‘National Team’ Buying Speculation As Mainland Shares See Sharp Afternoon Turnaround

The CSI 300 and Hang Seng finished 1.4% & 0.8% higher on Thursday, respectively.

• Still, that doesn’t tell the entire story, with a sharp turnaround in mainland shares witnessed during the afternoon. Both the CSI 300 and Hang Seng registered fresh ’24 lows earlier in the day, with the former down 1.8% at one point.
• During the rally we noted that these sort of afternoon turnarounds often generate speculation re: potential state-backed (‘national team’) buying given historical tendencies/precedent, particularly when news flow is light.
• Some ETFs (a favoured channel of the ‘national team’) saw notable volume spikes, adding credence to this idea.
• A reminder that state-backed and regulatory entities have flagged the potential for/their intentions re: supporting the equity market in recent weeks/months.
• International investors didn’t show any meaningful participation in the rally in net terms, with modest net outflows seen via the northbound legs of the HK-China Stock Connect schemes on the day (~CNY0.7bn), although that measure ticked away from session extremes during the rally.
• Yesterday saw those links provide the largest net daily outflow seen since Oct ’22.
• Wires have flagged structured product flow-related pressure re: the recent sell off in the Hang Seng, a reminder that various desks had already earmarked option-linked flow as a key driver of the sell off.
• Economic worry and a light touch on immediate policy support (MLF rate cut disappointment and no meaningful signals from Premier Li) also continued to factor in to the early sell off.
• More granularly, renewable energy names did well, with a focus on potential growth drivers.
• Baidu benefitted from a brokerage comment.