Benefiting from the artificial intelligence boom, easing geopolitical tensions, and expected policy support, the Chinese stock market is experiencing its best monthly rally since 2018.
In September, the MSCI China Index rose nearly 9%, marking the fifth consecutive month of increase. Since hitting bottom in April, the index has rebounded by about 40%, surpassing the rebound of the S&P 500 index and MSCI Asia index after the tariff shock.
Bloomberg reported that this market trend has triggered a "fear of missing out (FOMO)" sentiment among global funds, and many overseas investors who previously believed that the Chinese market was too risky have begun to return. The breakthroughs made by Chinese companies in the fields of artificial intelligence, chips, and other key technologies highlight their industrial strength and prompt investors to re-examine the Chinese market. At the same time, the recovery of industrial enterprise profits also brings hope, indicating that Beijing's efforts to curb overcapacity and vicious competition are beginning to show results.
Hong Hao, a partner at Hong Kong Lotus Asset Management, believes that this market trend will continue into the first quarter of next year, as many investors are still hesitant and FOMO sentiment will drive these investors to enter as the market continues to rise.
However, valuation issues may slow down the upward trend. The forward P/E ratio of the MSCI China Index is currently about 13 times, higher than the five-year average of 11 times, but still lower than the S&P 500 index's 23 times.
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