A-Share Sentiment Edges Up, but Global Liquidity Turns Less Supportive

MSASI rose slightly this week but remains at weak levels. We reiterate our cautious stance on China equities and our early September index target cuts, as the Fed's rate hike adds to global liquidity headwinds amid weakening China macro momentum. A-share investor sentiment increased marginally vs. the previous cycle: Weighted MSASI rose by 4ppt as of September 16 vs. the prior cutoff date (Sep 9), to 23%. The weighted MSASI 1MMA decreased by 2ppt in the same period, to 29%. ADT for ChiNext and A-shares outstanding fell 11% (to Rmb421bn) and 9% (to Rmb1,742bn), respectively, while equity futures turnover increased by 11% (to Rmb463bn) and margin transactions remained the same (at Rmb2,596bn) vs. the prior cutoff date (Sep 9). The 30-day RSI decreased 7ppt in the same period (September 10-16). Consensus earnings estimate revision breadth remained negative and deteriorated a bit vs. last week. Southbound net inflows were US$2.1bn over September 10-16;