The past trading week (November 25–29) marked the end of November for China’s A-share market. Over five trading days, the market managed to stabilize and recover from the sharp losses of November 22. Although it didn’t fully rebound, the sentiment improved significantly, and the monthly charts ended in the green. According to Wind data, 3,491 stocks rose in November, showing a slight improvement from October.
For many investors, November’s journey mirrored the broader market: strong gains at the start, losses in the middle, and a modest recovery by the end.
As we step into December—the final month of 2024—let’s explore what lies ahead for A-shares.
Multiple Positive Catalysts Ahead
1. Policy Tailwinds: Possible RRR Cut by Year-End
Several potential positive developments may bring additional liquidity and investor confidence to A-shares:
•Revised Foreign Investment Rules:
On December 2, new regulations from the Ministry of Commerce and other departments will come into effect, reducing barriers for foreign investors in Chinese listed companies. Changes include:
•Allowing foreign individuals to invest strategically.
•Easing asset requirements for foreign investors.
•Enabling acquisitions through stock offerings or tender offers.
•Reducing minimum holding periods and lock-in restrictions.
Analysts believe these changes could attract long-term foreign capital, promoting value investing in China’s market.
•Liquidity Boost from PBOC:
On November 29, the People’s Bank of China (PBOC) announced a ¥800 billion reverse repurchase operation to maintain liquidity through the year-end and into the Chinese New Year. Analysts suggest this move, coupled with expectations for a 0.5% reserve requirement ratio (RRR) cut, could provide critical liquidity support.
2. Rising Institutional Interest
Institutional investors are ramping up their participation. Several ETFs based on the CSI 500 Index have gained traction, attracting pension funds, insurance capital, and other institutional investments. Financing balances in A-shares have steadily risen, reflecting stronger market sentiment.
Wall Street’s Perspective: China as a “Cheap Market”
Global investment experts continue to view China as an attractive opportunity amid relatively high valuations in other markets:
•Jim Rogers (Renowned Global Investor):
In a recent interview, Rogers described China as the “last cheap market” and noted that while he has reduced positions in most global markets, he continues to hold Chinese stocks, citing their long-term growth potential.
•J.P. Morgan Asset Management:
In its 2025 Long-Term Capital Market Assumptions, J.P. Morgan forecasts an annualized return of 7.8% for Chinese equities over the next 10–15 years (in USD terms). It expects China’s fiscal policies to spur recovery in production and consumption, laying the groundwork for sustained growth.
December Market Outlook
1.Key Drivers:
•Policy Signals: The upcoming Central Economic Work Conference will outline fiscal and monetary policies for 2025. Measures to boost infrastructure, real estate, and consumption could lift market sentiment.
•External Risks: Analysts expect geopolitical risks, such as U.S.-China tensions or global conflicts, to remain relatively subdued in December.
2.Strategic Insights:
•Short-Term Opportunities: Technical support around the 60-day moving average may stabilize the market by mid-December.
•Sector Focus: Analysts recommend a balanced approach, favoring “big finance” and “technology” sectors while seeking undervalued stocks.
Conclusion
Despite challenges earlier this year, A-shares are ending 2024 with momentum. Policies aimed at boosting liquidity, foreign investment, and institutional participation could set the stage for a stronger December.
For investors, this could be an opportune time to increase exposure to promising sectors, keeping an eye on long-term fundamentals while navigating short-term volatility.
(Disclaimer: The content is for informational purposes only and does not constitute investment advice. Investors should make decisions based on their own research and risk tolerance.)
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