[TL;DR]:

Since late September, A-shares and H-shares have both experienced a big pump, with Trading Volume and price surges breaking consecutive historical records, following a series of Favourable Information policies released by China.

As a barometer of the capital flow, the USDT premium rate has been continuously discounted recently, reflecting signs of capital outflow in the crypto market.

The encryption market and the stock market differ in volatility, market-driving factors, and investor sentiment, but the correlation between the two is gradually increasing.

Introduction

Since the new policy of "9·24", A shares and H shares have experienced an epic big pump, leading the global financial market. At the same time, the Crypto Assets market, which has always been known for its high volatility, is currently relatively quiet.

This article will analyze the latest performance of the A-share market, as well as the subtle changes brought about by the crypto market, and explore whether the enthusiasm of the A-share market can spread to the crypto market.

A-shares and Hong Kong stocks experience a big pump, causing attention

Since the Chinese government launched a combination of heavyweight policies such as reserve requirement ratio reduction and Interest Rate reduction on September 24th this year, A-shares and Hong Kong stock market have experienced a rare big pump trend, greatly mobilizing market participation enthusiasm.

Figure 1 Source: public information

As of September 30, the Shanghai Composite Index has accumulated a gain of more than 15%, with a monthly pump of 17.39% in September, marking the largest monthly increase in nearly 15 years. Since October, although the stock market has experienced some retreat, it is still in a state of significant volatility.

Figure 2 Source: Public information

From the perspective of Trading Volume, the last trading day before the A-share market's National Day holiday was unusually hot, with multiple data repeatedly breaking historical records, especially the single-day turnover of 26.1 trillion yuan, refreshing the historical record. And on the first trading day of October, the Trading Volume even reached nearly 3.5 trillion yuan, setting a new historical high.

From the perspective of sentiment indicators, the A-share market sentiment index constructed by Turnover Rate, new equity fund issuance, and margin financing proportion reached a new high for this year in September, second only to March this year.

In addition, in September, the net value index of ICBC's bank-to-securities transfer reached 1.51, the first positive value in nearly five months, indicating that investors' funds flowed into the securities market, with the individual investor index reaching as high as 1.47 and the market sentiment being high.

In fact, before the outbreak of the market, the median price-to-book ratio of A-share companies has been below 2 times for a long time, reaching a low level in nearly 15 years. The valuation percentile of the ChiNext Index is less than 8%, which obviously provides a fundamental support for funds to speculate with the background of Favourable Information, marginal improvement in economic data, etc.

The Hong Kong stock market has also surged recently, achieving its best performance in nearly a decade during the same period. From the end of September to now, the Hang Seng Index has shown a significant pump trend, with market focus mainly on zones such as technology, finance, and consumer goods. Among them, technology stocks have been widely followed due to the recovery of the global technology industry and the increased valuation of technology stocks in the Hong Kong stock market. Financial stocks have also performed well due to the overall pump of the Hong Kong stock market and the enhanced confidence of investors in the financial industry.

Figure 3 Source: Public Information

Similar to the high trading volume of A-shares, the turnover of the Hong Kong stock market increased significantly from the end of September to the beginning of October. The average daily turnover in September was 169.2 billion Hong Kong dollars, an increase of 77% from 95.5 billion Hong Kong dollars in August.

Although the A-share and Hong Kong stock markets experienced a pullback this week, the overall upward trend remains unchanged. At the same time, the fiery stock market has also sparked concerns about the crypto market being bled dry of funds.

USDT frequently appears at a negative premium, is there a significant outflow of funds from the crypto market?

While A-share and Hong Kong stock markets continue to heat up, the cryptocurrency market presents a completely different bleak scene. Especially since September 27, when Bitcoin touched a high of $66,500, the price has been oscillating downward and has fallen to the $60,000 level as of the writing date.

As an indicator of fund flow, the USDT premium rate reflects signs of recent capital outflows. According to public data, the current exchange rate for the US dollar is 7.01, while the over-the-counter trading price on multiple platforms is only 6.94, with a negative premium rate of up to 1.1%.

Image 4 Source: BTC126.COM

The so-called USDT premium refers to the deviation between the market price of USDT and its true USD value. When a negative premium occurs in the market, it often happens in the context of weakened market demand or restricted liquidity, usually indicating a greater selling pressure in the market.

It is not difficult to infer that the appearance of USDT negative premium is likely to be related to speculators who are eager to dump USDT and turn to the A-share market. In order to raise Fiat Currency faster, they have to sell USDT at a discount, which leads to the decline of its market price and forms a negative premium.

However, in terms of the supply of stablecoins, the overall increase in the past year is 36.25%, and since late September, there has been a net outflow of less than 1 billion US dollars, accounting for less than 0.6%. The trend of liquidity in the encryption market has not changed for the time being.

Figure 5 Source: CoinMarketCap

The stock market may not have peaked, the crypto market still has potential

Overall, based on the analysis of the phased bottom characteristics of the A-share market in the past 20 years, the strength of policy signals often exceeds market expectations, which are key and necessary conditions for the A-share market to stabilize and rebound.

Although the fundamentals of the current series of policy implementations have not yet emerged, the short-term pump in the market is mainly driven by expectations and capital inflows, leading to overheated market sentiment. High volatility markets often accompany excessive reactions, so the pullback after the historical level of big pump is both in line with technical requirements and reasonable.

Overall, based on past experience, the recent decline can be seen as an adjustment rather than the end of the trend, and the top of A-shares and Hong Kong stocks has not yet arrived.

At the same time, the encryption market and the stock market differ in terms of volatility, market driving factors, and investor sentiment, but the correlation between the two is gradually increasing. In the coupling process with the TradFi market, the correlation between the encryption market and the Spot ETF, encryption laws and other compliance processes is becoming stronger. This has led to many encryption concept stocks being not only affected by assets such as BTC, but also disturbed by the overall operation of the stock market.

Figure 6 Source: Public information

In addition, despite the current sluggishness of the crypto market, the 40% increase this year indicates that Bitcoin is still the leader among all kinds of assets. What can be expected is that, as global liquidity gradually increases and risk appetite gradually improves, the value of BTC will gradually be discovered.

In short, with policy support and substantial capital injection, the long-term prospects of A-share and H-share markets are promising, while the crypto market, despite current uncertainties, still has potential in the long run. Investors should closely follow market dynamics, make cautious decisions, and follow the impact of global economic environment, market sentiment, and policy changes on both.

Author: Charle Y.

This article represents only the author's point of view and does not constitute any trading advice.

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