The market finally ushered in a decent rebound.
On January 17, stimulated by the news that the central bank’s MLF was over extended and the interest rate was reduced by 10bp, the A-share market closed higher after the major indexes opened higher. Among the mainstream indexes, the Shanghai Composite Index, gem index, CSI 500 and CSI 300 rose 0.58%, 1.63%, 1.08% and 0.86% respectively.
From the perspective of sectors, TMT, military industry, new energy and other sectors with more adjustments have led the increase since the beginning of the year, while social services, nonferrous metals, banking, steel and other sectors are relatively weak.
What is behind the “interest rate cut” action of the central bank’s excessive continuation of MLF and reduction of interest rate by 10bp? Will this rebound continue? Fund King contacted Nanfang, Boshi, Penghua, Ping An, Dacheng, HSBC Jinxin, beehive, Western Lide, Morgan Stanley Agriculture Group Co.Ltd(002588) Huaxin, great wall, Hang Seng Qianhai, Nord, ChuangJin Hexin and other fund companies at the first time.
These companies said that the “interest rate cut” is expected, and there may be such operations in the future, which may boost the stock market in the short term. They are optimistic about infrastructure, building materials, consumption and digital economy.
“interest rate cut” is expected
it is expected that the LPR in subsequent periods will be reduced synchronously
The biggest event on January 17 was that the Central Bank of China operated a one-year MLF of 700 billion yuan, with an interest rate of 2.85%, up from 2.95%. On the same day, 500 billion yuan of MLF expired. The Central Bank of China conducted 100 billion yuan of 7-day reverse repurchase on the 17th, and another 10 billion yuan of reverse repurchase expired. The bid winning interest rate was 2.1%, down 10 basis points.
For the “interest rate cut”, many investment researchers believe that the interest rate cut is expected and are optimistic about the trend of the stock market.
China Southern Fund believes that the central bank lowered the MLF and reverse repo interest rate by 10bp, basically fulfilling the market’s expectations for the annual rate cut, and the policy focus will gradually shift from broad currency to stable credit. The core contradiction in the first quarter started well in credit in January. If the GDP target of each province is obviously biased to 5.5% this week, the broad credit expectation of infrastructure and real estate may heat up.
“This interest rate cut is mainly to convey a clearer determination and policy guidance to stabilize growth. It may be transmitted to the corresponding decline of LPR in the future, so as to more stabilize the market’s expectations for subsequent stable growth.” Penghua Fund commented that the interest rate cut is one of the means of the combination of stable growth policies. The central economic work conference mentioned that the policy force should be moderately advanced. Therefore, the market has certain expectations for the further support of monetary policy, and the interest rate cut is expected to be implemented. At the same time, this active easing is to support credit easing, which mainly affects the real economy, rather than the easing of residual liquidity in the financial market.
Looking ahead to the next market, Penghua Fund believes that the Q1 steady growth policy will continue to be fulfilled, the economic data such as PMI and social finance are expected to be further improved, and the loose policy is expected to bring about the repair of economic expectations and market sentiment, supporting the market performance in the first half of the year from the valuation level (mainly the convergence of valuation differences between sectors).
Dacheng Fund believes that after the RRR reduction in December 2021, the MLF continued in excess and cut interest rates in January, reflecting the determination of the policy to stabilize expectations and steady growth. If the subsequent 1-year and 5-year LPR interest rates are further reduced or help stabilize expectations, they will respectively alleviate the insufficient demand for physical financing and reduce the debt pressure of home buyers.
Zou Deli, general manager of the fixed income Department of Great Wall Fund, said that it is reasonable to reduce the policy interest rate by 10-15bp this month. At present, facing the problems of economic downturn and weak financing demand, the central bank needs to reduce the financing cost of the real economy by reducing the policy interest rate, so as to solve the problem of “expected weakening”. 10-15bp is a more appropriate range. It is expected that the LPR of each period will be reduced synchronously on January 20.
The honeycomb Fund said that the interest rate cut was generally expected, and the interest rate cut was slightly higher than expected. The market generally believed that the central bank would probably cut interest rates by 5bp under the condition of limited interest rate space, leaving room for future monetary policy. The interest rate cut is basically consistent with the idea of “giving full play to the dual functions of monetary policy in terms of aggregate and structure, and taking the initiative to increase efforts to the real economy” emphasized at the fourth quarter monetary policy regular meeting of the central bank in 2021. It reflects the current great pressure on economic fundamentals, which is reflected in weak domestic demand, sharp decline in real estate investment, and lower than expected medium and long-term loans of enterprises, The interest rate cut will help to reduce the cost of the real economy and reduce the cost of “steady growth” means such as infrastructure investment.
Xilide Fund said that the rate cut was basically in line with market expectations, and the time point was slightly higher than expected. However, there may be poor expectations in the stock and bond market. The high opening and low going of the bond market reflects that it is more cautious about the subsequent interest rate cut again, and the trend of the stock market is more optimistic.
Morgan Stanley Huaxin Fund believes that the interest rate cut is one of a series of measures taken by monetary policy to support steady growth. The easing range in volume and price is large, indicating that the central bank’s monetary end is “wide credit + wide money” to support the real economy. In the current situation of repeated epidemics and increasing economic uncertainty, the importance of countercyclical adjustment and stable growth of monetary policy has increased. The interest rate cut this month is a superposition period triggered by credit risk before the Fed’s interest rate increase, with less inflationary pressure and greater downward pressure on the economy.
Li Weikang, fund manager of Qianhai solid income Department of Hang Seng, said that on January 17, the central bank announced that the MLF would be lowered by 10bp, from 2.95% to 2.85%. The market expectation is 5bp or 10bp, which belongs to the level with higher expectation. The weakness of the current economy lies in the rapid decline in the prosperity of the real estate industry. The MLF interest rate cut is the most practical real estate industry support policy since the central economic work conference in December.
short term boosting effect on the stock market
For the “interest rate cut”, many people believe that improving the cost performance of equity assets, building materials, consumption and digital economy are optimistic.
For example, China Southern Fund said that the interest rate cut further verified the tone of steady growth and enhanced the cost performance of equity assets. The follow-up financial development can be expected, and the construction, building materials, steel and other sectors are expected to benefit. In addition, the period of stable growth in history is often accompanied by strong consumption stimulating policies. Optional consumer goods such as cars and consumer electronics are expected to become an important starting point for promoting consumption.
Boshi Fund said that steady growth needs to be supported by fixed asset investment and consumption. The central bank’s announcement of interest rate cut will reduce the financing cost of infrastructure projects, facilitate the development of infrastructure projects, and stimulate consumption at the same time; Moreover, the current inflation level in China is relatively controllable, which does not interfere with the loose monetary policy. Under the condition of continuous abundant liquidity, we can be relatively optimistic about the trend of A-Shares in the future. It is suggested to pay due attention to the opportunities of infrastructure sectors benefiting from stable growth.
“The interest rate cut on the 17th is basically in line with market expectations, which is conducive to the recovery of preference for growth stocks, but we should pay attention to the choice of sectors.”. The investment and research team of honeycomb Fund believes that, generally speaking, the high valuation sector will continue to compress the valuation this year, and it is necessary to have a higher than expected performance growth rate to resist the contraction of valuation. Therefore, it is necessary to carefully select the sectors with growth and balanced valuation.
Honeycomb fund further said that from the current point of view, the digital economy sector in the 14th five year plan has received strong policy support, and the valuation is more reasonable. It has the potential to become a follow-up main line and needs to be paid close attention.
In addition, the continued and competitive segments of new energy, electronic semiconductors and military industry can still achieve high growth rate and are expected to bring better returns. It is a direction that can continue to be configured. However, at present, we think it is mainly balanced configuration. If these core track segments can continue to fall out of better prices, they will be added.
Shen Chao, macro and strategic analyst of HSBC Jinxin fund, said that the interest rate cut released a signal of loose policy, helped to reduce corporate financing costs and reverse corporate pessimistic expectations. For the market, the interest rate cut may change the downward trend of the stock market in the early stage.
Secondly, from the perspective of specific industries, computers, communications and media are among the top gainers, which is obviously affected by the state’s statement on “expanding and strengthening the digital economy”, but today’s increase may more reflect the short-term market sentiment fluctuation.
With the gradual warming of the policy, we will be more optimistic about the overall market in the future. At the same time, we will dynamically tap the structural opportunities of the market from bottom to top according to the changes in the fundamentals of the industry and individual stocks and in combination with the valuation.
Ping An Fund said that the phased market style may tend to be more balanced, and the degree of sector differentiation will converge. However, in the long run, the market main line around scientific and technological innovation and consumption upgrading is still relatively clear. In the medium and short term, it is judged that the equity market may tend to be valuation convergence and style equilibrium between sectors, and undervalued and stable growth varieties will continue to be valued; In the long run, the core assets in the industries of consumption, medicine, new energy and science and technology will still be the main market we are optimistic about and pay attention to for a long time.
Wei Fengchun, chief economist of ChuangJin Hexin, said that based on the limited role of interest rate reduction, we suggest that investors still need steady investment, appropriate positions and both offensive and defensive.
First, for equity assets, the market is characterized by weak consumption, weak cycle, financial bottom shock, science and technology still have power, and the digital economy brings strategic layout opportunities. In terms of sectors, the pharmaceutical sector is stable in the short term, and structural opportunities continue; The short-term rebound probability of new energy is high, but it is difficult to reach a new high due to the second and third tier varieties. There will still be high-low switching between and within sectors, and we will continue to pay attention to the old and new infrastructure lines of meta universe and steady growth.
Second, for bond assets, it is difficult to say that the interest rate will rise systematically before credit is extended. The interest rate cut is expected to be fulfilled and maintain a slight shock trend.
Third, Hong Kong stocks have long-term strategic allocation, and there is still room for short-term repair.
Xie Yi, manager of Nord fund, said that the interest rate cut is the embodiment of the continuous marginal improvement of monetary policy. At the same time, we also believe that this is not the end of easing, and the subsequent longer-term interest rate may also decline, which will greatly boost the demand side, especially consumption. At the same time, for the supply side, it is also very helpful to reduce the financing cost. The latest growth data show that China’s economy is relatively resilient. With the easing of money, we think the growth rate this year will exceed the general expectation of the market. For the stock market, following the rise of fundamentals and its valuation is expected to boost with China’s easing, which can at least weaken the impact of overseas tightening. Therefore, we continue to be optimistic about China’s economy and stock market in 2022.
\u3000\u3000 “The relatively flat curve of the bond market has been price in. The interest rate has been cut, the wide monetary window has passed, and the policies such as wide credit and real estate have gradually increased. The benefit of the bond market may be limited. The equity market benefits from the loose liquidity and steady growth policies, which is still conducive to the continuation of the structural market. If the trend of interest rates changes, the style of the stock market may also change. The epidemic situation is still the biggest uncertainty Element. ” Western profit Fund said.
the downward range of the bond market may be limited
Referring to the impact on the bond market, the investment and research team of honeycomb Fund said that in terms of the impact on the bond market, the interest rate cut is slightly higher than expected, and the market will decline in the short term. However, considering that the bond market has reflected the interest rate cut in the early stage, the expected downward range is limited. With the implementation of the interest rate cut, the subsequent market focus will turn to the credit easing policy and its effect. Affected by the non speculation of housing and housing and the implicit debt constraints of government credit projects, it is difficult to completely replace the old economy in the short term stimulated by green economy, new infrastructure and other projects. The probability of the credit easing effect this time is lower than the two credit cycles in 2015 and 2018, and the economic probability is weak in the short term, The bond market is still long. However, considering that the interest rate curve is relatively flat and superimposed, it is currently in a wide credit cycle, and the wide credit policy is gradually implemented to restrict the long-end interest rate, the downward space of interest rate is limited, so it is more necessary to rely on the central bank to cut interest rates to release downward space.
Li Weikang, fund manager of the fixed income Department of Hang Seng Qianhai fund, said that the bond market had a certain expectation of interest rate cut before, so there had been a round of decline at the end of December. Therefore, today’s interest rate fluctuated little, and may have begun to price stable growth. It is expected that the bond market is still dominated by shock.
“On December 20, 2021, the central bank lowered the one-year LPR (quoted interest rate in the loan market) 5bp to 3.80%, marking the turning point of marginal easing of monetary policy.” Zou Deli said that the 10bp MLF interest rate cut means that the interest rate cut channel has been opened, and we can look forward to the possibility of further interest rate cuts. Although the Fed is expected to raise interest rates in advance, there is a large gap between China and the United States, and the central bank has repeatedly stressed that the monetary policy is “dominated by me”, which has a limited impact on China’s monetary policy. The inflection point and channel of interest rate reduction have appeared, so it is expected that interest rate and interest rate reduction will occur in March and April.
The decline and rebound of bond market yield are mostly affected by profit speculation. The bull market in bond market is not over yet. The risk lies in the cross spring festival liquidity risk and the time of economic stabilization and recovery.
Southern Fund said that in the bond market, the expectation of interest rate reduction has been fermented for a long time, there is profit taking trading sentiment in the short term, and the value of interest rate bonds is not high. However, from a fundamental point of view, medium-term interest rate bonds still have holding value and can actively adjust the duration to tide over the shock period. Follow up attention will be paid to whether the 5-year LPR quotation announced on the 20th fulfills the loose expectation on the demand side of real estate, and whether the financial data in January verify the good start of credit.
analysis and interpretation
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