Global capital markets review: During the week of October 31 to November 7, 2025, the U.S. financial environment remained strained due to the ongoing government shutdown. According to ICAP data, the overnight general collateral repo rate fluctuated sharply between 4.14% and 4.24%, significantly higher than the Fed’s 3.9% interest on excess reserves and above the federal funds target range of 3.75%-4.00%. This financial strain pushed interest rates higher, dampening risk appetite and leading to a broad decline in global equity markets. However, the CSI 300 and Hang Seng Index posted positive returns, reflecting strong investor confidence in Chinese assets.

1) Fixed income: The 10-year U.S. Treasury yield remained stable at 4.11%, while the U.S. dollar index edged down 0.18% to 99.5, nearing 100. 2) Equities: Most A-share indices rose, with the Shanghai Composite and Hang Seng Index leading gains. Globally, apart from Brazil’s stock market and China-related indices (CSI 300 and Hang Seng), other markets declined. 3) Commodities: Gold rose 0.33% in USD terms, while crude oil fell 1.65%.

Global fund flows: As of November 5, 2025, both domestic and foreign capital flowed into Chinese equities. Overseas active funds saw outflows of $618 million, while passive funds recorded inflows of $2.631 billion. Foreign investors injected $2.014 billion, and domestic investors added $6.898 billion. Money market funds attracted inflows, particularly in developed markets. U.S. fixed-income funds saw inflows of $14.59 billion, while equity funds in the U.S. and China drew $21.11 billion and $9.64 billion, respectively. Relative inflows favored Chinese fixed-income and equity funds, with emerging markets outperforming developed ones. Sector-wise, U.S. tech, utilities, and materials saw inflows, while Chinese equities saw strong inflows into tech, finance, and healthcare.

Global asset valuation metrics: As of November 7, 2025, the Shanghai Composite’s P/E ratio ranked second only to the S&P 500 at the 89.5th percentile over the past decade, though absolute valuations for the CSI 300 and Hang Seng H-shares remained below U.S. levels. Brazil’s Bovespa, CSI 300, and Shanghai Composite showed higher equity risk premium (ERP) percentiles, indicating better allocation value for Chinese equities. Risk-adjusted return percentiles for the S&P 500 and Nasdaq fell to 42% and 38%, respectively, while the CSI 300’s rose to 83%. Developed and emerging markets saw marginal declines, while GSCI precious metals surged to the 97th percentile.

Global risk sentiment: The S&P 500 closed at 6,728.80, below its 20-day moving average, with implied volatility edging up. The put-call ratio rose to 1.19 (from 1.02 on October 31), signaling heightened hedging demand. In A-shares, open interest for CSI 300 November call options above 4,650 dropped sharply, reflecting caution. Implied volatility for the CSI 300 showed a notable dip in the -100 to +200 strike range, underscoring market wariness.

Economic data: U.S. existing home sales rose 4.1% YoY in September, marking five months of improvement, while M1 and M2 growth accelerated. China’s October services PMI improved slightly, but manufacturing PMI dipped to 49, with weaker trade data. Fed rate-cut expectations rose, with a 66.9% chance of a 25bps cut in December (up from 63%) and an 80.8% probability of rates falling to 3.5%-3.75% or lower by January 2026. Key upcoming data include China’s October PPI/CPI and U.S. CPI/PPI.

Risks: Short-term asset price volatility may not reflect long-term trends; deeper-than-expected recessions in Europe/U.S.; major U.S. policy shifts under Trump’s administration.