On October 8th, the Chinese stock market experienced a remarkable surge after a steep drop earlier in the dayThe market rebounded significantly, and notably, the ChiNext Index reached its largest single-day percentage gain in historyBy the end of trading, the Shanghai Composite Index rose by 4.59%, while the Shenzhen Component Index jumped by an impressive 9.17%. The ChiNext Index surged by 17.25%, leading various ETFs such as the ChiNext Growth ETF (159967) and the Science and Technology Innovation 100 ETF from Huaxia (588800) to hit their upper trading limits, reflecting an overwhelming bullish sentiment.

The trading volume on the Shanghai and Shenzhen stock exchanges reached an astronomical 3.45 trillion yuan, marking an increase of 860 billion yuan compared to the previous trading day, establishing a new historical record for daily turnoverMost stocks witnessed price increases, with over 5,000 stocks gaining in value

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Sectors that saw substantial gains included semiconductors, software development, storage chips, and data security, while only a few sectors like tourism saw declines.

Investment giant Goldman Sachs expressed its bullish stance, questioning, "If not now, when?" This statement resonated strongly within the market given the high expectations after the extended National Day holiday breakThe seven-day closure of the A-shares during the holiday, while Hong Kong markets continued to surge, highlighted the rising global interest in Chinese assetsThis growing enthusiasm has led both institutional and retail investors to anticipate a positive start for the post-holiday trading.

During the recent holiday period, economist Ren Zeping humorously predicted that the stock market might reopen with a collective surge, suggesting that trading could conclude quicklyMeanwhile, foreign investment sentiments grew increasingly aggressive, with Goldman Sachs raising its rating for Chinese stocks to "overweight," hinting at the potential boost from significant stimulus measures for valuations

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Their report indicated that historical trends reveal substantial upward movements following major policy shifts, suggesting that the Chinese stock market is more responsive to fiscal policies than to monetary policies, with the latter now apparently having run its course.

Goldman Sachs emphasized that stocks seldom experience a slow rise below 30% after major policy redirectionsThey forecast a potential 14-15% increase for A-shares over the next year amid a favorable policy environment, also expressing a more favorable outlook for A-shares than Hong Kong stocks.

As the appetite for investments in A-shares continues to grow, investment banking firm CICC noted a breakdown of recent capital flow dynamicsFollowing 65 weeks of outflows, overseas active funds flowed back into the market for the first time just before the trading resumedThis shift, coupled with a significant influx of passive funds, has implications for future market dynamics

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As of early October, many overseas-listed Chinese ETFs, such as the KraneShares CSI China Internet ETF (KWEB) and the iShares China Large-Cap ETF (FXI), saw their assets increasing dramatically.

Eric Yee, a senior portfolio manager at Atlantis Investment Management in Singapore, mentioned that they are reallocating positions across Asia to make room for Chinese stocks, stating, "Everyone is doing thisIt's a good recovery driven by policyYou wouldn't want to miss this opportunity." Morgan Stanley's strategist Nikolaos Panigirtzoglou further corroborated this sentiment, emphasizing that the recent surge in American Depositary Receipts (ADRs) for Chinese firms mainly stemmed from new investments rather than short covering.

Moreover, S3 Partners indicated that if short-sellers were forced out due to the rising prices, there would be additional momentum for Chinese companiesIhor Dusaniwsky, their managing director of predictive analytics, suggested that sustained upward movement could trigger significant short covering, further inflating stock prices.

The optimism continued to build with news from Zheng Zhanjie, who announced efforts to boost the capital market

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He highlighted comprehensive measures under consideration to attract long-term investments to the market, emphasizing support for mergers and acquisitions, steady progress in mutual fund reforms, and policies aimed at protecting small investorsMany of these measures are being accelerated, signaling significant support for the capital markets.

In September, the logistics performance index in China registered at 52.4%, gaining 0.9 points from the previous month, with significant upticks in business volume and new orders indicating a stable expansion phaseE-commerce and express delivery services saw increased activity during this period as wellDespite ongoing leverage concerns, recent data showed increases in financing across both the Shanghai and Shenzhen exchanges, demonstrating a gradual recovery.

Research from CICC hinted that after the National Day holiday, the Chinese asset market demonstrated resilience against global challenges

This optimism was attributed to the gradual execution of stabilizing growth measures in various sectors, particularly in real estate, with positive consumption data emerging during the holiday.

Furthermore, CITIC Securities indicated a major shift in policy signals and market expectations following the holiday, predicting that sustained domestic demand policies might prompt significant capital inflowsThese increasing inflows could lead to a transformative market situation characterized by heightened retail participation and rapid increases in stock prices.

The environment appears ripe for a second surge in the markets, particularly for ChiNext and tech-focused fundsNotable products such as the ChiNext 100 ETF (159957) and the Science and Technology Innovation 100 ETF (588800) are positioned well to capture this growing interestWith the equity and ETF markets witnessing heightened activity, the rapid growth of ETF products has outstripped traditional investment avenues, often proving to be a more strategic choice for both new and seasoned investors alike.

As the interest in ETFs flourishes, many consider them a sharp tool for capital allocation in the current market climate