Good morning. Let's start with a look at international markets.
On the evening of the 20th, overseas natural gas prices surged. The near-month U.S. natural gas futures contract at one point soared over 28%.
Fundamentally, some institutions are forecasting a turn to colder weather. He Haoyun, a senior researcher at CITIC Futures Research Institute, stated that the recent synchronized strength in overseas natural gas prices is primarily driven by weather factors. Expectations for colder-than-previously-expected temperatures in Europe from mid-to-late January caused European gas prices to surge last week, widening the price gap with the U.S. and opening arbitrage opportunities further. With nearly 10 million tonnes of new LNG export capacity scheduled to commence operations in the U.S. in the first quarter, the rise in European prices is boosting expectations for U.S. export demand. This week, the U.S. National Oceanic and Atmospheric Administration also revised down its end-of-month temperature forecasts for the U.S., with the eastern regions facing a widespread cold wave. Against the backdrop of strengthening demand both domestically and for exports, U.S. gas prices are expected to trade with a firm bias in the short term.
Additionally, the spot price of London gold hit another historic high, while New York silver futures prices surged 8.18% intraday.
Fundamentally, Poland's central bank stated on Tuesday that it has approved a plan to purchase up to 150 tonnes of gold, which would increase the nation's gold reserves to 700 tonnes. In a statement, the central bank said Poland would rank among the top 10 countries globally by gold reserves. According to a report, former U.S. President Donald Trump stated that his objective to control Greenland "absolutely will not change" and did not rule out the possibility of seizing it by force. Trump clarified his aim on social media: to claim sovereignty over Greenland from NATO ally Denmark. Just a day earlier, Trump declined in an interview to specify whether he would use force to take Greenland, saying "no comment." The European Parliament announced on the 20th that it is freezing the approval process for the trade agreement reached with the U.S. last July. This is seen as the EU's first response to Trump's latest pressure tactics. Trump announced on social media on the 17th that a 10% tariff on goods from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland would be imposed starting February 1st, with the rate scheduled to increase to 25% from June 1st until an agreement is reached on the U.S. "comprehensively and thoroughly purchasing Greenland." European Central Bank President Christine Lagarde said on Tuesday that mutual trust between Europe and the U.S. is being damaged by political tensions, but this will accelerate the long-stalled process of European integration.
At the close, international gold prices reached new highs. New York gold futures rose over 3%, London spot gold gained over 2%, and New York silver futures climbed over 6%.
A "triple whammy" for stocks, bonds, and the currency! Markets witnessed a return of the "sell America" trade pattern. On the evening of January 20th, Danish pension fund AkademikerPension stated it plans to completely divest its holdings of U.S. Treasury bonds by the end of the month, citing concerns about "non-negligible" credit risks stemming from the policies of U.S. President Donald Trump. Anders Schelde, Chief Investment Officer of AkademikerPension, said on Tuesday: "Fundamentally, the U.S. can no longer be considered a high-quality credit; in the long term, the U.S. government's finances are not sustainable." Schelde noted that AkademikerPension held approximately $100 million in U.S. Treasuries as of the end of 2025. Bridgewater Associates founder Ray Dalio warned that Trump's policies could trigger a "capital war" as countries and investors reduce investment in U.S. assets. Escalating trade tensions and increasing fiscal deficits could undermine confidence in U.S. debt, potentially prompting investors to shift towards hard assets like gold, which he recommends as a crucial hedge.
At the time of writing, U.S. stocks, bonds, and the dollar all declined during the session. The three major U.S. stock indices closed sharply lower, with the Dow Jones Industrial Average down 1.76%, the S&P 500 falling 2.06% (marking its largest single-day drop since last October), and the Nasdaq Composite declining 2.39%. The U.S. Dollar Index, which measures the dollar against a basket of six major currencies, fell 0.41% on the day to settle at 98.642. The yield on the benchmark 10-year U.S. Treasury note rose 6.76 basis points to 4.2906%; the 2-year yield increased by 0.87 basis points to 3.5947%; and the 30-year yield climbed 7.92 basis points to 4.9158%. Notably, the 30-year and 10-year yields hit their highest levels since early September last year during the session. Bond yields move inversely to prices, so rising yields indicate falling bond prices.
The Shanghai Futures Exchange adjusted the trading margin requirements and price fluctuation limits for contracts related to copper, aluminum, gold, silver, and other futures. On the evening of January 20th, the Shanghai Futures Exchange issued a notice, broadly adjusting the trading margin ratios and daily price limits for contracts related to copper, aluminum, gold, silver, and other futures. According to the notice, starting from the close of settlement on Thursday, January 22, 2026, the daily price limit for listed copper futures contracts will be adjusted to 8%, with margin requirements for hedging positions set at 9% and for speculative positions at 10%. Similarly, the daily price limit for listed aluminum futures contracts will be adjusted to 8%, with hedging margins at 9% and speculative margins at 10%. Concurrently, the Shanghai International Energy Exchange made synchronous adjustments for international copper contracts. The daily price limit for listed international copper futures contracts will be adjusted to 8%, with hedging margins at 9% and speculative margins at 10%. For precious metals, the daily price limits for gold futures contracts AU2602, AU2603, and AU2604 will be adjusted to 16%, with hedging margins at 17% and speculative margins at 18%. For gold futures contracts AU2606, AU2608, AU2610, AU2612, and AU2702, the daily price limit will be adjusted to 15%, with hedging margins at 16% and speculative margins at 17%. For silver futures contracts AG2602, AG2603, and AG2604, the daily price limit will be adjusted to 17%, with hedging margins at 18% and speculative margins at 19%. For silver futures contracts AG2605, AG2606, AG2607, AG2608, AG2609, AG2610, AG2611, AG2612, and AG2701, the daily price limit will be adjusted to 15%, with hedging margins at 16% and speculative margins at 17%.
Analysts suggest the A-share market may enter a consolidation phase in the short term. Since the beginning of 2026, major A-share indices have risen significantly, with market sentiment noticeably improving. Several institutions predict that the potential scale of incremental funds for the full year could reach trillions of yuan. Where will these funds come from? What characteristics will the future market exhibit? Hua Xiang, an intermediate analyst for equity indices at Yong'an Futures Research Center, categorizes the incremental funds into active speculative capital and medium- to long-term funds. He noted that active speculative capital, represented by margin financing, saw inflows of 274.9 billion yuan in 2024 and 670 billion yuan in 2025, showing considerable volatility. The true stabilizing force for the market, however, comes from medium- to long-term funds such as insurance capital and public funds. Data shows that as of the third quarter of 2025, the balance of stocks and securities investment funds held by insurance capital reached 5.59 trillion yuan, a significant increase from 4.1 trillion yuan at the end of 2024 and 3.47 trillion yuan in 2023. The stock market value held by public funds also grew from 5.8 trillion yuan in 2023 and 6.77 trillion yuan in Q4 2024 to 8.99 trillion yuan in Q3 2025. Hua Xiang estimates that, excluding the increase in market value due to rising stock prices, the net inflow from insurance and public funds in 2025 was between 0.8 trillion and 1.2 trillion yuan each. Combined with other channels like foreign capital, the total incremental fund inflow for last year was between 2.3 trillion and 2.7 trillion yuan. For 2026, he expects medium- to long-term funds to continue flowing in at a relatively high level, bringing about 2 trillion yuan in incremental capital. Huang Siyuan, a macro researcher at Hongye Futures, analyzed the sustainability of capital entering the market from an institutional perspective. She emphasized that this wave of capital inflows is not a temporary phenomenon but is supported by solid institutional safeguards. In early 2025, six departments including the Central Financial Commission jointly issued the "Implementation Plan for Promoting Medium- and Long-Term Capital Entry into the Market." This year's CSRC system work conference also clearly stated the goal of全力构建“长钱长投”的市场生态 (building a market ecology for long-term capital and long-term investment). A series of targeted policy measures ensures that the inflow of incremental funds is a sustained process accompanying the optimization of the market ecosystem. Data indicates that by the end of 2025, various medium- to long-term funds collectively held approximately 23 trillion yuan in A-share circulating market capitalization, an increase of 36% from the beginning of the year. The scale of equity-focused funds grew from 8.4 trillion yuan at the start of the year to around 11 trillion yuan, evidencing the effectiveness of institutionally-guided capital inflows. Besides domestic capital, the return of foreign capital is also highly anticipated by the market. In the third quarter of 2025, the amount of domestic stocks held by overseas institutions and individuals increased to 3.5 trillion yuan, up from 2.9 trillion yuan at the end of 2024. In Hua Xiang's view, the role of foreign capital in the future lies somewhere between active speculative capital and medium- to long-term funds. Its inflows and outflows have a certain degree of persistence but are also susceptible to factors like overseas liquidity; historically, inflows have often accompanied RMB appreciation. Huang Siyuan believes that foreign capital is highly focused on China's new quality productive forces with global competitiveness, particularly technological assets like artificial intelligence, new energy, and biopharmaceuticals. China's increasingly clear "technology narrative" and the qualitative change of some industries from "catching up" to "running neck-and-neck" are attracting global capital focused on long-term growth. Simultaneously, the return of foreign capital will form a synergistic allocation force with domestic medium- to long-term capital. As institutional opening-up of the capital market deepens, foreign capital, as an important medium- to long-term force, plays a "value discovery" role that helps improve the pricing efficiency of high-quality assets, jointly providing solid support for the A-share market alongside domestic capital. Amid high market enthusiasm, the China Securities Regulatory Commission announced an increase in the margin requirement for margin trading from 80% to 100%, clearly signaling regulatory intent to guide the market from a "fast bull" to a "slow bull" market. Compared to the previous period of consecutive gains, the recent upward momentum in the market has also slowed. "The root of a structural slow bull market lies in the macroeconomic shift from high-speed growth to a high-quality development stage. The engines of economic growth are transitioning from traditional real estate and infrastructure to new growth points represented by technological innovation, advanced manufacturing, green energy, and consumption upgrades. This structural change at the macro level inevitably maps onto the capital market. Market differentiation will manifest in multiple dimensions: on one hand, differentiation among sectors and themes, with capital highly concentrated on tracks aligned with national long-term strategy and possessing genuine growth potential, such as AI and semiconductors, while some traditional sectors may face long-term valuation pressure. On the other hand, differentiation in capital flows, with incremental funds being more concentrated in core assets," Huang Siyuan said. Looking ahead, Huang Siyuan stated that valuations in many popular sectors are already at elevated levels, and the short-term market may enter a consolidation phase. The medium- to long-term upward trend for the overall market has not reversed, but the pace of gains may slow, with driving factors shifting from valuation expansion to a dual driver of earnings and valuation. "The 'good start' rally of 2026 has significantly exceeded expectations, with gains concentrated in specific sectors and driven more by news or sentiment, carrying relatively high uncertainty. With the increase in margin requirements, the market is likely to transition from 'front-running' to searching for more solid clues and more appropriate valuations. Subsequent focus should be on company earnings previews," Hua Xiang said.
