Chinese assets soar, foreign investors buy in! Nearly 90 billion yuan bought at the bottom

Last week, European and American stock markets rose across the board, with the S&P 500 index rising by more than 1%. Chinese assets surged, with the Nasdaq China Golden Dragon Index rising nearly 4%. EPFR data shows that in the week ending January 24, emerging market equity fund inflows hit a record high of US$12.1 billion; of which US$11.9 billion (RMB 85.4 billion) flowed into Chinese equity funds, the second largest in history .

According to Forbes rankings, Arnault, chairman and CEO of LVMH Moët Hennessy Louis Vuitton (LVMH), the “biggest brother” in the luxury brand world, has once again surpassed Tesla CEO Elon Musk to become the world’s richest man.

The Federal Reserve will announce its latest interest rate decision this Thursday (February 1). This week, large technology stocks such as Apple, Google, Microsoft, Amazon, and Meta will release financial reports. In addition, important events and blockbuster data such as the Bank of England's interest rate decision, U.S. non-farm payroll data, the U.S. Treasury Department's new quarter bond issuance plan, the Eurozone's GDP in the fourth quarter of last year and CPI in January this year will be released.

Nearly 90 billion yuan of funds are used to buy Chinese assets at the bottom

Last week, major European stock indexes rose across the board, with the British FTSE 100 index rising by 2.32%, the French CAC40 index rising by 3.56%, the German DAX index rising by 2.45%, and the European STOXX50 index rising by 4.20%.

The three major U.S. stock indexes rose across the board. The Dow Jones Industrial Index, Nasdaq Index, and S&P 500 Index rose 0.65%, 0.94%, and 1.06% respectively last week.

Chinese assets have surged. The Nasdaq China Golden Dragon Index rose 3.87% last week. Alibaba, NetEase, JD.com, Baidu and other stocks all rose sharply last week.

On January 26, Bank of America strategist Michael Hartnett cited EPFR data and said that in the week ending January 24, emerging market equity fund inflows reached a record $12.1 billion. Chinese stock funds attracted US$11.9 billion (85.4 billion yuan) in capital inflows that week, the largest since July 2015 and the second largest in history. This is a positive sign for the Chinese stock market.

Hartnett believes that buying Chinese stocks currently may be the world's "most attractive contrarian long-term investment."

In addition, call option trading volume on the $4.2 billion iShares China Large Cap ETF (FXI) surged to its highest point in more than a year.

The bullish contract trading volume of the KraneShares CSI China Internet ETF (KWEB), which focuses on the technology field, has also increased, climbing to the second highest level in history.

Regarding Chinese assets, overseas institutions are actively optimistic. Goldman Sachs Group said that it is expected that China will usher in more favorable policies in the future and is optimistic about short-term Chinese government bonds. Appetite for Chinese Internet stocks has also risen.

Charles Gave, co-founder of the Gavekal Group, said that Chinese stocks are undervalued relative to cash, Chinese bonds, gold and other stock markets around the world, and are now the most valuable investments in the world.

Changes in the world’s richest man

On January 28, according to Forbes rankings, Arnault, chairman and CEO of LVMH, the "big brother" in the luxury brand world, once again surpassed Tesla CEO Elon Musk and became the world's richest man. As of now, Arnault and his family have a net worth of US$207.6 billion (approximately RMB 1.49 trillion), ranking first on the Forbes Global Rich List, followed by Musk with a net worth of US$204.7 billion, followed by Jeff Besso Sri Lanka ranked third.

On January 26, LVMH released its 2023 annual report. The financial report shows that LVMH's annual revenue in 2023 will be 86.2 billion euros, a year-on-year increase of 9%; net profit will be 15.2 billion euros, a year-on-year increase of 8%, with both revenue and net profit hitting record highs. On January 25, Tesla released its fourth quarter financial report for 2023. The performance was lower than expected. The full-year net profit was US$10.882 billion, a year-on-year decrease of 23%. Total revenue for the year reached US$96.773 billion, a year-on-year increase of 19%. Compared with the growth rate of more than 50% in the previous two years, revenue growth in 2023 has slowed down significantly.

Last week, Tesla fell by 13.64%, while LVMH Group rose by more than 17% last week. With each drop and then rise, the world's richest man changed.

The Federal Reserve’s interest rate decision will be announced

This week, the Federal Reserve and the Bank of England will announce their latest interest rate decisions. Major data such as the U.S. non-farm payrolls, the U.S. Treasury Department’s new quarter bond issuance plan, the Eurozone’s GDP in the fourth quarter of last year, and CPI in January this year will be released this week. In addition, technology giants such as Apple, Google, Microsoft, Meta, AMD, and Qualcomm will release financial reports one after another.

On January 31, Beijing time (this Wednesday), the Federal Reserve will hold an FOMC meeting and announce the latest interest rate decision at 3:00 a.m. on February 1. Fed Chairman Powell will hold a press conference at 3:30 a.m. Pantheon macroeconomist Ian Shepherdson expects the Fed's first easing policy to be introduced in March or May.

Nick Timiraos wrote that the Federal Reserve will not cut interest rates at this week's meeting because the economy has been growing steadily. While monthly inflation, excluding food and energy, has been at or below 2% in six of the past seven months, the Fed wants to ensure that continues before cutting rates. Fed officials may take a major symbolic step this week by no longer saying in policy statements that interest rates are more likely to rise than to fall. Typically, the Fed cuts interest rates in response to a sharp slowdown in economic activity, but until late last year, economic growth remained surprisingly strong. Instead, they are considering whether softening inflation means real interest rates could be too restrictive on economic activity if no action is taken.

On February 1, the U.S. Treasury Department will hold a refinancing meeting, and on February 2, the U.S. will release January non-farm payroll data.

In Europe, on January 30, the Eurozone released the initial quarter-on-quarter GDP value for the fourth quarter, the January economic sentiment index, and the final value of the January consumer confidence index. On February 1, the Eurozone will announce the preliminary month-on-month adjusted CPI value for January. On February 1, the Bank of England will announce its latest interest rate decision.

In addition, on January 30, Microsoft and Google will release financial reports after the U.S. stock market closes. On February 1, Apple, Amazon, and Meta will release financial reports after the U.S. stock market closes.

WedbushSecurities research analyst Daniel Ives believes that Microsoft's financial report may be a bellwether for the performance of technology companies in the next 12 to 18 months. Google and Amazon's cloud businesses will remain strong this quarter as the industry moves aggressively towards artificial intelligence and the companies begin to explore how to monetize artificial intelligence.