Market events
On January 17, 2022, the central bank carried out 700 billion MLF operations (500 billion at maturity and 200 billion net release) and 100 billion open market reverse repurchase (10 billion at maturity and 90 billion net release). In addition, the MLF operating interest rate decreased from 2.95% to 2.85%, and the 7-day reverse repo interest rate decreased from 2.20% to 2.10%, all down 10bp.
Higher than expected interest rate cuts will be implemented to consolidate the market's expectations of steady growth, and the liquidity environment will be more relaxed
The landing of this interest rate cut has three impacts on the current market: first, the overall "volume increase and price decrease", with both strength and scope exceeding expectations and boosting market sentiment. The interest rate cut is loose at the level of short-term liquidity and medium-term liquidity. On the one hand, it is reflected in the expansion of investment scale, on the other hand, the interest rate level is reduced by 10bp at the same time. Both the expansion of operation scale and the decline of interest rate level are comprehensively higher than expected. Second, the implementation of strong measures to stabilize growth and consolidate market expectations for stable growth. Since the beginning of the year, the issuance of government bonds has been lower than the market expectation, resulting in the phased failure and doubt of the market's expectation of stable growth policies. The implementation of this higher than expected interest rate cut will help to reverse the market's pessimistic expectation of policies. As the starting gun of this round of policy underpinning economy, it is expected to consolidate the market's expectation of subsequent stable growth policies and improve the market risk appetite. Third, the liquidity environment will be more abundant, at the best time of marginal easing in 2022. The volume and price of short-term and medium-term liquidity will be fully relaxed. The current and next quarter will be the most relaxed time for monetary policy and liquidity environment in 2021 and 2022, which will provide another level of valuation support for the restless market.
Restless market "from the east wind", in order to have a source of fresh water
Strong than expected interest rate cuts sounded the clarion call for the intensive introduction of stable growth policies. The core support of the restless market is coming, and the follow-up force can be expected. At the policy level, we can still expect: first, the force of fiscal policy is expected to accelerate. The national Standing Committee strongly urges the issuance and use of local government special bonds to form physical workload, the national development and Reform Commission to speed up the approval of major social projects, and local governments to step up the implementation of infrastructure projects. Under the background of liquidity cooperation by the central bank, the issuance of government bonds is expected to accelerate and intensify. Second, there is still room for monetary policy. On the 20th, LPR is expected to further cooperate with the interest rate cut; In order to cope with the increase in the issuance of government bonds, it is expected that there will be a comprehensive RRR reduction in the follow-up, and the time point is probably in the middle of February; MLF also has room to continue to expand its operation. The amount due in February and March is only 200 billion and 100 billion respectively; The large-scale operation of the open market will continue until the Spring Festival, and it is expected to expand to 14 days in the follow-up, so there is no worry about short-term liquidity. Monetary policy and liquidity are in a more positive time window. In addition, with the continuous efforts of steady growth measures, economic growth in 2022q1 is expected to improve marginally and exceed market expectations. The continuous implementation of steady growth policies and the marginal economic expectation will help the interpretation of the restless market in spring. This unexpected interest rate cut is expected to become the east wind of the rise of this round of restless market.
The growth main line is still the most preferred direction, and the logic of steady growth main line is further strengthened
The higher than expected interest rate cut is expected to become the east wind of this round of restless market in spring, and grasp four investment mainlines: first, the growth mainline. The growth sector with large valuation elasticity will bear the brunt, benefit from loose liquidity, and the growth mainline has higher cost performance after the early valuation correction. The third stage of growth style is expected to be fully interpreted under the restless market in spring. Focus on three subdivided directions: ① green power, photovoltaic, energy storage, wind power, nuclear power, hydrogen energy, new energy and new energy vehicle chain related to "double carbon"; ② The middle and upper reaches of semiconductors and national defense industry in the boom direction; ③ Dilemma inversion superposition growth diffusion, such as computers. Second, the main line of steady growth. After the interest rate reduction is implemented, the expectation of steady growth policy is more clear, focusing on two sub directions: ① power for infrastructure construction, such as power grid construction, power grid operation, transmission and distribution, UHV, etc; ② The traditional direction of capital construction, such as building materials. Third, the wind vane of restless market, such as securities companies. The fourth is the follow-up and layout of the consumption sector, mainly focusing on the price increase lines, such as food processing, dairy products, condiments, etc., as well as pharmaceutical and biological products with valuation repair demands. The theme investment direction focuses on digital currency and the reform of state-owned enterprises.
Risk tips
The development of Omicron mutant strain exceeded expectations; There is a deviation in China's economic forecast; China's policy tightening exceeded expectations; Sino US relations deteriorated more than expected.
