Event: on December 3, Premier Li Keqiang gave a “Preview” of the RRR reduction in a meeting with Georgieva, President of the International Monetary Fund, It is proposed that “we will continue to implement prudent monetary policy, maintain reasonable and sufficient liquidity, formulate policies around the needs of market subjects, reduce reserve requirements in real time, increase support for the real economy, especially small, medium and micro enterprises, and ensure the stable and healthy operation of the economy”. On December 6, in order to support the development of the real economy and promote the steady decline of comprehensive financing costs, The people’s Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.5 percentage points on December 15, 2021 (excluding financial institutions that have implemented the 5% deposit reserve ratio). After this reduction, the weighted average deposit reserve ratio of financial institutions is 8.4%.
Several understandings of this RRR reduction: This RRR reduction is relatively direct and rapid. It is a comprehensive RRR reduction, indicating the government’s determination to continue to support the real economy and the financing of small, medium and micro enterprises. We believe that this RRR reduction is a routine operation of monetary policy. There are several main reasons for the RRR reduction: 1 The upstream cost side pressure is still superimposed on the macroeconomic downturn, and the central bank lowered the reserve requirement to support the real economy. At present, although the tight balance between supply and demand of raw materials in the upstream has eased, it still takes time for PPI to go down, and the weak demand side hinders the transmission of upstream raw material price increases to the downstream, putting pressure on many middle and downstream small and medium-sized enterprises. At the same time, the downward pressure on the economy has increased, and the downward real estate investment has dragged down the economy. With the improvement of the epidemic situation, the subsequent export support may decline. This RRR reduction is also a continuation of the RRR reduction in July, which is intended to reduce the financing cost of enterprises to alleviate the pressure. 2. The RRR reduction stabilized market expectations, alleviated market concerns about the economic downturn, the spread of defaults of real estate enterprises and bank risks, and boosted market confidence. 3. The released funds are used to return MLF due in December and release liquidity for the first quarter. 4. Cooperate with the Politburo working meeting in December to reflect “prudent monetary policy, flexibility and moderation”.
The RRR reduction is not directly related to the trend of a shares, but this RRR reduction brings upward momentum to a shares. 1. The RRR reduction is not necessarily related to the rise of the market index, but it has a certain law. The short-term trend probability of the market at the time of RRR reduction is consistent with the original trend of the market, and will not change greatly due to RRR reduction; 2. The impact of this RRR reduction on the market is optimistic. At present, the macroeconomic downturn and some tracks have been fully expected, which are important factors restricting the market upside. However, the market has abundant liquidity and the money credit cycle is still relatively loose, which supports the market. Therefore, the market style rotates rapidly and the structural differentiation is large. The sectors with large decline in the early stage, such as real estate, food and beverage and computer, have accumulated certain kinetic energy. The RRR reduction will release a strong signal of steady growth, or provide power for the rebound of the sector. At present, the military industry and new energy industry chain with high prosperity will continue to dominate under the expected improvement of liquidity.
Impact of RRR reduction on each plate: 1 In the resumption of trading, the central bank lowered the reserve requirement nearly 25 times, and the sectors such as household appliances, food and beverage, electrical equipment, TMT and national defense industry performed well. After the reduction, the short-term rise and fall have ranked high in various industries for many times. 2. At different market stages, in the case of RRR reduction, the sectors with high prosperity had better resistance to decline or higher growth.
Configuration suggestions: 1 New energy industry chain, chip, national defense and military industry and other industries with high prosperity at present (strategic configuration); 2. Finance, computer, food and beverage, real estate and other industries that benefit from the favorable promotion of standard reduction in the short term and may have periodic rebound opportunities (periodic view) can pay attention to the cross-year market.
Risk tip: the risk that the policy is not as expected.
