"Chinese Stock Market Remains Bullish Even After Military Parade"

Despite Rising Volatility, Authorities Highlight Stock Market Importance
Consumer and High-Dividend Stocks Expected to Outperform

On September 8, NH Investment & Securities stated that despite the recent increase in volatility, the bullish trend in the Chinese stock market has not yet been broken. The company predicted that this month, consumer stocks and high-dividend stocks with attractive valuations are expected to perform well.

Park Ingeum, a researcher at NH Investment & Securities, explained, "After the Chinese Victory Day military parade on September 3, the mainland China and Hong Kong stock markets entered a phase of increased short-term volatility. The main reason is the sell-off for profit-taking following the end of political events." She added, "There is currently a strong concentration of investment in artificial intelligence (AI) hardware. The desire for profit-taking has increased, and the valuation burden on related stocks is also likely to have an impact."

In addition, she cited the large scale of leveraged funds as another factor increasing volatility. She pointed out, "As of September 3, the balance of margin trading exceeded 2.3 trillion yuan, reaching its highest level since 2016. The average margin ratio in the mainland market fell to 281.5%, increasing potential risks."

However, she believes that the bullish market will continue, as the Chinese government still places significant importance on the stock market. Park explained, "Financial authorities are emphasizing the importance of the stock market to an unprecedented degree. Due to the pronounced concentration seen in this bull market, individual accounts have not achieved relatively high returns. The stock market will continue to stand out as a means for household asset growth."

She also noted, "Large-scale capital withdrawals such as initial public offerings (IPOs), refinancing, and major shareholder stake sales have not yet occurred. There is an ongoing shift of funds from household deposits to the stock market, and an increase in the allocation of insurance funds to stocks is also expected in the future."

Regarding the stock market next month, she forecasted, "Due to policy issues such as the Fourth Plenary Session, technology stocks are expected to once again take on a leading role."