On Friday, the sudden spike in the A-share market caused a buzz, leading some to speculate that this unexpected rise was triggered by rumors of "Wall Street traders suddenly going long on options for A-shares." This comes as investors scrutinize the unusual activity surrounding specific financial instruments.

Particularly, two options—CHAU (which aims for double the performance of the CSI 300 ETF) and YINN (a threefold bet on the FTSE China ETF)—overwhelmingly drew a significant influx of investments, contrasting with their typically low trading volumes.

Foreign Investments Focused on The A-Share Surge

Listeners familiar with options trading know that these financial tools allow for "limited losses and unlimited gains." This unique characteristic makes options an enticing way for traders to leverage their positions on not just an increase, but a substantial surge in prices.

However, analyzing the timing provides less convincing support for the notion that Friday's increase was directly spurred by these unusual option purchases

In fact, the notable trading spike was primarily concentrated on the preceding MondayEven accounting for China’s often reticent market reactions, the notion that it would take until Friday to register these developments feels far-fetched.

A more likely explanation for foreign capital's sudden bullishness on A-shares hinges on speculation regarding an impending major stimulus announced at significant meetings in DecemberThe rationale is straightforward: 2025 marks the conclusion of the 14th Five-Year Plan, positioning it as a critical year for the economy, which has already demonstrated promising results in previous years.

The anomalous trading patterns in CHAU and YINN on that Monday could be interpreted as an early indication or reaction to a "preemptive notification" of impending meetingsHowever, it appears that domestic institutions remain skeptical of such optimistic forecasts.

The recent surge in the A-share market reflects more than speculative bets on potential stimulus; it signals a validation of the government's tangible efforts to enact change.

On Thursday evening, the Ministry of Finance announced plans to lead government procurement initiatives providing a 20% price review discount on domestically produced goods

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This preferential treatment extends to foreign enterprises as long as their products feature at least 80% local content.

This strategy bears similarities to the impact of imposing tariffs aimed at protecting domestic industriesHowever, when juxtaposed with the blunt approach of tariff implementation, this move comes across as significantly more measured and amicable.

While labeled as a "proposed" measure, the likelihood of implementation appears quite highIn contrast to various speculations that lack concrete grounding, these actionable plans earned a more favorable reception from the market.

This marks yet another resolute countermeasure following previous actions such as the cancellation or reduction of export tax rebates, calls from major associations to resist American chips, and prohibitions on exporting essential metals to the United States

The potency and scope of this recent announcement seem to surpass earlier initiatives.

Despite being strategically supported as a priority industry, the reality of "domestic substitution" has proven less favorable for many small and medium-sized enterprises engaged in this spaceThe harsh truth is known mostly to those directly involved or those who have closely scrutinized the situation.

Take, for instance, domestic softwareWhile a handful of software products like WPS and Kingdee are familiar to consumers, the majority of domestic software lacks a competitive edge in the marketMany firms have for years been entrenched in utilizing foreign software, and the incurred sunk costs have hindered them from considering alternatives that offer comparable performance and pricingAdditionally, existing domestic software typically lags behind the quality of foreign counterparts.

With a stagnant market, further research and iteration become increasingly challenging for domestic companies attempting to catch up with established foreign software enterprises

Without erecting trade barriers, the chances of closing this gap remain slim, rendering the concept of "domestic substitution" meaninglessThis encapsulates the previously unspoken challenges prevalent in this sector.

Understanding these challenges sheds light on the significance of the recent "20% price review discount." It embodies a practical approach to invigorating the domestic market amidst external pressures.

What Are the Signals for The Next Major Stimulus?

Unlike previous meetings that heavily managed expectations ahead of time, the impending significant meeting in December has seen little in terms of anticipatory communicationsDiscussions among institutions focused on the anticipated deficit rates for the upcoming year, and even those have failed to generate much traction lately.

Nevertheless, as the crucial meeting approaches, state media has unexpectedly begun to drop hints

The unavoidable contrast between the average retail investor and professional investors continues to exist; retail investors frequently underestimate the information relayed by official media and miss critical insights, often leading to discrepancies in expectations.

Much of the prior discourse outlined last month’s policy addressing the national debt at 12 trillion yuan, with a final section poised to reflect on China’s fiscal standing in comparison to international peersThe media discussed debt ratios: G20 countries sitting at 118.2%, G7 countries at 123.4%, while China remains at a comparatively low 67.5%. Additionally, the budget deficit ratio below 3% stands in stark contrast to other nations.

Despite never explicitly stating concerns over deflation, hints of an intention to stimulate a rise in prices were clearly evident: a flexible approach to monetary policy next year is anticipated, with no inherent fears of inflation, possibly even advocating for a target to elevate the consumer price index (CPI) moving forward.

Structured monetary policy could encompass measures like targeted reductions in interest rates

While comprehensive measures such as broad rate cuts can be used sparingly to avoid unintended consequences, more precise adjustments can increase the effectiveness of monetary interventions.

The central bank has also indicated a renewed focus on actively purchasing government bonds in the secondary market, signaling a strong preference toward buying.

Enhancing transparency in monetary policy relates to improving "expectation management." This strategy could aid in mitigating excessive volatility in markets that typically disconcert short-term traders but favor the majority of general investors.

Improving the efficiency of monetary policy transmission addresses a long-standing issueFor instance, a prior reduction in reserve requirements meant to inject 500 billion yuan into the economy saw that capital stagnate within the banking system for six months before reaching broader market channels