Today's market focus: A dovish Federal Reserve official sees a 40% chance of a major rate hike.

Market Review

Key Highlights

Chinese Market

1. Shanghai and Shenzhen Stock Exchanges issue notice on further regulating the reduction of shareholdings

The Shanghai and Shenzhen Stock Exchanges issued a notice on further regulating the reduction of shareholdings. The notice requires that if a listed company's shares fall below their issuance price or net asset value, or if the company has not distributed cash dividends in the past three years or the cumulative amount of cash dividends is less than 30% of the average net profit over the last three years, then controlling shareholders and actual controllers cannot reduce their shareholdings through the secondary market. On the same day, the Beijing Stock Exchange also revised its reduction guidance to further regulate the reduction behavior of key minorities.

2. Further adjustments to the real estate purchase restrictions in some cities

According to information from Chengdu's Housing and Urban-Rural Development Bureau, purchase restrictions are lifted outside the 5+2 central urban areas, and housing larger than 144m² within the restricted areas no longer requires qualification review, nor will the mechanism for publishing reference prices for transactions of second-hand housing be implemented. A new round of real estate regulatory policies continues to relax, with first-tier cities like Beijing officially lifting the policy of recognizing house purchases without recognizing loans, reigniting many homebuyers' enthusiasm. Lianjia, Beijing's largest brokerage, will adjust its fee standard from the current 2.7% of the total transaction price of the house to 2%, with costs borne equally by buyers and sellers.

3. The Three Gorges Power Station achieves full load operation for the first time in 2023

Recently, due to a continuous process of heavy rainfall in the Yangtze River basin, the inflow into the Three Gorges increased. Under the guidance of the Yangtze River Water Resources Commission, State Grid, and Southern Power Grid, the total output of the Three Gorges Power Station reached 22.5 million kilowatts, achieving full load operation for the first time in 2023. The Yangtze River Electric Power Company stated that it will closely monitor the water inflow situation in the upper reaches of the Yangtze River and the demand for electricity in the receiving areas, strengthen the prediction of water and rain conditions in the basin, optimize the dispatching of the Three Gorges Reservoir, and further do an excellent job in flood control, energy supply security, and annual water storage, ensuring that the Three Gorges Project continues to play a significant comprehensive benefit.

4. Leading funds join hands with brokerages to establish "Investment Advisory College"

In a landscape where fund investment advice is burgeoning, leading public funds, brokerages, and third-party sales have jointly established companies related to the investment advisory track. Reporters from Securities China noted that recently, E Fund and GF Fund, two of China's fund giants, joined forces with the subsidiaries of four brokerages in Guangdong and the subsidiary of Yingmi Fund to establish Guangzhou Investment Consultant Academy Management Co., Ltd. The company’s business scope includes business training, securities financial advisory services, and enrollment support services.

Overseas Markets

1. Federal Reserve's dovish member estimates a 40% chance of significant rate hikes

Neel Kashkari, President of the Minneapolis Federal Reserve, stated that the US might move towards a "high-pressure equilibrium" scenario, characterized by sustained economic growth and robust consumer spending. In this scenario, inflation would decrease but remain above the Federal Reserve's 2% target, posing a challenge that necessitates substantial rate hikes by policymakers. Kashkari believes there is almost a 50% chance that US interest rates need to continue to rise significantly to reduce inflation.

2. "Zero-DTE (End-of-Day Options)" make a comeback

Zero-DTEs, known as "end-of-day options," are regaining momentum, potentially exacerbating volatility in an already turbulent stock market, reminiscent of a market crash five years ago. JPMorgan states that the volume of zero-DTE trades has been hitting new historical highs, recently accounting for half of all S&P 500 index options traded (see below). End-of-day options expire and become worthless on the trading day, making them cheaper and offering higher leverage, with about $1 able to move $1000 in market value.

3. Morgan Stanley warns El Niño could trigger an "inflation storm"

Ben Noll, a meteorologist at the National Institute of Water and Atmospheric Research in New Zealand, pointed out that the provisional value of the Southern Oscillation Index (SOI) in September is -1.6, the lowest since 2015, further increasing the likelihood of an El Niño event (see below). The SOI is an atmospheric measure for El Niño and La Niña phenomena, with persistent negative values indicating El Niño and positive values indicating La Niña. Morgan Stanley stated that the El Niño phenomenon makes the fight against inflation more challenging, possibly prolonging the Federal Reserve's cycle of interest rate hikes.

4. Japan's Finance Minister says closely monitoring forex trends with a strong sense of urgency

Last week, the Bank of Japan maintained its ultra-loose monetary policy, leading to the yen's exchange rate in Tokyo's forex market dropping to 149.18 yen per US dollar at one point during the week, the lowest level since October 2022. Responding to this, Finance Minister Shunichi Suzuki expressed that the government is closely monitoring currency fluctuations with a high degree of urgency and will take appropriate measures to address rapid volatility, not ruling out any options against excessive currency fluctuations.

Focus of the Day

Today, investors should pay attention to important economic data such as the German Gfk consumer confidence index, the Swiss Credit Suisse/CFA economic expectations index, US durable goods orders, and EIA crude oil stocks. In addition, investors should also stay informed on risk events like the minutes of the Bank of Japan's July monetary policy meeting and the election of the new Prime Minister in Spain's parliament.