Hao Hong: The Puzzle of “Vanishing Surplus”

  • FX settlement growth at record low, trade surplus has not yet been converted to yuan liquidity fully but will likely so. It explains the disconnect between record surplus and plunging stocks in 2022.
  • The yuan vol and traders’ USD positions are not sending out strong trading signals, while northbound buying has hit a near-term wall. Bide your time, while waiting for the recovery to unfold.

Hao Hong: A Deadcat, or A New Bull?

  • The Hang Seng rally stalled at 22,700, vs. our price target of 23,000 set in late October 2022 and our 850-Cycle line of 22,500.
  • After a 50% rally in three months, the itch to take profit cannot be denied. Onshore market has yet to respond in full to China’s PMI re-expansion.
  • But – the market bottom we called in late October 2022 is indeed a secular turning point, as shown by our leading indicator, valuation and China’s market cap.

Hao Hong: Savings Glut Fuel for Spring Rally

  • Consensus is mistakenly over analyzing the activity data during the Spring Festival. Good data mean recovery, bad data suggest more stimulus. Indeed, PBoC’s balance sheet expansion has heralded a positive turn in economic cycle.
  • With data vacuum, we are at the inception of intense speculation. China’s savings glut many taken as a sign of extreme risk aversion can be the fuel for a spring rally.
  • Stay bullish.