Chinese Stocks Surge 17% on Policy Shifts, U.S. Market Flat

On August 18, the U.S. stock market experienced minor fluctuations, with several Chinese stocks listed in the U.S. surging. The three major U.S. stock indices closed nearly flat, with the Nasdaq Composite rising 0.03%, the S&P 500 Index falling 0.01%, and the Dow Jones Industrial Average declining 0.08%.

Among the technology sector, Meta fell 2.27% due to pressure from earnings expectations, acting as a drag on the overall market. Tesla rose 1.39%, while Amazon and NVIDIA also recorded slight gains. Notably, NVIDIA's CEO Jensen Huang sold over $27.1 million worth of shares in eight transactions between August 14 and 15, raising short-term concerns about the company's business outlook.

Meanwhile, Chinese stocks listed in the U.S. continued their strong rebound. The Nasdaq Golden Dragon China Index rose 0.12%. iQIYI surged 17% due to the popularity of its new drama "All is Well." Xunlei jumped 37.56% following the 20% limit-up of its investment target, Shixin Innovation. In the new energy vehicle supply chain, NIO and Xpeng both gained more than 1%, while BYD became a market focus due to its IPO progress.

The surge in Chinese stocks can be attributed to several factors. The recent policy adjustments by the Chinese government, aimed at enhancing content creation and innovation in the broadcasting sector, have provided a positive outlook for companies in this industry. The implementation of measures such as the "content renewal plan" and the optimization of television drama content review processes are expected to boost the performance of companies like iQIYI and Xunlei.

Additionally, the announcement by Novo Nordisk of a nearly 50% reduction in the out-of-pocket price of its diabetes drug Ozempic to $499 per month has had a significant impact on the pharmaceutical sector. This move, in response to U.S. drug price control policies, aims to expand patient coverage and has led to a surge in the stock prices of companies like Goodrx, which partnered with Novo Nordisk to supply the drug in the U.S. market.

As the Jackson Hole symposium approaches, market interpretations of Federal Reserve Chairman Jerome Powell's speech will be a major catalyst for short-term volatility. Investors are closely watching for Powell to emphasize the impact of labor market weakness on policy direction, rather than focusing solely on inflation data. The progress of the U.S.-Russia-Ukraine three-way talks will also determine the direction of risk appetite, with potential breakthroughs alleviating global supply chain tensions and conversely, a stalemate increasing demand for safe-haven assets.

In investment strategy, Morgan Stanley advises investors to focus on financial and consumer sectors that benefit from a low-interest-rate environment, while being cautious of energy price volatility's impact on inflation expectations. For technology stocks, short-term valuation adjustments are nearing completion, and investors should wait for quarterly earnings to confirm growth prospects before reallocating.