What have we experienced in cutting reserve requirements and interest rates?If the loosening degree of monetary policy is described by the changes of reserve ratio and loan interest rate, since 2007, China has experienced five rounds of periodic RRR-interest reduction operations:

• The first round began in September 2008In response to the impact of the global financial crisis, the central bank's monetary policy turned loose, cutting reserve requirements and interest rates at the same time, the biggest in recent rounds.

• The second round began in November 2011.The impact of the European debt crisis superimposed on the domestic economy accelerated the decline, and the central bank launched monetary easing. In November 2011, the central bank announced a comprehensive reserve reduction, six months after the first cut, the central bank cut interest rates for the first time.

• The third round began in April 2014The tightening of real estate regulation and control increased the downward pressure on the economy, and monetary policy turned loose. A targeted reserve cut was made in April 2014, followed by an interest rate cut in November. The current easing cycle was relatively long and did not end gradually until 2016.

• The fourth round begins in April 2018.Against the backdrop of Sino-US trade frictions and slowing investment growth, the central bank began a new round of easing, which was dominated by reserve reduction in the early stage. After the Federal Reserve started easing, the domestic interest rate reduction cycle also began.

• The fifth round began after the epidemic in 2020.COVID-19 's epidemic situation had a great impact on the economy, and the policy quickly increased its support, and the pace of reducing the reserve requirement and interest rate was relatively fast. Shortly after the cut in early January 2020, the interest rate cut began in February.

The interest rate cut will not be absent, and it takes conditions to open it.. Review the reserve requirement and interest rate cuts in the past few rounds of easing:First of all, policies tend to respond quickly to shocksOnce the impact of domestic policy tightening, sudden disasters or external crises on economic growth begins to take shape, it will start to cut reserve requirements or interest rates to adjust countercyclically.

Second, in most cases, the central bank may use reserve reduction first.Interest rate cuts will not begin soon unless the economic shock is particularly significant, and generally speaking, it may take about half a year from the first cut (whether directional or comprehensive) to the first cut.At present, we have not seen the operation of only cutting reserve requirements but not interest rates in the easing cycle..

From past experience, the opening of interest rate cuts needs to meet certain conditions: first, the downward pressure on the economy continues; second, the inflationary pressure has eased; and third, overseas, especially the United States, is not yet in the cycle of raising interest rates.

Last,From the point of view of the monetary policy operation after the last interest rate cut, it is likely that the interest rate cut is not the last stop of easing, and it is often accompanied by a reserve cut as the end., but there are exceptions.

How to allocate assets after interest rate reduction?Judging from the asset performance after the first interest rate cut in previous cycles, short-term equity and debt dealers have benefited. But if the time dimension is extended to more than one month,Bonds have performed relatively better.

Judging from the performance of various equity indexes after the first interest rate cut in previous cycles, although most indexes can benefit within a week from the beginning of the interest rate cut, over a longer period of timeGem with partial growth style has the best performance.There is a similar situation in small and medium-sized board index.And Shanghai and Shenzhen 300 and Shanghai 50 performance is slightly inferior.Judging from the performance of various industry indexes after the first interest rate cut in all previous cycles, three months after the interest rate cutGrowth sectors such as pharmaceutical biology, electronics and media led the way, while financial, real estate and cyclical sectors performed relatively poorly, while consumer sectors rose moderately.

The necessity of interest rate cut is on the rise, and phased opportunities are opened.. At present, the necessity of interest rate reduction has increased: first, it is difficult to ease the pressure on corporate costs in the short term; second, real lending rates may rebound; and third, the United States has not really entered the cycle of raising interest rates. We believe that the current cycle of monetary easing will not only cut reserve requirements, the high probability of interest rate cuts will not be absent. If the central bank starts to cut interest rates, bonds may benefit most, when the downward space for yields is expected to open, while the growth style of small and medium-sized equity markets is relatively dominant. However, as the pace of the Fed's interest rate hike draws nearer and nearer, domestic interest rate cuts will bring phased opportunities and need to be wary of subsequent style adjustments.