Artificial Bull Market: A Grand Adventure of RMB Assets

The autumn wind is bleak, and the fallen leaves drift, symbolizing not only the changing of seasons in nature but also the subtle moments of economic cycles.

The recent strong performance of A-shares has left many feeling unfamiliar and somewhat surreal. This is not a spontaneous burst of market enthusiasm but a meticulously planned artificial bull market, a splendid adventure for RMB assets.

In recent days, the intensive convening of high-level meetings has sent a clear signal: stimulating the recovery of RMB asset prices and boosting domestic demand has become a top priority in economic work. It is no longer the superficial policy probing of the past but an unprecedented investment of real money.

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This inevitably recalls a slightly darkly humorous quip: "When a whale falls, all things thrive." There was once hope that the decline of the real estate market would unleash tremendous consumer potential, only to find that without the support of asset prices, consumer willingness is like the leaves in the autumn wind, uncertain and difficult to take root.

Economic theory tells us that the wealth effect is an important factor affecting consumption. When asset prices rise, people feel their wallets are fuller, and their willingness to consume naturally increases. On the contrary, when asset prices fall, even if there is still some cash on hand, people will tighten their pockets and dare not consume easily.

In the past few years, the sluggish real estate market has shrunk the wealth of many, dampened consumer confidence, and weak domestic demand has become a huge obstacle to economic recovery.

Recognizing the crux of the problem, officials have begun to shift their focus to the stock market and the real estate market, attempting to boost consumer confidence by stimulating the recovery of RMB asset prices. This is like giving the economy a strong stimulant, hoping to activate dormant consumer desires.

At the same time, stabilizing employment and ensuring people's livelihoods have also been put on the agenda, striving to truly fill the pockets of the people through the dual drive of wage income and property income.The magnitude of this policy is truly remarkable. Not only does it call for an increase in the counter-cyclical adjustment of fiscal and monetary policies, but it also involves the issuance and use of ultra-long-term special treasury bonds and local government special bonds to leverage the catalytic effect of government investment.

RRR cuts, adjustments to housing purchase restrictions, reductions in existing mortgage interest rates, and guidance for medium to long-term capital into the market... A series of policy combinations are aimed directly at enhancing the value of RMB-denominated assets.

Compared to previous policies, this one is more pragmatic and urgent. The phrase "face difficulties" underscores the severity of the current economic situation. The expected decline in GDP growth rate for the third quarter, coupled with the high base pressure in the fourth quarter, means that achieving the annual growth target of 5% requires greater effort. The widening fiscal revenue and expenditure gap adds to the urgency of policy implementation.

In the past, the official attitude towards the capital market was relatively cautious, with more emphasis on risk control. This time, however, there is a clear demand to "boost the capital market" and a series of substantial stimulus measures have been introduced, including large-scale bottom-fishing by the national team, newly approved swap facilities, and special stock repurchase and increase in re-lending. These measures indicate that the authorities have made up their minds to turn the tide and stabilize the prices of RMB assets.

The situation in the real estate market is more complex. The rapid development in the past has overdraw the economic growth potential for the next decade or so, and has also left most people with a heavy burden of mortgage pressure. To rejuvenate the real estate market, it is necessary to reduce the debt pressure on residents and stabilize the downward trend of housing prices. Significantly reducing the interest rates on existing mortgages and increasing the cash flow on the resident side have become key to stimulating consumption.

Of course, it is unrealistic to expect housing prices to return to the era of explosive growth in the past. The real estate industry needs a healthy and sustainable development model.

In the future, the real estate market, as people imagine, will inevitably differentiate. Housing prices in some core cities and areas may rebound, while in some economically depressed and depopulating third, fourth, and fifth-tier cities, housing prices may continue to decline.

The success of this splendid adventure of RMB assets remains to be seen. The interplay between the stock market and the real estate market will have a significant impact on economic recovery.If the prices of RMB-denominated assets can stabilize and rebound, with domestic demand effectively stimulated and inflation picking up, then the A-share market may be poised for a bullish trend. Conversely, if the economy remains sluggish and the prices of RMB-denominated assets continue to decline, the A-share market will also struggle to remain unscathed.

As the ancients wisely said: "He who observes the trend is enlightened, and he who follows the trend is wise." We cannot focus solely on the stock market itself; we must also pay attention to the macroeconomic situation, policy direction, real estate market, and other factors to make more accurate judgments.

This artificial bull market is a challenging adventure and a rare opportunity. Whether we can seize the opportunity to achieve a soft landing for the economy requires wisdom and courage, and more importantly, the test of time.