Global Hedge Funds Rush to China: New Bull Market on Horizon?

On Thursday (October 3rd), in response to the recent surge in China's stock market, Ray Dalio, founder of the world's largest hedge fund Bridgewater Associates, "Godfather of Emerging Markets" Mark Mobius, BlackRock, Goldman Sachs, and Manulife Investment Management have all voiced their opinions. Dalio posted on LinkedIn that if China's decision-makers can deliver actions that far exceed their promises, this round of economic stimulus measures will become a historic turning point, comparable to the 2012 commitment by the former European Central Bank President Mario Draghi to do "whatever it takes" to save the Euro. With a series of policies, Draghi ultimately succeeded in rescuing the European debt crisis that year. Considering that Chinese assets are still very cheap, multiple factors have ignited the market, attracting a large number of investors to enter the market to bottom-fish.

After the authorities announced a series of stimulus measures last week, including interest rate cuts, cash releases to banks, and liquidity support for stocks, the sustained rebound indicates investors' ongoing optimism about China's economy and risk assets. Hedge funds and mutual funds that were previously underexposed are now turning to Chinese assets. The US Dollar Index rose to 101.80; non-US currencies declined, with the Australian Dollar to US Dollar reaching 0.6860, the Euro to US Dollar falling to around 1.1030, and the offshore Renminbi reaching 7.04. Spot gold rebounded to near 2655 US dollars, and spot silver came to 31.60 US dollars. Crude oil fell back to around 71.40 US dollars.

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Fundamentals: Currently, household consumption in Europe is decreasing, businesses are cutting back on commercial investments, housing investment is declining, and demand remains weak. Although the service industry continues to grow, there are signs of deceleration, and manufacturing and construction activities remain sluggish. The European Central Bank's latest forecast shows that the Eurozone economy will grow by 0.8% in 2024 and 1.3% in 2025. Inflation levels may rebound in the fourth quarter of this year. The European Central Bank predicts an inflation rate of 2.5% for the Eurozone in 2024 and 2.2% in 2025.

Technical Analysis: The Euro to US Dollar continues to fall at the H4 level and operates below the 48-day bull-bear boundary. In addition, the MACD lines and volume bars converge below the zero axis. The European Central Bank will consider the latest inflation data at the next monetary policy meeting, and the European Central Bank may continue to lower interest rates in October.

Resistance and Support Levels:

First Resistance Level: 1.1090 First Support Level: 1.0980

Second Resistance Level: 1.1140 Second Support Level: 1.0930Fundamentals: On Wednesday, the Bank of England released a quarterly statement emphasizing that global asset prices remain overvalued, especially in the context of a rapid rebound following recent market turmoil. Although the central bank's assessment of financial stability risks in the UK is largely consistent with that in June, it did not overly optimistic about the market rebound in August, but rather warned that there is still a significant risk of a major correction. Compared to its counterparts in the US and Europe, the Bank of England has adopted a more gradual interest rate reduction strategy.

Technical Analysis: The British Pound against the US Dollar is experiencing a downward trend on the H4 timeframe and is operating below the 48-day moving average. Additionally, the MACD lines and volume bars are beginning to converge below the zero axis. The UK is currently facing persistent inflationary pressures, and the central bank hopes to alleviate market pressures without undermining financial stability through a gradual rate reduction.

Resistance and Support Levels:

First Resistance Level: 1.3310 First Support Level: 1.3200

Second Resistance Level: 1.3360 Second Support Level: 1.3150

Fundamentals: The decades-long infatuation of Japanese investors with overseas assets is beginning to wane. With overseas investments amounting to as much as $4.4 trillion surpassing the economic total of India, any pace and scale of divestment could be sufficient to disrupt global markets. Although the interest rate gap between Japan and other countries has narrowed, the inflow of funds remains a steady stream rather than the flood that some investors fear. Overseas capital will continue to flow back to Japan in a sustained, gradual, and large-scale manner.

Technical Analysis: The US Dollar against the Japanese Yen has rebounded significantly on the H4 timeframe and is operating above the 48-day moving average. Additionally, the MACD volume bars and lines are expanding above the zero axis. In the first eight months of this year, Japanese investors have net purchased 28 trillion yen ($192 billion) worth of Japanese government bonds, setting a record for the highest level for the same period in at least 14 years.Resistance and Support Levels:

First Resistance Level: 147.70 First Support Level: 145.90

Second Resistance Level: 148.60 Second Support Level: 145.00

Fundamentals: The International Monetary Fund (IMF) has completed the Article IV consultation with Australia. The IMF pointed out that if the disinflation process stalls, Australia would need to implement fiscal consolidation. The IMF urged Australia to adopt a comprehensive approach to address housing affordability issues and supported the decision of the Reserve Bank of Australia to maintain a restrictive policy stance. In accordance with Article IV of the IMF Agreement, the IMF typically holds annual bilateral discussions with member countries.

Technical Analysis: The Australian Dollar against the US Dollar is experiencing a consolidation decline at the H4 level and is operating below the 48-day moving average. Additionally, the MACD lines and volume bars are converging near the zero axis. If the disinflation process stalls, Australia would need fiscal consolidation, and the IMF urges Australia to adopt a comprehensive approach to solve housing affordability issues.

Resistance and Support Levels:

First Resistance Level: 0.6920 First Support Level: 0.6830

Second Resistance Level: 0.6960 Second Support Level: 0.6790Fundamentals: Gold prices fluctuated slightly lower on Wednesday. Stronger-than-expected US September ADP employment data helped the US dollar index record three consecutive daily gains and rise to a near three-week high. US Treasury yields also rose, causing gold prices to fall to around $2,641.05 at one point during Wednesday's trading. However, tensions in the Middle East continue to provide safe-haven buying support for gold prices, leading to a rebound. Market attention will continue to focus on US economic data and news related to geopolitical situations in the Middle East.

Technical Analysis: Gold is experiencing high-level consolidation at the H4 level and is operating near the 48-day bull-bear boundary. Additionally, the MACD lines and volume bars are converging near the zero axis. Global risks, including deglobalization and the aftermath of regional military conflicts, may bring unexpected shocks to gold prices.

Resistance and Support Levels:

First Resistance Level: $2,674.00 First Support Level: $2,638.00

Second Resistance Level: $2,692.00 Second Support Level: $2,610.00

Fundamentals: As the third-largest oil producer in OPEC, Iran's daily oil production has climbed to 3.7 million barrels. However, significant escalations by Iran may prompt US intervention, potentially leading to stricter sanctions or direct attacks on Iranian oil facilities. Although Iran's oil production accounts for 4% of global output, disruptions in oil supply could significantly drive up oil prices. Against this backdrop, OPEC+ ministers convened to review market conditions, but no policy changes are expected.Technical Analysis: Crude oil on the H4 timeframe has reached a peak and is retreating, returning to the vicinity of the 48-day bull-bear line. Additionally, the MACD lines and volume bars are gradually shrinking near the zero axis. The group plans to gradually increase production starting from December. However, any further escalation in the Middle East situation could overturn these plans, driving up oil prices and offsetting any supply growth from OPEC+.

Resistance and Support Levels:

First Resistance Level: 74.00 First Support Level: 69.00

Second Resistance Level: 76.00 Second Support Level: 67.00