The Chinese stock market has experienced significant warming since August, with the Shanghai Composite Index gaining 6.39% during the month and accumulating a 13.42% increase year-to-date. On August 27, the Shanghai Composite Index initially surged before plunging in late trading, ultimately closing down 1.8%, marking the largest single-day decline in nearly five months.

Citibank believes that the recent rally in Chinese stocks has been primarily driven by liquidity factors, with household deposit "migration" potentially still in its early stages. The bank notes that regulators are not rushing to tighten liquidity but will control the pace of the rebound, suggesting that Chinese stocks will not transition "from summer to autumn" just yet.

In a report released on Tuesday, Citibank posed the question: "Chinese stocks have experienced a hopeful summer, but are we now sensing the scent of autumn?" The report argues that three major macro catalysts remain ahead, including the further rollout of incremental measures such as real estate support, continued liquidity benefits, and positive sentiment from major events including parades, the National Day Golden Week holiday, APEC summit, and China-US trade negotiations.

The report indicates that as deposit rates trend downward, the reallocation of maturing term deposits may become more certain in the short term. Based on three-year deposit terms, the report estimates that approximately 5.5 trillion yuan could be available for reallocation in 2025.

The report also suggests that the significant stock market rally may delay China's reserve requirement ratio cuts. If necessary, "national team" activities and support provided by the People's Bank of China through swap facilities and stock repurchase additional lending could become more targeted.