Super heavy bonus! The central bank announced that it will cut the required reserve ratio by 0.5 percentage points, and 15 public equity companies urgently interpreted it!

On January 24, the People's Bank of China announced that it would lower the deposit reserve ratio by 0.5 percentage points on February 5 to provide the market with long-term liquidity of approximately 1 trillion yuan. , the rediscount rate is 0.25 percentage points.

This is another comprehensive RRR cut since September 2023. In terms of magnitude, it is also larger than the 0.25 percentage point in September 2023. It shows the determination of the central bank to release liquidity to stabilize growth and stabilize expectations.

On the market, the three major A-share indexes staged a "V" shaped rebound today. As of the close, the Shanghai Stock Exchange Index rose 1.8% to close at 2820.77 points, the Shenzhen Component Index rose 1% to close at 8682.19 points, and the GEM Index rose 0.51% to close at 1696.19 points. More than 4,000 stocks in the two cities rose, and northbound funds sold a net 539 million yuan. In terms of sector themes, diversified finance, securities, Shanghai state-owned enterprise reform, and stocks with Chinese prefixes were among the top gainers; sectors such as BC batteries, semiconductors and components were in the green.

So, how much impact will the RRR cut have on the market? Can A-shares stage a reversal? What investment opportunities are worthy of attention? In this regard, reporters from China Fund News interviewed Boshi, CITIC Prudential, Pengyang, Debon, Great Wall, Rongtong, Industrial, Chuangjin Hexin, HSBC Jinxin, Nuoan, Xinyuan, Cathay Pacific, China Merchants, Dacheng, ABC-CA, etc. 15 fund companies.

These fund companies said that this RRR cut exceeded market expectations and would not only expand loan demand in the real economy, but also boost confidence in the stock market and help restore risk appetite.

A larger-than-expected RRR cut is expected to boost market confidence

Regarding this RRR cut, many fund company investment researchers believe that this RRR cut exceeded market expectations in terms of timing, magnitude, and release method. This RRR cut will help stabilize market expectations for monetary policy, reduce the financing costs of financial institutions and the real economy, and help stabilize the capital market.

"The current reduction in the reserve requirement ratio shows that the countercyclical adjustment policy has begun to take effect. Monetary easing and the release of 1 trillion yuan will maintain sufficient market liquidity. In conjunction with fiscal easing, special bonds and government bonds can be issued as soon as possible in the first quarter; structural interest rate cuts will also reduce "Zhunyi Yiyi plays a two-pronged role, which is not only conducive to expanding loan demand in the real economy, but also conducive to boosting stock market confidence and helping to restore risk appetite." said Li Zhan, chief economist of the Research Department of China Merchants Fund.

Regarding the impact of the RRR cut, Boshi Fund said that RRR cut is one of the monetary policy measures to deal with insufficient economic demand. Considering the current economic and corporate profitability situation, the market has strong expectations for monetary policy easing in the near future. This RRR cut will help stabilize market expectations for monetary policy, reduce the financing costs of financial institutions and the real economy, and help stabilize the capital market.

CITIC Prudential Fund stated that the "reduction in reserve requirements and interest rates" at this time has the following purposes: first, to guide the LPR to continue to decline and strengthen the effectiveness of credit support entities; second, the Spring Festival is a period when the liquidity of the banking system is relatively tight, and residents have a greater demand for cash. At this time, lowering the reserve requirement ratio and investing long-term funds will help to stabilize the capital fluctuations before and after the Spring Festival and stabilize the liquidity of the financial market at the end of the year and the beginning of the year. Third, the capital market has been highly volatile recently, and the society has called for the introduction of strong measures at the policy level. Higher, the central bank announced the policy on the spot at the press conference in response to market concerns.

Great Wall Fund said that subsequent adjustments to the deposit reserve ratio and re-lending and re-discount rates will help push the LPR downward and boost credit demand. In terms of the capital market, it still needs to be observed whether policies can be continuously introduced and whether market sentiment can reverse and other factors.

Hongde Fund stated that the timing and magnitude of this RRR cut far exceeded market expectations. In early January, the market expected the central bank to cut interest rates and reserve requirement ratios. However, after the MLF on January 15 and the 1-year and 5-year LPR on January 22 remained unchanged, the market expectations for an interest rate cut have been disappointed. Today, the central bank suddenly announced a reduction in reserve requirements and a 50BP cut in the deposit reserve ratio, once again rekindling the market's expectations for monetary policy. The central bank's unexpected reduction in reserve requirements at this time is expected to help the economy pick up, boost market confidence and alleviate pessimism.

Dacheng Fund also said that this RRR cut is like a "timely rain", exceeding expectations in terms of timing and magnitude, which will help stabilize capital market confidence, improve market expectations, and help economic recovery.

At present, there is still the problem of insufficient effective demand in the country, with weak inflation expectations and high real interest rates, which constrains the business vitality of enterprises. This RRR cut is 50bp, the largest reduction in the past two years, and will provide the market with long-term liquidity of approximately 1 Trillion yuan, reducing bank capital costs, coupled with structural interest rate cuts (relending to support agriculture and small businesses, and rediscount rates from 2% to 1.75%) will help promote the downward trend of LPR. On the one hand, it will help reduce the actual value of enterprises. On the other hand, it will also help reduce residents’ debt pressure and boost economic vitality.

“The most direct impact of this RRR cut is to provide approximately 1 trillion yuan of liquidity to the market, to a large extent alleviate the tight liquidity situation before and after the Spring Festival, and ensure a smooth transition of funds before and after the Spring Festival; at the same time, it also reduces the risk of liquidity bias. The capital market fluctuations caused by the tightening are conducive to repairing the recent large-scale adjustments caused by the failure of interest rate cut expectations." Gan Jingyun, a macro analyst at Chuangjin Hexin Fund, said that from a fundamental point of view, the current domestic economy has not yet completely bottomed out, and the strength of repairs Weak, low inflation continues, and monetary policy will not be too relaxed, so liquidity support from loose money is needed.

Shen Chao, a macro and strategy analyst at HSBC Jintrust Fund, said that this RRR cut is an important signal to strengthen the policy of stabilizing growth, and the single release of trillions of liquidity also shows that this stabilization of growth is stronger than the previous one. At present, there are still twists and turns on the road to macroeconomic recovery. This RRR cut will help increase financial institutions' stable funding sources and reduce bank liability costs. It will also help banks increase capital investment in the real economy and reduce the financing costs of the real economy, thus consolidating the economy. The trend is improving. For the market, the impact of RRR cuts on the stock market has been generally neutral from a historical perspective. However, the stock market is currently at a historically low range. Stabilizing growth policies such as RRR cuts can help reverse the market's pessimistic expectations. Therefore, this RRR cut has a positive impact on the stock market. Influence.

Helps to repair stock market valuations

Positive and optimistic about the A-share market outlook

This RRR cut will help restore stock market valuations, and many investors are optimistic about the market outlook for A-shares.

Cathay Fund said that for the A-share market, this RRR cut has increased the intensity of policies to stabilize growth and will help restore market confidence. This RRR cut is similar to that in February 2016 and January 2019. It is relatively good in the short term for growth stocks that have been oversold recently. Historical data shows that since 2016, the central bank has made a total of 17 RRR cuts (not including this one). On the first trading day after the announcement of the RRR cut, the Shanghai Composite Index rose 10 times, with a probability of rise of nearly 60%. Among them, there were 10 comprehensive RRR cuts (not including this one). On the first trading day after the RRR cut was announced, the Shanghai Composite Index rose 6 times. For the bond market, this RRR cut can temporarily alleviate the pressure on banks' liability side and is relatively positive for the market as a whole.

The Fixed Income Research Department of Industrial Fund also said that in terms of the equity market, the performance of the A-share market after historical reserve requirement ratio cuts has a greater correlation with the market's position. The current market valuation and risk premium are at historically low levels, and risks have been released to a greater extent. Therefore, the RRR cut is expected to play an important role in stabilizing market confidence. Combined with previous statements from the National Council on the protection of the A-share market, we believe that the market is currently at the bottom area. With the successive introduction of top-down stabilization policies, the market is expected to gradually stabilize at the bottom and perform in rotation.

Xinyuan Fund said that in the equity market, the RRR cut will boost market confidence in the short term, but the long-term market trend will be less affected by the RRR cut. In the short term, the market may continue to fluctuate at low levels, but after the Spring Festival, especially in March and April, the equity market may improve to a certain extent. First of all, according to the situation of the local two sessions, the probability of maintaining the GDP policy target of 5% this year is relatively high. 5% is significantly higher than the 4.1% compound growth rate in the two years of 2022-2023, which means that finance must make large-scale efforts. After the Spring Festival, government bonds Centralized issuance, project construction launched in batches, policy paths may become clearer, and the A-share market may be boosted. Secondly, the next move of the Federal Reserve in March and April will also be clearer, and the adverse impact on A-shares will also be reduced. Therefore, the equity market is more likely to improve in March and April.

Regarding the A-share market outlook, Pengyang Fund said that from the perspective of the stock market, on the one hand, we must pay attention to the impact of market sentiment on the RRR cut, which will help alleviate the irrational selling pressure caused by the continuous decline in the market; on the other hand, we must pay attention to whether the policy Will quantitative changes lead to qualitative changes? Does this mean that the attitude of monetary policy may change? Especially if funds can continue to loosen in the future and risk-free interest rates decline, it will have a more direct positive effect on high dividend strategies and have a positive impact on earnings and growth expectations. Sensitive core assets will also have a certain supporting role. In addition, convertible bonds, as assets with certain equity attributes, will also benefit from loose liquidity and will be a beneficial tool for investors to allocate assets in the future.

Deppon Fund stated that this RRR cut and interest rate cut exceeded market expectations in terms of the timing of the announcement and the extent of the cut, reflecting the current central bank's care for the real economy. From an intuitive point of view, it provides 1 trillion yuan of liquidity support to the market and directly drives the reduction of social financing costs. Looking at a deeper level, the current market sentiment is sluggish, which can boost market confidence at this time and at the same time provide better coordination with subsequent fiscal policies. Looking forward to the market outlook, the pessimism of A-shares may be restored after the RRR cut, and the market is expected to stabilize.

Gan Jingyun, a macro analyst at Chuangjin Hexin Fund, said that the overshoot caused by tight liquidity in the short-term market will be gradually restored with the release of liquidity from the RRR cut, confidence in maintaining loose monetary policy, and the inflow of marginal funds. . From the perspective of trading indicators, the current market has entered an oversold state, the price-performance ratio of stocks and bonds continues to be optimistic about equity, and the winning rate and odds of allocating A shares in the future are both high.

Noah Fund said that "equilibrium" funds have begun to continue to exert force, and the supporting role is obvious. The current market valuation may have been at a relatively extreme level in history. Domestic macro policies are also in an observation period. Overseas factors have no actual impact. Under the combined effect of the above factors, the market may enter a monthly-level recovery trading window period, and will still show the characteristics of transaction-oriented capital behavior.

ABC-CA Fund even believes that the current market has fully priced in internal and external risks, and the A-share market is still in a position with a high implicit risk premium. The equity risk premium of the CSI 300 is still around 2 times the standard deviation. The broad-based index and the valuation of most industries are at a low level, with large room for upward recovery. The domestic economy is expected to gradually stabilize, and we are optimistic about medium- and long-term investment opportunities. This is the layout stage.

You can pay attention to AI, semiconductors,

Pharmaceutical, non-bank financial and other sectors

Regarding the bullish sectors, Gan Jingyun, a macro analyst at Chuangjin Hexin Fund, said that the RRR cut is generally beneficial to the valuation increase of equity assets and has a relatively greater impact on small-market stocks; the RRR cut is conducive to improving liquidity expectations and is good for companies that are greatly affected by liquidity. The sector is also a recent oversold target and has the conditions for an oversold rebound. It mainly includes technology growth TMT, small and medium-sized market capitalization stocks, Hang Seng Technology, etc. You can pay attention to consumer electronics and chips that are logically pointed to the supply side of the inventory cycle. The policy bias has structural high prosperity. high-tech, traditional Chinese medicine, etc.

In addition, Gan Jingyun said that if loose monetary policies such as RRR cuts and subsequent reductions in comprehensive financing costs promote credit easing, it will help improve growth expectations, so the procyclical sector will also benefit. Judging from historical experience, the RRR cut will mostly boost procyclical sectors such as real estate, finance, and building materials. You can pay attention to coal, electricity, infrastructure, etc., which have both performance scarcity and policy-friendly characteristics in the procyclical period.

Great Wall Fund said that positive changes in policy are expected to break the negative feedback on the capital side, and the market is expected to gradually start repairing from the bottom. After the correction of the sharp decline, sectors that were oversold in the early stage and have industry catalysts and whose performance is expected to exceed expectations deserve attention, such as AI core hardware, MR, semiconductors, securities firms, etc.

Noah Fund said that in the past two and a half years, the "stay away from heavy institutional positions" transactions have continued to ferment, eventually evolving into a "dumbbell strategy" with significant excess returns in 2023. However, the "dumbbell" is not a stable strategic structure. In 2024, with the internal market changes The indiscriminate adjustment of absolute return funds, the rebalancing and lightening of positions, and the underpinning role of quasi-"levelling" funds have made the market style extremely differentiated since 2023. Currently, high-quality blue chips already have relatively high cost performance and are at the margin of liquidity. With the support of factors such as improvement and relatively stable performance, we can focus on high-quality blue chips in the technology, medicine, and new energy sectors.

ABC-CA said that in terms of structure, in the short term, it is recommended to focus on the high-dividend sectors in the initial stage of economic recovery and the high-tech growth direction that benefits from industrial trends.

On the one hand, considering that the domestic economy and corporate profits have just entered the recovery stage, and overseas liquidity has not yet been fully relaxed, coupled with the economic recovery, the Hershey Dividend Index can often bring absolute returns, and the high dividend sector still has a medium and long-term bottom position Allocation value, focusing on coal, banks, petroleum and petrochemicals, operators, electricity, transportation, etc.

On the other hand, the RRR cut will better support key areas and weak links, especially technology-based companies driven by strong national policy support and industrial trends in recent years. In the medium to long term, the direction of technological growth has growth potential. Product breakthroughs and innovations will increase performance and increase growth flexibility. It is recommended to focus on AI+, robots, intelligent driving, satellite Internet, consumer electronics, etc.

Li Zhan, chief economist of the Research Department of China Merchants Fund, said that in 2024, A-shares are expected to still be dominated by shocks and stabilization, the overall market safety margin is high, and there will be structural opportunities. In 2024, macro monetary and fiscal policies will be launched in a timely manner, endogenous growth will resume, and the current overall valuation of A-shares is already very low. The valuation percentiles of important indexes are already lower than the past several market bottoms. The valuation of the GEM is even at a historical bottom. etc. Indexes such as equity risk premium rates are also in extremely low value ranges, with a high margin of safety. We can focus on seizing structural opportunities such as high dividend dividend strategies, technological innovation, reversal of consumption difficulties and supply-side reform.

It is expected that there will be downside in the short term in the future.

The long end may continue to remain volatile

Regarding the bond market, Xinyuan Fund said that in the bond market, it is expected that there will be downward space in the short-term in the future, while the long-term may continue to remain volatile and the curve will become steeper. The two most important functions of the RRR cut may be to boost confidence in the equity market and prepare for the large-scale issuance of government bonds. Governor Pan said that monetary policy is effective in maintaining reasonable and sufficient liquidity, supporting large-scale centralized issuance of government bonds, and supporting the centralized construction of projects. Sufficient space means that funding will be guaranteed during the large-scale issuance of government bonds. The stability of capital opens up space for short-term easing, but the issuance of government bonds and the concentrated construction of projects are not very friendly to the long-term. It is expected that bond market yields will open up downside in the short-term but remain volatile in the long-term.

Pengyang Fund stated that under the current background that the money market is highly dependent on the central bank's open market operations, the reduction of the reserve requirement and the release of long-term funds are aimed at easing market volatility before the Spring Festival and supporting the bond issuance in February, which will have a negative impact on the short-term financial market. It is beneficial and will also help to cooperate with the credit extension of commercial banks in the first quarter and support the smooth and healthy operation of the real economy.

Looking ahead to the next year, if bondsThe issuance scale has increased significantly, and it is expected that new policy tools will be needed for hedging, and the use of other monetary policy tools cannot be ruled out. We remain optimistic about the mid-term performance of the bond market. After the RRR cut, we expect that policy interest rates will still have room to fall in the future. If cashed out, short- and medium-duration interest rate assets will generate direct returns, and in the medium term, duration strategies are expected to perform better.

Wang Chao, director of the Fixed Income Department of Rongtong Fund, said that based on the current situation and in the medium term, the bullish trend in the bond market may continue. But the short-term gains are exhausted, and the long-term upside risks may outweigh the downside opportunities. In the short term, under the low odds and high congestion in the long term, the superimposed winning rate variable is not beneficial enough, and there may be a risk of upward shock in the short term. The short-term overall reduction in duration is positive, and the coupon leverage strategy may be better than the duration strategy.