The recent severe fluctuations abroad have involved a carry trade unwind (liquidation of interest rate arbitrage trades), but the main factor is the result of deleveraging.
Due to the narrowing interest rate differential between Japan and the US, which has driven up the Japanese yen, the carry trade unwind is expected to continue, meaning there will be pressure to sell off US dollar assets and return funds to Japan.
The carry trade unwind has, on the one hand, prevented short-term US Treasury yields from decreasing, and on the other hand, has led to stagnant earnings per share (EPS) for Japanese stocks when valued in yen, affecting the performance of the Japanese stock market.
The suppressed performance of the Japanese stock market may lead some global Asia-Pacific funds to temporarily choose Chinese assets.
If these global Asia-Pacific funds choose Chinese assets, they are likely to select industries with long-term growth potential rather than traditional industries with high valuations.
If there is a net inflow of funds into certain industries, it will further drive a change in the style of the A-share market.
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