A50 Futures Surge Overnight, Bitcoin Breaks $71,000, US Stocks and Chinese ADRs RiseThe A50 index futures surged overnight, opening with a straight climb and rising more than 1.5%
A50 Futures Surge Overnight, Bitcoin Breaks $71,000, US Stocks and Chinese ADRs Rise
The A50 index futures surged overnight, opening with a straight climb and rising more than 1.5%. This strong performance also boosted Bitcoin, breaking through $71,000, a gain of over 4%, according to Coinglass. Over 60,000 traders liquidated their positions in the past 24 hours. The US stock market also saw strong activity, with popular Chinese ADRs rallying, with NIO rising more than 6%, Alibaba and Pinduoduo both up over 3%. The Nasdaq Golden Dragon China Index closed up 4.05%, reaching its highest level since October 15. The three major US stock indices also saw gains across the board.
The strong performance of the A50 index is closely related to the recent announcement of a comprehensive debt reduction plan. To alleviate the debt pressure on local governments, the Ministry of Finance plans to "increase the debt limit on a one-time basis to replace the existing shadow debt of local governments," which will be the most vigorous local debt reduction measure in recent years. Finance Minister Liu Kun called it a "timely rain" policy. From the perspective of addressing fiscal pressure in some areas and promoting the "transformation of hidden debt into explicit debt," conducting large-scale replacement of existing shadow debt is a necessary step to address short-term risks and strengthen debt monitoring. According to experts interviewed, the scale of the new round of debt replacement is expected to reach 6 trillion to 10 trillion yuan. Local governments can restart the issuance of "replacement bonds," or continue to issue "special refinancing bonds" and "special new special bonds" to mitigate the risk of local debt defaults, helping local governments to allocate more energy and resources to economic development and people's livelihood.
In stark contrast to the A50 index and the US stock market, the A-share market saw a correction. The Shanghai Composite Index fell by more than 1%, losing the 3,300-point mark, the ChiNext Index fell more than 2%, also falling below the 2,200-point mark, the CSI 50 Index lost the 2,700-point mark, while the North Securities 50 Index continued to rise by 3.68%. Over 4,200 stocks traded down, with turnover reaching 2.11 trillion yuan.
Scott Rubner, managing director of Goldman Sachs Group, pointed out in his latest market commentary that many investors are either seeing or hoping to see a short-term pullback in US stocks that may never come. Rubner expects US stocks to continue to rise before the end of the year, in line with seasonal patterns. Historically, US stocks have typically performed strongly in November and December. If anything, the election could be a "risk asset clearing event," leading to an immediate rise in the market because "fear of missing out" (FOMO) would drive investors to chase gains. In this scenario, Rubner anticipates the biggest gains coming from currently undervalued and unpopular themes and sectors.
However, over the next two months, Rubner believes seasonal changes in corporate buybacks and investor positioning could have a greater impact. Rubner says retail investors and private wealth managers typically adjust their portfolios in January, April, and November. Investors holding Treasury bills may want to reinvest their maturing earnings elsewhere, and the stock market seems like a logical place to do so. Assuming the US stock market performs as it has in the past, the last two months of the year could be very profitable. Since 1928, the median return for the index from October 27 to December 31 has been 5.2%. In election years, that figure climbs to 6.3%.
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