Source: Broker China Author: Shi Qian

This morning, Hong Kong stocks and A shares opened low and moved higher. The Shanghai Index surged more than 50 points and is approaching 3,000 points. FTSE China A50 Index futures continued to strengthen, increasing by more than 2%. MSCI China A50 Connectivity Index futures rose 1.6%. The Hang Seng Index rose 3%, and the Hang Seng Technology Index rose more than 4%. On the market, bank stocks with Chinese letters continued to rise. Among them, Ping An Bank went up and down, with a turnover of over 3.5 billion yuan.

Judging from the news, three major benefits have surfaced. First, according to a report by Reuters on February 20, local time, some US fund managers with Chinese products have long been optimistic that investors will return to the market. They think that the valuation of China's huge market is difficult to ignore. This morning, northbound capital poured into A-shares, and net purchases broke through the critical 10 billion yuan mark; second, demand for insurance capital allocation increased dramatically. Since such funds needed to cover 4% of debt-side costs after interest rate cuts, high-interest concept stocks are sought after, such as banks; third, market rumors suggest that an assessment plan for state-owned enterprises is about to be introduced, but no official information has yet been confirmed.

The Shanghai Index approached 3,000 points, the Hang Seng Index rose more than 3%, and the Science Index rose more than 4%

Last night, despite the poor performance of US stocks, the performance of A-shares in early trading today can be described as strong. As of midday trading, the Shanghai Index was up 1.72%, the Shenzhen Index was up 1.75%, and the GEM Index was up 1.28%. In terms of Hong Kong stocks, the Hang Seng Index rose 3%, while the Hang Seng Technology Index rose more than 4%. Among them, the big financial sector led the way, with lithium batteries, photovoltaics, pharmaceuticals, automobiles, and real estate rising ahead. FTSE China A50 Index futures continued to strengthen, increasing to 2%. MSCI China A50 Connectivity Index futures rose 1.6%.

What is particularly noteworthy is the sharp rise in A-share bank stocks. Ping An Bank rose strongly, Bank of Ningbo rose more than 6%, shares such as China Merchants Bank and Bank of Chengdu rose more than 4%, and Bank of China and Agricultural Bank continued to hit new highs. Real estate stocks also fluctuated and picked up. Rongfeng Holdings and Zhongdi Investment rose and stopped, and Dima shares impacted the rise and fall. Brokerage stocks also skyrocketed. Hongta Securities rose or stopped, and Pioneer Securities impacted the rise and fall.

Hong Kong stock finance also continued to rise. Zhongan Online rose 6%, while China Life Insurance, China Merchants Bank, Xinhua Insurance, and Industrial and Commercial Bank had the highest gains. There have also been changes in the futures market. The main coking coal futures contract went up and down, with an increase of about 8%. The increase in coke extended to 6.5%. Against this background, treasury bond futures also showed no slump.

The performance of financial assets and real estate stocks may indicate that the market is anticipating the beginning of a new cycle. China Merchants Securities believes that the current asymmetric reduction in LPR indicates that monetary policy will increase countercyclical and cross-cycle adjustment efforts. The reduction in interest rates on early bank deposits has paved the way for the current decline in LPR, expanding the room for concessions to the real economy. This asymmetric reduction in LPR can reduce the cost of housing purchase loans for residents, which is conducive to stimulating demand for home purchases and supporting the steady and healthy development of the real estate market.

Furthermore, it helps save interest expenses for mortgage borrowers, promotes investment and consumption, and helps to stabilize growth, stabilize expectations, and stabilize the market. Historically, financial real estate has often performed well after LPR interest rates were lowered separately. The main reason was that LPR cuts stimulated real estate demand and reversed residents' expectations for home purchases. At the same time, although interest rate cuts would put pressure on bank interest spreads in the short term, improvements in the real estate industry help to form expectations of improved bank asset quality, and the banking sector often showed performance as well.

Three good news came out

It is worth noting that foreign investment has performed very well today. The net inflow for early trading once exceeded 10 billion yuan. According to the Observer Network, quoting a report by Reuters on February 20, local time, some US fund managers with Chinese products have long been optimistic that investors will return to the market. They believe that the valuation of China's huge market is difficult to ignore. “This could be a once-in-a-lifetime opportunity to buy Chinese stocks at a valuation level that hasn't been seen in a long time.” American Jinrui Fund, a company focused on Chinese investment opportunities and exchange-traded funds (ETFs), thought so in an email.

According to reports, since the beginning of 2021, Jinrui Fund, which was founded in 2013 and has assets of about 5 billion US dollars, has launched 4 China-focused ETFs, of which KWBE is one of the largest ETFs in China.

Second, due to the arrival of interest rate cuts, insurance funds need to cover 4% of annualized costs on the debt side, increasing demand for allocation of high-yield stocks. Some analysts believe that today's drastic changes in the banking sector, led by Ping An Bank, are due to the need to allocate insurance funds. Moreover, the Big Blue Chip dividend ratio in the Hong Kong stock market is higher, so today Hong Kong Stock Finance is also benefiting quite a bit.

Third, according to previous news from China News Agency, on January 29, we learned from the central enterprise and local State-owned Assets Administration Commission assessment and allocation work meeting held by the State Council's State-owned Assets Administration Commission of the State Council of China that market value management assessments for listed companies will be fully implemented in 2024.

However, it is even more widely reported in the market today, and the relevant assessment method may be released in the near future. However, at present, the news has not been confirmed by an authoritative source.

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