The A-shares market, along with Hong Kong stocks, experienced a sharp rebound following the Chinese government’s new stimulus measures announced on September 24. The CSI300 index surged over 15% within a week, turning its year-to-date losses into a 7.9% gain as of September 27. A significant factor driving this rally appears to be a short squeeze, which has amplified the recent price movements.

Investor sentiment toward both Chinese and Hong Kong markets has also improved substantially, prompting a notable influx of capital. On September 27, turnover in the Hong Kong stock market reached a record high of HKD 445.8 billion. Similarly, the top 15 largest A-shares ETFs listed in the U.S. have experienced a significant increase in fund inflows. The 20-day rolling sum of fund flows surged to +$367 million by September 27, rebounding from a record low of -$23.3 billion on August 14 this year (Exhibit 1).

The pressing question now is when this surge in panic buying — or fear of missing out (FOMO)—might subside. Before the recent stimulus, many foreign investors and fund managers were underweight in A-shares and Hong Kong equities. As of September 24, year-to-date outflows for the same A-shares ETFs had plunged to a record low of -$5.0 billion before rebounding. However, despite this recent recovery, cumulative outflows still stand at more than $4.1 billion — marking the lowest level in over a decade (Exhibit 2). This suggests that the current short squeeze may persist for some time, particularly as markets are likely working to close the gap with previous years.

AShares #HongKongStocks #FundFlows #ShortSqueeze #MarketRebound #Stimulus

Exhibit 1:

Exhibit 2: