China Fund News reporter Fang Li
The market is finally on a decent rally.
On January 17, the A-share market was stimulated by the news that the central bank's MLF exceeded the sequel and cut the interest rate by 10bp, and the major indexes closed higher after opening high. Among the mainstream indices, the Shanghai Composite Index, the ChiNext Index, the CSI 500 and the CSI 300 rose by 0.58%, 1.63%, 1.08% and 0.86% respectively.
From the perspective of plates, TMT, military, new energy and other sectors that have been adjusted more since the beginning of the year have risen in the front, 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 MLF over-renewal and the 10bp interest rate cut? Will this rally continue? The fund Jun contacted Nanfang, Boshi, Penghua, Ping An, Dentons, HSBC Jinxin, Hive, Western Lide, Morgan Stanley Huaxin, Great Wall, Hang Seng Qianhai, Nord, Chuangjin Hexin and other fund companies for the first time.
These companies said that the "interest rate cut" is expected, there may be such operations in the future, the short-term stock market may be boosted, optimistic about infrastructure, building materials, consumption, digital economy and so on are optimistic.
The "rate cut" is expected
It is expected that the LPR will be reduced simultaneously in subsequent periods
The biggest event on January 17 was the 700 billion yuan 1-year MLF operation of the People's Bank of China at an interest rate of 2.85%, compared with 2.95% previously. On that day, 500 billion yuan of MLF was due. On the 17th, the People's Bank of China carried out a 7-day reverse repurchase operation of 100 billion yuan, and another 10 billion yuan of reverse repurchase expired. The winning rate was 2.1%, down 10 basis points.
In response to this "interest rate cut", many investment researchers believe that this interest rate cut is expected and the stock market trend is more optimistic.
The Southern Fund believes that the central bank cut the MLF and reverse repo interest rate by 10BP, basically fulfilling the market's expectations for the annual interest rate cut, and the policy focus will gradually shift from wide money to stable credit. The core contradiction in the first quarter was that credit opened in January, and if the GDP target of each province this week is clearly biased towards 5.5%, the infrastructure and real estate wide credit expectations may heat up.
"The interest rate cut is mainly to convey a clearer determination to stabilize growth and policy orientation, and the follow-up may be transmitted to the corresponding decline of LPR, which will stabilize the market's expectations for subsequent stable growth." Penghua Fund commented that interest rate cuts are one of the means of stabilizing the growth policy combination, and the Central Economic Work Conference mentioned that the policy force should be moderately advanced, so for the further support of monetary policy, the market has certain expectations, and the interest rate cut is the landing of expectations. At the same time, this active easing is to support wide credit, mainly to the real economy, rather than the easing of the remaining liquidity of the financial market.
Looking forward to the next market, Penghua Fund believes that the Q1 stable growth policy will continue to be fulfilled, the economic data such as PMI and social finance are expected to further improve, and the policy easing is expected to bring economic expectations and market sentiment repair, 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 cut in December 2021, the MLF oversubscribed and cut interest rates in January, reflecting the determination of the policy to stabilize expectations and stabilize growth. Further reductions in subsequent 1-year and 5-year LPR rates may help stabilize expectations, alleviating insufficient financing needs for entities and alleviating debt pressure on home buyers, respectively.
Zou Deli, general manager of the fixed income department of the Great Wall Fund, said that it is reasonable to reduce the policy interest rate by 10-15BP this month. At present, facing the economic downturn, weak financing demand and other issues, 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 on January 20, the LPR of each period will be reduced simultaneously.
The Hive Fund said that the interest rate cut operation is generally within expectations, the interest rate cut is slightly more than expected, and the market generally believes that the central bank has a high probability of cutting interest rates by 5bp in the case of limited interest rate space, leaving room for future monetary policy. The interest rate cut is basically the same as the idea of "giving full play to the dual functions of monetary policy in the total amount and structure of monetary policy, and taking the initiative to increase the intensity of the real economy" emphasized at the central bank's fourth quarter monetary policy regular meeting in 2021, reflecting the current pressure on economic fundamentals, which is reflected in the weak domestic demand, the sharp decline in real estate investment, and the medium- and long-term loans of enterprises are not as expected.
The West Lide Fund said that the rate cut was basically in line with market expectations, and the timing slightly exceeded expectations. However, there may be poor expectations in the stock and bond market, and the high opening and low movement of the bond market reflect that it is more cautious about the subsequent interest rate cut again, and the stock market trend is more optimistic.
The Morgan Stanley Huaxin Fund believes that the interest rate cut is one of a series of measures for monetary policy to support stable growth, and the easing range in volume and price is large, showing that the central bank's monetary end is "wide credit + wide currency" to support the real economy. In the current situation of repeated epidemics and increased uncertainty in the economic situation, the counter-cyclical adjustment of monetary policy and the importance of stable growth have increased. This month's interest rate cut is a superposition period before the Fed raises interest rates, with less inflationary pressure, greater downward pressure on the economy, and credit risk triggering, which has the right opportunity.
Li Weikang, fund manager of Hang Seng Qianhai Fixed Income Department, said that on January 17, the central bank announced that the MLF was lowered by 10BP, from 2.95% to 2.85%, and the market expectation was 5BP or 10BP, which was a higher expectation. The weak point of the current economy lies in the rapid decline in the prosperity of the real estate industry, and the MLF interest rate cut is the most practical real estate industry support policy since the Central Economic Work Conference in December.
In the short term, it has a boost to the stock market
For this "interest rate cut", many people believe that to improve the cost performance of equity assets, building materials, consumption, digital economy, etc. are optimistic.
For example, the Southern Fund said that the interest rate cut further verifies the tone of stable growth, while enhancing the cost performance of equity assets. Follow-up fiscal force can be expected, construction, building materials, steel and other sectors are expected to benefit. In addition, the period of steady growth in history is often accompanied by a strong consumption policy, and optional consumer goods such as automobiles and consumer electronics are expected to become an important starting point for promoting consumption.
Boshi Fund said that stable growth needs to rely on fixed asset investment and consumption to support, the central bank announced interest rate cuts, will reduce the financing costs of infrastructure projects, is conducive to the development of infrastructure projects, but also can stimulate consumption; and the current domestic inflation level is relatively controllable, the loose monetary policy has not interfered. In the case of continued abundant liquidity, we can be relatively optimistic about the future trend of A-shares, and it is recommended to consider appropriate attention to the opportunities of infrastructure sectors that benefit from steady 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 must pay attention to the choice of sectors." The hive fund investment research team believes that overall, the high valuation sector this year will continue to compress the valuation, and it is necessary to have a performance growth rate that exceeds expectations to resist the contraction of valuation, so it is necessary to carefully select the growth and valuation balance of the sector.
The Hive Fund further said that from the current point of view, the digital economy sector of the 14th Five-Year Plan has received strong policy support, and the valuation is more reasonable, and it has the potential to become the follow-up main line and needs to be paid close attention to. In addition, the new energy, electronic semiconductors and military industry in the continuation of the boom, competitive subdivision sector can still get high growth rate, is also expected to bring better returns, is the direction can continue to configure, but at present we believe that it is still balanced configuration, such as these core track sectors can continue to fall out of better prices, will increase allocation.
Shen Chao, a macro and strategic analyst at HSBC Jinxin Fund, said that the interest rate cut released a signal of policy easing, which helped reduce corporate financing costs while reversing corporate pessimistic expectations. For the market, a rate cut may change the downward trend of the stock market in the early stage.
Secondly, from the perspective of specific industries, the increase in computers, communications, and media is in the front, which is obviously affected by the state's statement on "making the digital economy bigger and stronger", but today's increase may reflect more short-term market sentiment fluctuations.
As the policy gradually warms up, we will be more optimistic about the market as a whole in the future. At the same time, we will also dynamically explore the structural opportunities of the market from the bottom up according to the changes in the fundamentals of the industry and individual stocks, combined with the valuation situation.
Ping An Fund said that the market style may tend to be more balanced in stages, and the degree of plate differentiation will converge. However, in the long run, the main line of the market around technological innovation and consumption upgrading is still relatively clear. In the short and medium term, the judgment of the equity market may tend to converge and balance the valuation between sectors, and the low valuation and stable growth varieties will continue to receive attention; and in the long run, the core assets in the consumer, pharmaceutical, new energy, and technology industries will continue to be the main line of the market that 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 cuts, we recommend that investors still need to invest steadily, with appropriate positions and both offensive and defensive positions.
First, for equity assets, the market is characterized by weak consumption, weak cycle, financial bottom shock, science and technology still have strength, and the digital economy brings strategic layout opportunities. From the perspective of the sector, the pharmaceutical sector is stable in the short term and the structural opportunities continue; the short-term rebound probability of new energy is large, but it is difficult to reach a new high of second- and third-tier varieties. The inter-plate and intra-plate will still switch high and low, and continue to pay attention to the main line of new and old infrastructure construction with meta-universe and steady growth.
Second, bond assets, interest rates before the wide credit is difficult to say the system upwards, interest rate cuts are expected to cash in, maintaining a slight shock trend.
Third, Hong Kong stocks have a long-term strategic allocation, and there is still room for short-term repair.
Xie Yi, fund manager of NORD, 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 rates may also follow the decline, which will have a relatively large boost to the demand side, especially to consumption. At the same time, for the supply side, it is also very helpful to reduce financing costs. The latest released growth data shows that China's economy is relatively resilient, and with the easing of money, we feel that there is a high probability that this year's growth will exceed the general expectations of the market. For the stock market, following the rise in fundamentals, while its valuation is also expected to be boosted with domestic easing, at least to weaken the impact of overseas tightening. So we continue to be optimistic about China's economy and stock market in 2022.
"The flat curve of the bond market has been priced in interest rate cuts, the wide currency window has passed, and policies such as wide credit and real estate have gradually increased, and the benefits of the bond market may be limited." The equity market benefits from the easing of liquidity and the steady growth policy, which is still conducive to the continuation of the structural market. If interest rates change in a trend, the stock market style may also switch. The pandemic remains the biggest source of uncertainty. Western Lyde Fund said.
The decline in the bond market may be limited
Speaking of the impact on the bond market, the Hive Fund investment research team said that in terms of the impact of the bond market, the overall interest rate cut slightly exceeded expectations, and the market will decline in the short term, but considering that the bond market has reflected on the interest rate cut in the early stage, the expected downward range is limited. With the landing of interest rate cuts, the follow-up market focus will shift to the wide credit policy and its effect, affected by the impact of housing not speculation, implicit debt constraints of political credit projects, etc., green economy, new infrastructure and other projects are difficult to completely replace the old economy in the short term, the wide credit effect is more likely than the two rounds of credit cycles in 2015 and 2018, the economy is weak in the short term, and the bond market is still in a bullish market. However, considering that the interest rate curve is relatively flat and superimposed is currently in a wide credit cycle, the wide credit policy is gradually implemented to restrict long-end interest rates, and the downward space of interest rates is limited, and more need to rely on the central bank to cut interest rates to release the downside space.
Li Weikang, fund manager of the fixed income department of Hang Seng Qianhai Fund, said that the bond market has had a round of decline at the end of December because it has had certain expectations for interest rate cuts, so today's interest rate fluctuations are not large, and may have begun to price for stable growth, and it is expected that the bond market will still be dominated by shocks.
"On December 20, 2021, the central bank cut the one-year LPR (Loan Market Quotation Rate) by 5BP to 3.80%, marking the inflection point of marginal easing of monetary policy." Zou Deli said that the MLF rate cut of 10BP means that the interest rate reduction channel has been opened, and it can be expected that further interest rate cuts may be possible. Although the Fed is expected to raise interest rates in advance, the interest rate differential between China and the United States is large, and the central bank has repeatedly emphasized that monetary policy is "mainly based on me", which has limited impact on China's monetary policy. The inflection point and channel of RRR cuts and interest rate cuts have already appeared, so it is expected that there will be interest rate cuts and RRR cuts in March and April.
The downward and rebound of bond market yields is mostly affected by speculative trading in profit plates, the bull market in the bond market has not yet ended, and the risk lies in the liquidity risk and economic stabilization recovery time across the Spring Festival.
Southern Fund said that in the bond market, interest rate cuts are expected to ferment for a long time, and there is a trading sentiment of profit settlement in the short term, and the value of interest rate bonds continues to be low. 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 to whether the 5-year LPR quotation announced on the 20th will fulfill the expectation of easing on the demand side of real estate, and whether the Financial Data in January will verify the opening of credit.
EDIT: Captain
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