August eighteenth, two thousand twenty-five
《China Assets at Highs: Playbooks & Bond-Equity Rotation》
《Strategies for China’s assets at new highs (three scenarios) + the bond-equity rotation question》
The indices are at new highs, and most individual stocks in the market have also reached their initial pattern-based target prices,
Two different mindsets will continue to trouble market participants:
1) Participants who entered at the start of pattern confirmation or at the first pullback and made substantial profits may feel that they have everything under control and believe they will once again anticipate the top before everyone else.
But In fact, most tops that people manage to exit are not real tops，For us, setting a passive take-profit some distance below the initial target price is a better choice than selling based on subjective judgment，A genuinely strong breakout will not meaningfully retest the level. Giving up cheap shares right as a potential move begins is a poor trade-off, while once a pullback truly begins, banking these floating gains is already satisfying enough.
2) For those who have not entered yet, or who remain tucked away in some lagging blue chips and feel “extremely anxious” after seeing other participants who are “clearly no more professional than they are” “make money easily,” emotional urgency will not help you make good decisions. Chasing highs in an uncertain area is not a good choice.
Whether the market continues to rise strongly or shifts into another mode will be clear by the end of this week. It won't be too late to decide then; you can watch for now, Think it through fully before acting, rather than acting first and thinking afterward; don't lose your composure.
3) Of course, there is also a third kind…
Those who, before seeing this article, had already chased the market heavily near the intraday high and were sitting on floating losses after the pullback: if your trading horizon is measured in weeks and the portion you chased was not bought into an extreme price vacuum... it is better not to touch it. Frequent trading will only make your mindset and equity curve worse and worse.
In terms of fund flows, PB data show that hedge funds’ net buying of Chinese stocks last week was the fastest in the past seven weeks. This included both active additions to long positions and short covering, as for For the Prime book so far this month, China has become the largest market by net purchases.
Finally, on the much-discussed recent rotation between stocks and bonds:
The monetary policy implementation report for the second quarter, released over the weekend, showed a slightly hawkish tone, which also drove today’s bond-market sell-off. A few points are worth noting:a) The report changed “guide banks to increase credit support” to “consolidate” credit support; b) in a special section, the central bank emphasized that the structural shift in credit allocation from property and infrastructure to the “five major new areas” had made positive progress, indicating no concern about recent weakness in loan data; c) the report added the phrase “prevent funds from idling,” which may also raise market concerns about liquidity conditions.
But in substance, these points are not aimed at the bond market, which has already adjusted; they point instead to inefficient bill-based credit allocation, Overall, the central bank does not appear particularly intent on tightening liquidity at this point (the report still emphasizes “ample liquidity”). Also, unlike last time, this report no longer mentions “resuming government bond purchases in the open market at an appropriate time.”
Rotation from bonds to stocks has already widened the spread between 10-year and 30-year maturities, domestic investors’ participation in A-shares continues to rise, and margin financing and securities lending balances have reached their highest level since 2015, further accelerating the rotation from bonds to equities through redemptions of bond funds.
One point requiring particular attention is that the ownership structure of 30-year government bonds is relatively concentrated, mainly: 1)Rural commercial banks; 2) cross-asset investors in 30-year government bond futures(Over the past few years, a lack of quality-yielding assets led these investors to pour into 30-year government bonds in pursuit of returns. But with the recent strength in equities, cross-asset investors’ demand to shift funds from 30-year government bonds into stocks has increased noticeably.)
We require our in-house trading-room Traders to produce roughly one single-market note every 2 days, covering U.S. stocks, A-shares and Hong Kong, and commodities. We select the better ones to post in the corresponding small planets (we also include some of our own commentary, though we do indeed anonymize some details).
Interested readers can subscribe as needed (subscribe only if you need it; don't waste your money):
U.S. stocks:https://www.meridianresearch.app/home?product=us-strategies(Xingzhi)
A-shares and Hong Kong:https://www.meridianresearch.app/home?product=asia-strategies(Ganglong)
Commodities:https://www.meridianresearch.app/home?product=commodity-strategies(Dixin)
As for the level of detail, we will probably get down to the industry level. On the mainland, we will try to avoid crowded trades; if we write too specifically, someone may jump in ahead. We may be able to be more specific about U.S. stocks, but readers will still need to think things through and fill in the gaps themselves, There are no trades to copy directly!。
The overall win rate has been fairly good lately.
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Wishing you all the best.
2025.08.18
Note: All content in this text is for reference only, does not constitute investment advice, and is not a basis for any laws, regulations, or regulatory policies. Investors should not use this information as a basis for decisions or rely on it.