled with the favorable comments of the top leaders of the central economic departments, will boost market confidence if a few analysts from securities firms stand up, and investors won’t buy it?

To put it simply, if you really believe you’re in a historical position, buy in; if it’s truly solid gold and silver, keep buying; historical positions are worth going all in. In practice, action is always more convincing than shouting. Even Hu Xijin knows to get in before complaining.

When foreign capital enters, the A-share market becomes a mixed dish, and their analyses hold little reference value.

When it comes to “fleecing the lambs,” the bourgeoisie’s stance always seems surprisingly consistent, even to the point of transcending species to establish “friendship.

Thanks for the invitation. The A-share market doesn’t rise just because they are bullish on it, nor does it fall just because they are bearish. The A-share market has its own logic. The current state of the A-share market can be described as: waiting.

If you dislike someone, advise them to sell A-shares now;

If you like someone, suggest they buy A-shares at the moment;

The rest is left to time because time doesn’t speak, but it will reveal the answers to us.

I’m done playing, I’m leaving.

Knowledge and experience are shallow when confined to paper; true understanding requires practical action! Goldman Sachs, Nomura, Morgan Stanley, you should all take a step back. If you’re really concerned about opportunities, you should get involved yourself! Just like Hu Xijin said:

Hu Xijin still has his eyes on below 2800; that’s too extreme. When the market hit 3114, Hu Xijin firmly expressed optimism. Now that it has dropped by 200 points, some seem hesitant. If you keep this up, you might turn Hu Xijin, who was originally “Hu Xijin Buys,” into “Hu Xijin Sells.”

This reminds me of a response I gave some time ago. Let me bring it up:

Hu Xijin has been trading stocks for five months now. What is currently bothering him the most?