Core view
Looking forward to the future, we believe that under the influence of the approaching policy underpinning meeting, the A-share probability continues the shock repair trend, and the market is dominated by structural market. It is suggested to focus on three main lines.
Study and judgment of the general trend: the central bank gently lowered the reserve requirement and repaired the market shock
This week, the market was first restrained and then raised. On Monday, affected by the repeated epidemic and inflation expectations, the market ushered in a shock rebound. On Friday, the Shanghai stock index closed above the five-day moving average, above the 3200 point integer mark, but it was still suppressed by the ten day and ten day moving average.
In terms of valuation, the overall valuation of A-Shares is relatively low globally and has valuation advantages. With the continuous development of the steady growth policy, it will form a positive support for corporate profits and stock market valuation. With the gradual emergence of the utility of broad money, the valuation has an expansion foundation.
In terms of policy, although the central bank's overall RRR reduction is less than expected, it still plays a certain role in reducing social comprehensive financing costs and improving market risk appetite. In addition, the upcoming April Politburo meeting is the highest level meeting to deploy the focus of follow-up economic work, with high market attention. The probability of this Politburo meeting will continue the main tone of last year's central economic work conference and Politburo meeting, with the word "stability" at the head to support the economic operation in a reasonable range.
In addition, the Shanghai Economic and Information Technology Commission issued guidelines on the prevention and control of the epidemic situation of industrial enterprises returning to work and production, and actively supported enterprises returning to work and production. The first batch of enterprises to resume production include not only enterprises in key industries such as integrated circuit, automobile manufacturing, equipment manufacturing and biomedicine, but also many operation support and economic support enterprises. As an important production base in China, Shanghai was previously affected by the epidemic, which had a certain impact on the automobile and other related industrial chains. With the resumption of work and production, the pressure on related industries is expected to be gradually relieved, which is good for the stock market. Looking forward to the future, we believe that under the influence of the approaching policy underpinning meeting, the A-share probability continues the shock repair trend, and the market is dominated by structural market. It is suggested to focus on three main lines.
First, focus on the main line of steady growth. Internal and external disturbances have increased the downward pressure on the economy. As the main policy line, steady growth will remain the main market in the long run. It is suggested to pay attention to the new and old infrastructure that directly benefit from counter cyclical adjustment and the targets with outstanding performance and low valuation in the real estate sector.
Second, focus on the main line of large consumption. In terms of policies, the NSC will deploy policies and measures to promote consumption and comprehensively implement policies to release consumption potential; In terms of capital, the recent recovery in the issuance of public funds with consumption theme is expected to bring incremental capital into the market; At the company level, after the cost side pressure of leading companies is gradually relieved, it is expected to enjoy the dividend of profit elasticity repair in the medium and long term.
Third, pay attention to the large financial sector with favorable RRR reduction policies. The RRR reduction helps to optimize the capital structure of the financial machine pole. For the banking sector, the RRR reduction helps to slow down the cost of bank liabilities, support the performance, and pay attention to the undervalued core stocks with high asset quality. For the securities sector, the loose liquidity environment helps to boost the market risk appetite, and the low-level securities sector is expected to usher in the valuation repair market. How does the central bank's RRR reduction affect the market? (historical back test attached)
On April 15, the central bank announced that it decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, 2022 (excluding financial institutions that have implemented the 5% deposit reserve ratio). After this comprehensive RRR reduction, the capital cost of financial institutions will be reduced by about 6.5 billion yuan per year, releasing a total of about 0.53 trillion yuan of long-term funds.
The central bank's overall RRR reduction is the implementation of the spirit of the national standing committee meeting. From the statements of a series of important meetings since April, this RRR reduction is an important part of the recent steady growth policy and will form a more coherent policy idea. On April 6, the national Standing Committee proposed to implement the phased deferred payment of pension insurance premiums for industries in extreme poverty, strengthen the support of unemployment insurance for job stabilization and training, and deploy the timely use of monetary policy tools to more effectively support the development of the real economy. On April 11, the Symposium on economic situation once again emphasized that stability is the key, seeking progress in stability, and stabilizing employment and prices to support the economic operation in a reasonable range. At the executive meeting of the State Council held on April 13, it was clearly proposed to encourage large banks with high provision level to reduce the provision coverage in an orderly manner and make timely use of monetary policy tools such as RRR reduction. In addition, a series of policy measures to promote consumption were deployed to make concerted efforts, give consideration to the long-term and short-term, and implement comprehensive measures to release the consumption potential.
The comprehensive RRR reduction will help reduce the actual financing cost and "make profits" to the real economy. Comprehensive RRR reduction can enhance the capital strength of financial institutions, guide banks to issue loans to enterprises at more preferential interest rates, and effectively reduce the actual financing cost of real enterprises. The supplement to enterprise liquidity provides important support for steady growth and helps boost the development of the real economy. At the same time, the overall RRR reduction releases liquidity, which can significantly boost investment, economic growth and market sentiment, and is conducive to improving market risk appetite.
According to the statistics of the rise and fall of the Shanghai stock index in the period after the central bank announced the RRR reduction in the past 10 times, generally speaking, A-Shares generally have a more positive market reaction after the central bank announced the RRR reduction, and the Shanghai index has a high probability of rise and dominant growth style; In terms of industry, the average growth rate of science and technology growth sectors such as communication and computer was higher one week after the RRR reduction.
This comprehensive RRR reduction is the central bank's re-use of RRR reduction tools after four months after December 2021, which clearly releases the signal that finance continues to strengthen its support for steady growth, which helps to stabilize market expectations. However, it is worth noting that this RRR reduction is lower than the market expectation and lower than the previous comprehensive RRR reduction of the central bank. It is mainly subject to the external constraints of the upside down interest rate spread between China and the United States and the internal restrictions of polarity inflation, which is also an important reason for the correction of market shock on Friday. In addition, the transmission of liquidity from the banking system to real enterprises is not achieved overnight, which needs the cooperation of other policies related to steady growth. Overall, we expect that the RRR reduction will have a relatively limited boost to the market, and the shock repair market will probably continue next week.
Risk tips: policy promotion is less than expected, epidemic prevention and control is less than expected, and the risk of geographical situation disturbance
