Focus On Potential State Buying As CSI 300 Rebounds From Fresh Cycle Lows

Mainland deflationary worry (post-weekend data) initially weighed on Chinese equity benchmarks before a sharp bid was seen during the afternoon session.

• That allowed the CSI 300 to finish 0.6% higher on the day.
• The early downtick resulted in a fresh multi-year low for the index.
• Talk of state-owned buying did the rounds during the sharp bid. A spike in volumes for an ETF that is a preferred tool of state-backed names was noted.
• A reminder that recent weeks have seen confirmation of similar activity, along with source reports pointing to such intentions, doing the rounds.
• Some also noted that the dropping of the word “forceful” from the Politburo readout re: monetary policy was a negative.
• Mainland property developers struggled.
• Alcohol producers also struggled, following press reports pointing to one name being set to cut price to boost sales.
• News re: apps on Huawei’s operating systems boosted related names.
• M&A news in the brokerage sphere provided some support for the sector (remember previously covered policymaker intentions re: promoting such activity).
• International participants were net sellers via the HK-China Stock Connect scheme, offloading ~CNY3.3bn of mainland exposure on the day, breaking a run of 3 consecutive days of (modest) net inflows. Today’s flow more than reversed the cumulative net inflows seen during the second half of last week.