Policy strength, A-shares welcome long-lost surge, and future fundamental recovery is still the key.

A-share investors ushered in a long-lost surge in the market.

On January 25, as of the close, the Shanghai Composite Index rose by 3.03%, the biggest increase since March 2022, and returned above 2900 points to close at 2906.11 points. The Shenzhen Component Index rose 2% to close at 8856.22 points; Growth enterprise market index rose 1.45% to close at 1720.78 points. The concept of "China Special Appraisal" led the two cities, and finance and real estate collectively strengthened.

This big rise is due to the intensive release of policies a few days ago. According to industry insiders, the combination of unexpected policies will help boost investor confidence and help the market to further pick up. However, it is still necessary to observe the economic fundamentals and the recovery of corporate profits.

The Shanghai Composite Index returned to 2900 points.

After stepping out of the three Dayang lines, the Shanghai Composite Index returned to above 2900 points. As of the close of the 25th, a total of 4,884 stocks in the two cities rose, of which 110 stocks had daily limit; Only 422 stocks fell, of which 5 stocks fell. In one fell swoop, it reversed the decline of a large number of stocks in the previous period.

The capital flow was upward, and the northbound capital was enthusiastic, with a net inflow of 6.294 billion yuan, of which Shanghai Stock Connect bought 4.834 billion yuan and Shenzhen Stock Connect bought 1.459 billion yuan. The turnover of the two cities in the whole day was 891.433 billion yuan, including 437.690 billion yuan in Shanghai and 453.753 billion yuan in Shenzhen.

This rebound is related to the collective release of multi-sector favorable signals the day before. On 24th, Xie Xiaobing, head of the Property Rights Administration Bureau of the State Council State-owned Assets Supervision and Administration Commission (SASAC), said that it would further study how to incorporate market value management into the performance appraisal of the heads of central enterprises, and guide the heads of central enterprises to pay more attention to the market performance of listed companies controlled by them, and timely use market-oriented means such as increasing holdings and repurchases to convey confidence, stabilize expectations and increase cash dividends.

On the same day, Pan Gongsheng, governor of the People’s Bank of China, said that the central bank will cut the deposit reserve ratio of financial institutions by 0.5 percentage points from February 5 to provide the market with long-term liquidity of about 1 trillion yuan; On January 25th, the interest rate of refinancing and rediscounting for supporting agriculture began to be lowered by 0.25 percentage point. At the same time, the comprehensive financing cost of society will continue to decrease steadily.

On the same day, the central bank and the General Administration of Financial Supervision jointly issued the Notice on Doing a Good Job in the Management of Operating Property Loans, proposing that operating property loans can be used to repay existing real estate loans.

On the 25th, the State Administration of Financial Supervision said that it would guide financial institutions to implement the management requirements for operating property loans; Promote the growth rate of corporate loans for private small and micro enterprises not less than the growth rate of various loans.

The unanimous view of the institutions and bankers interviewed by CBN is that the RRR cut will further ease the pressure of interest margin on the basis of the previous deposit interest rate reduction, which will help banks to "get off to a good start"; Structural interest rate cuts and relaxation of small and micro loan standards will help to increase credit support in key areas and narrow the spread, but the scale is more favorable.

Regarding the relaxation of conditions such as the use of operating property loans and loan subjects, some bankers said that the policy implementation is expected to ease the short-term debt pressure of housing enterprises, and it is safer than the relaxation of liquidity loans expected by the previous market. However, from the perspective of beneficiaries and lending motivation, it may still be concentrated in the head housing enterprises in the short term, and the loan issuance motivation for repaying the bank’s debts is more sufficient.

A person from the Jing Shun Great Wall Stock Investment Department said that for the first time in several months, many ministries and commissions cooperated to stabilize the capital market, which strongly promoted the restoration of market sentiment. After the previous adjustment, the dimensions of market valuation, capital and sentiment were all close to the historical low level, so there was a technical rebound driven by capital.

"China Special Estimate" leads the market

On the 25th, the most outstanding concept in the market was "China Special Appraisal", and the daily stocks rose to a daily limit. At the close, more than 20 stocks including China Petroleum, China Coal Energy, China Jiaojian and China Unicom rose to a daily limit, and the China Special Appraisal Index (WI.884681) rose by 5.02%, while the theme ETFs of 21 stock-based central state-owned enterprises in the whole market rose by over 5%, and the ETFs of China state-owned enterprises rose by 8.31.

The above-mentioned person in the investment department said that it would further study "incorporating market value management into the performance appraisal of the heads of central enterprises". If the relevant plan is finally implemented, it may promote some central enterprises with poor stock prices and low valuations to optimize their capital structure, increase dividends and share repurchases, or increase market value through capital operation.

Mao Yongchun, executive director of the Market Value Management Research Center of Shanghai Academy of Social Sciences, said that market value management is a systematic project to make the value creation of listed companies recognized by the capital market. Only with healthy and stable market value growth can we talk about real shareholder returns. Central enterprises attach importance to the market value and market value management of holding listed companies, which is a positive signal to the whole market.

According to Wind data, there are 135 "Chinese prefix" stocks in A-share listed companies, and the current total market value is 13.3 trillion yuan, accounting for more than 50%.

The central state-owned enterprises have always been the most dividend-paying A-share listed companies. The data shows that in 2022, the dividend quota of A-share listed central enterprises exceeded one trillion yuan, reaching 1.06 trillion yuan, accounting for more than half of the dividends of all A-share listed companies, an increase of 22.53% compared with 2021. The total dividend of listed central state-owned enterprises in 2022 reached 1.76 trillion yuan, accounting for about 80%.

In 2023, as the CSRC issued new dividend regulations and continuously guided listed companies to increase dividends, central enterprises continued to "make a big red envelope". According to the reporter’s incomplete statistics, in 2023, there were 10 listed central enterprises with dividends exceeding 10 billion yuan, among which China Petroleum ranked first with dividends of 78.699 billion yuan, and other listed central enterprises also included China CNOOC, China Petrochemical, China Telecom and China Mobile.

"The starting point of this round of rebound must be policy-oriented and take central state-owned enterprises as the starting point." A Public Offering of Fund analyst in Shanghai told reporters that in the past two days, the policies of central state-owned enterprises have been intensively released, and this "main story" can be confirmed from the active concept of central state-owned enterprises in Shanghai to the active prefix and big financial sector.

It is still necessary to observe the fundamental recovery.

Many people in the industry interviewed by reporters said that the overall market decline in the previous period was due to the lack of market confidence, and this situation is being changed, and it is still particularly important to repair confidence in the future.

"The’ combination boxing’ that exceeds the expected policy will obviously encourage the market in the short term." Huang Cendong, an analyst at Guojin Securities, believes that the RRR cut has restored investors’ expectations of monetary policy and eliminated investors’ concerns about liquidity. At the same time, incorporating market value management into the performance appraisal of central enterprises has also enhanced investors’ confidence in listed companies and market repair.

"The timing and scale of this RRR cut have greatly exceeded market expectations." Ming Ming, chief economist of CITIC Securities, believes that it is relatively rare for central bank leaders to directly announce the RRR cut at a press conference from the perspective of operation mode; From the perspective of the RRR cut, it is rare to expand to 50BP this time. The last 50BP RRR cut was on December 15th, 2021. Overall, this RRR cut reflects the central bank’s clear support for the recovery goal of the real economy.

"We believe that the RRR cut is aimed at providing a more relaxed financial environment for banks to’ get off to a good start’ and alleviating the pressure on the debt side of banks." According to Lin Yingqi, a banking analyst of CICC, the RRR cut is expected to increase the bank’s net interest margin by 1BP, contributing 0.5% and 0.9% (annualized) to revenue and profit respectively.

Under the centralized release of policies, how long can this round of rebound last? Liang Chengwei, an investment consultant of Minmetals Securities, believes that the index will experience a short-term sharp pull and then a high-level sideways shock. After the recent large-scale stocks have differentiated, this round of gains will be completed, which may take about one and a half months.

However, under the surge in the market on the 25th, the volume of energy failed to keep up with investors’ expectations. The turnover of the two cities in the whole day has not reached 900 billion yuan, which is still far from the expected trillion-dollar volume increase.

According to the aforementioned analysts, this performance may be related to the upcoming Spring Festival holiday. According to past experience, the two cities will enter a state of continuous shrinking capacity in more than 10 trading days before the Spring Festival holiday. He also reminded that if the Shanghai Composite Index steps back on the 20-day moving average, it will enter the process of shrinkage and shock. Investors are faced with index differentiation and mandatory disclosure of listed companies’ performance at the end of January, so they should beware of differentiation and performance problems of individual stocks.

Looking into the future, people from the Jing Shun Great Wall Stock Investment Department said that the introduction of various policies boosted market confidence, and it is still necessary to observe the recovery of fundamentals for the follow-up sustainability. The overall trend of the stock market still depends more on the fundamentals of the economy and the profit growth of enterprises, which is also the most important factor affecting market confidence.

"Everyone’s concerns about economic data remain to be seen." Huang Cendong believes that the disclosure of subsequent economic data should continue to be paid attention to.