US and European stocks plummet while Chinese assets surge: Wall Street giants bullish on China, are investors returning to the Chinese market?

US and European stocks plummet while Chinese assets surge: Wall Street giants bullish on China, are investors returning to the Chinese market?Last night, US and European stock markets experienced a collective plunge, while Chinese assets bucked the trend and rose sharply, presenting a stark contrast. This phenomenon has attracted widespread market attention and is interpreted as a sign of global investor optimism towards China's economic prospects and a renewed focus on Chinese assets

US and European stocks plummet while Chinese assets surge: Wall Street giants bullish on China, are investors returning to the Chinese market?

Last night, US and European stock markets experienced a collective plunge, while Chinese assets bucked the trend and rose sharply, presenting a stark contrast. This phenomenon has attracted widespread market attention and is interpreted as a sign of global investor optimism towards China's economic prospects and a renewed focus on Chinese assets.

Collective plunge in US and European stock markets

On October 1, US stocks plummeted during trading hours and closed lower. The Dow Jones Industrial Average fell by 0.41%, the S&P 500 Index dropped by 0.93%, and the Nasdaq Composite Index declined by 1.53%, at one point falling more than 2% during the session.

The sectors most affected included technology and banking stocks. Major tech stocks mostly declined, with Apple down 2.91% and Microsoft down 2.23%. Chip stocks generally fell, with GlobalFoundries dropping more than 4%, NVIDIA, Broadcom, AMD, Qualcomm, Micron Technology, and ASML all falling over 2%. In the banking sector, JP Morgan Chase and Wells Fargo declined by nearly 2%, while Goldman Sachs, Citigroup, and Bank of America fell about 1%.

European stock markets also experienced a largely negative performance. Several markets opened higher but then fell, ultimately resulting in a 0.58% decrease for the German DAX Index to 19,213.14 points and a 0.81% drop for the French CAC40 Index to 7,574.07 points.

The cryptocurrency market also saw a sharp decline. Bitcoin fell to around $60,000 at one point, while Ethereum dropped more than 5% for the day. Data from Coinglass shows that over 150,000 accounts were liquidated within 24 hours.

Chinese assets soar against the trend

In stark contrast to the collective plunge in US and European stock markets, Chinese assets surged against the trend. The Nasdaq Golden Dragon China Index rose more than 5%. Popular Chinese ADRs mostly closed in the green, with KE Holdings up 17.43%, Bilibili up 14.33%, Futu Holdings up 12.43%, Li Auto up 11.50%, Pinduoduo up 8.03%, JD.com up 7.33%, and Alibaba up 6.24%.

Wall Street giants bullish on Chinese assets

At the same time as the US stock market crash, Wall Street giants have expressed a strong interest in Chinese assets, with many expressing a bullish outlook for the sector.

BlackRock upgraded its rating for Chinese stocks from neutral to overweight. BlackRock Investment Institute said that with Chinese stock valuations near record lows relative to developed market equities, there is scope for further modest increases in allocations to Chinese stocks in the near term, given the potential catalysts to trigger investors' return to the market

Other media reports have stated that global investors are preparing to return to China. Gabriel Sacks, emerging market portfolio manager at UK asset manager Abrdn, said the group "selectively" purchased Chinese stocks last week.

In its latest research report, Goldman Sachs pointed out that the combined market capitalization of Alibaba, Pinduoduo, and JD.com is only a quarter of Amazon's, and in the context of continuous policy support and sustained market enthusiasm, there is a huge revaluation potential for Chinese e-commerce companies. Goldman Sachs compared e-commerce stocks to gaming companies, seeing them as the preferred sector within the Chinese internet industry, and also raised its price targets for Alibaba, Pinduoduo, JD.com, Tencent, and Meituan.

Investors returning to the Chinese market

The bullish sentiment from Wall Street giants and the strong performance of Chinese assets both indicate that investors are returning to the Chinese market.

The Chinese economy has achieved significant results in both pandemic control and economic recovery, with robust economic growth momentum and a continuously optimized policy environment, providing investors with favorable investment opportunities.

Furthermore, China has a large and growing consumer market and its technological innovation capabilities are continuously improving, these factors are attracting the attention of global investors.

Future outlook

The short-term correction in US and European stock markets will not change global investors' long-term optimism towards the Chinese economy. As the Chinese economy maintains its growth trajectory, Chinese assets will continue to attract global investor attention, with a promising future outlook.

Market volatility reminds investors to invest rationally

Despite the strong performance of Chinese assets, market volatility is inevitable. Investors need to remain rational, avoiding blindly chasing gains or selling off assets in panic, and ensuring proper risk management.

Summary

The collective plunge in US and European stock markets, while Chinese assets bucked the trend and surged, reflects global investor optimism towards the Chinese economy and a renewed focus on Chinese assets. Wall Street giants are bullish on Chinese assets, and investors are returning to the Chinese market. Going forward, sustained growth in the Chinese economy will continue to attract global investor attention, promising a favorable future outlook for the sector.