On Thursday (November 28), the A and H share markets experienced fluctuations and adjustments, with all three major Hong Kong stock indices declining by more than 1%. Geopolitical tensions and a strengthening dollar were considered key factors leading to market sentiment volatility.
Russia-Ukraine Conflict Reaches Critical Stage
Reports indicate that the Russia-Ukraine conflict has escalated again in the city of Kurakhove in the Donetsk region. The Russian military is attempting to capture this key city to advance strategically towards Red Army City (known as Pokrovsk in Ukraine). UK Defense Minister Healy stated that the Russia-Ukraine conflict has reached a critical stage, and NATO countries need to strengthen their collective defense capabilities to consolidate the eastern border.
Analysts point out that the ongoing escalation of the Russia-Ukraine conflict not only exacerbates regional instability but also further reflects the confrontation between NATO and Russia. The rise in geopolitical risks has had a widespread impact on global capital markets, with investor sentiment becoming cautious.
Dollar Rebound and Market Fluctuations
The recent rebound of the dollar index has put pressure on emerging market stocks. Coupled with the geopolitical uncertainties brought about by the Russia-Ukraine conflict, this has led to adjustments in the Chinese and Hong Kong stock markets. In Hong Kong, major stock indices such as the Hang Seng Index and the Hang Seng Tech Index have all fallen by more than 1%.
Behind the market fluctuations are concerns about a slowdown in global economic growth and uncertainties regarding the U.S. Federal Reserve's monetary policy. As geopolitical risks and changes in the external environment intensify, investors are taking a wait-and-see approach toward short-term market trends.
CITIC Securities Mid-term Optimism on Chinese Stock Market
Despite the market being suppressed in the short term by geopolitical risks and a dollar rebound, CITIC Securities maintains an optimistic outlook for the Chinese stock market's medium to long-term performance. The institution believes that the Chinese stock market is undergoing a "confidence reevaluation bull" cycle, with future policy benefits expected to gradually drive the market toward a "fundamentals bull" by 2025.
CITIC Securities notes that even though the market may experience periodic fluctuations and differentiation as policies are intensified, in the long run, improving liquidity and the recovery of economic fundamentals will provide strong support for the stock market. The institution also emphasizes that during this process, investors will have ample opportunities to discover high-quality targets.
Coexistence of Short-term Risks and Long-term Opportunities
Currently, geopolitical uncertainty remains a significant factor suppressing global markets. The continued escalation of the Russia-Ukraine conflict and NATO’s hardline stance introduce new variables into the market. However, the Chinese stock market, driven by policy support and economic recovery, is still viewed positively in the medium to long-term prospects by the market.
Investors need to be cautious of short-term volatility, while also focusing on structural opportunities within long-term trends. CITIC Securities suggests that investors could appropriately allocate growth assets, especially in sectors benefiting from policy support, such as new energy and high-end manufacturing. Future market trends need to closely monitor the latest dynamics of geopolitical situations, as well as changes in the dollar and policy environment.
