Since September 24, the macro policies have clearly shifted, greatly boosting market sentiment, and A-shares have also seen rapid recovery. Since the beginning of this year, the relevant policies to deepen reforms and improve the capital market system have been successively introduced, creating positive conditions for the stable and healthy development of the macro economy and capital markets. This article provides a detailed review and summary of the capital market reform policies since the beginning of the year and the comprehensive policy package after September 24.

Since September 24, there has been a clear shift in the tone of macro policies, and the comprehensive policy package has greatly eased market concerns about the operation of the macro economy and the development of the capital markets. Market confidence has been significantly boosted, and major A-share indices have experienced a substantial increase in trading volume. By the end of September, A-shares were already in a major bottom area based on indicators such as valuation, price-to-book ratio, risk premium, and stock-bond yield ratio. Investor pessimism was strong, market turnover was significantly reduced, and the total turnover of A shares was less than 480 billion.

Since 9/24, the comprehensive policy package signifies that the policy bottom has arrived. At a press conference on 9/24, a variety of macro policies were launched, covering support policies in multiple dimensions including currency, real estate, and capital markets; on 9/26, an unusually comprehensive economic work deployment was made by the Central Political Bureau, further releasing a sense of policy warmth. Subsequent counter-cyclical growth stabilization policies gradually came into effect, indicating that the current policy bottom has been reached. Specifically:

In terms of fiscal/monetary policy, the counter-cyclical policies continue to strengthen. In monetary policy, on 9/25, the central bank carried out a 300 billion yuan MLF operation with a 30BP reduction in the bid rate compared to the previous one. On 9/27, the central bank simultaneously implemented reserve requirement ratio cuts and interest rate cuts, reducing the deposit reserve ratio by 0.5 percentage points, while lowering the 7-day reverse repo operation rate by 0.2 percentage points. On 10/21, the one-year and five-year and above LPR rates were each lowered by 25BP to 3.1% and 3.6%, respectively, to reduce financing costs and support the rebound in credit demand.

In terms of fiscal policies, at a press conference on 10/12, the Ministry of Finance introduced incremental fiscal policies focusing on debt-to-equity swaps, real estate, people's livelihood, etc., and mentioned that other policy tools are under review. The central government still has considerable room for debt issuance and deficit expansion.

Regarding real estate, efforts are being made to stabilize and boost the real estate sector. At a news conference on 9/24, various policies to support the real estate sector were proposed, including guiding the interest rates of existing housing loans to be lowered to the level of new housing loans, with an average reduction of around 50BP according to the central bank's statistics; unifying the minimum down payment ratio for first-time and second-home mortgages nationwide, reducing the minimum down payment ratio for second-home mortgages from 25% to 15% at the national level; optimizing the policy for re-loans on affordable housing, with the central bank's fund support proportion in the 300 billion yuan re-loans for affordable housing being raised from 60% to 100%.

At a press conference on 10/17, officials from the Ministry of Housing and Urban-Rural Development announced plans to add 1 million sets of urban village renovations and dilapidated house renovations through monetized resettlement methods, and increase the credit scale of the 'white list' projects to 4 trillion by the end of the year. Demand-side policies at the local level continue to be optimized, with first-tier cities such as Beijing, Shanghai, Guangzhou, and Shenzhen recently issuing real estate optimization policies, with Guangzhou fully lifting purchase restrictions.

In terms of capital markets, new tools support the stable development of the stock market. On 9/24, the CSRC issued the "Opinions on Deepening the Reform of Mergers and Acquisitions of Listed Companies", implementing the new "Nine Articles" to deploy the active merger and reorganization market, further stimulating the vitality of the merger and reorganization market. On 9/26, the Central Financial Office and the CSRC jointly issued the "Guiding Opinions on Promoting the Entry of Medium and Long-term Funds into the Market", emphasizing efforts to improve the supporting policies and systems for the entry of various types of medium and long-term funds into the market.

On 10/18, the central bank announced the official launch of the first phase with a scale of 500 billion yuan for convenient operations such as securities, funds, and insurance companies, and completed the first repo transaction on 10/21 with an operation amount of 50 billion yuan. On 10/18, the central bank formally set up the first quota of 300 billion yuan for share buyback and shareholding refinancing, supporting listed companies' share buybacks and shareholdings.

In summary, since the Central Political Bureau meeting on 9/24, the People's Bank of China, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Housing, and other four New Office press conferences have introduced a series of policy combinations, indicating a clear shift in policy direction, signaling that the policy bottom of the A-share market has arrived. With the warm breeze of policies, the sentiment of the A-share market has clearly reversed. The main A-share indices have significantly increased in volume since 9/24.$SSE Composite Index (000001.SH)$,$CSI 300 Index (399300.SZ)$,$Chinext Price Index (399006.SZ)$The largest increase reached 33.1%, 38.1%, 68.1%, with the highest turnover nearing 3.5 trillion, hitting a historical high.

Since the beginning of the year, various capital market reforms have been gradually implemented, which will promote the high-quality development of the capital markets. As mentioned earlier, the multitude of policies introduced since 924 signals the emergence of the policy bottom in this round, greatly boosting market confidence and stock market performance. In fact, a series of policies focusing on capital market reforms, such as the Nine Articles of the New Country, have been successively introduced since the beginning of this year, outlining the phased blueprint for the long-term development of the capital markets. Specifically:

On March 6th of this year, Wu Qing, the chairman of the China Securities Regulatory Commission, clearly stated the supervisory ideology of "strengthening the foundation, strict supervision" in his first public address since taking office, proposing to enhance the quality of listed companies and strengthen the inherent stability of the capital markets through five pillars: "funds, systems, mechanisms, institutions, supervision." On March 15th, the CSRC concentrated on issuing four policy documents concerning initial public offerings, listed company supervision, institutional supervision, and the construction of the CSRC system, enforcing the supervisory requirements of "two strengths and two stricts."

On April 12th, following the "Nine Articles of the New Country" in 2004 and 2014, the State Council once again released the "Opinions on Strengthening Regulation, Preventing Risks, and Promoting High-Quality Development of the Capital Markets" (New "Nine Articles"). The core ideas and main tasks of the various "Nine Articles" have undergone significant changes in different stages of development, with requirements for the capital markets transitioning from stable development to healthy development and further to high-quality development, ultimately promoting the steady and healthy development of the capital markets and the unfolding of the stock market trend in a medium-term perspective.

This new "Nine Articles" focuses on establishing sound regulatory systems, cultivating the introduction of long-term funds, and promoting financial services to entities in various directions of capital market reform, complemented by subsequent detailed policies of the CSRC, forming a "1+N" reform system for the capital markets. On one hand, this benefits the improvement of the regulatory system, enhancing the quality of listed companies; on the other hand, it helps maintain market order and develop and strengthen long-term investments. Overall, with the gradual improvement of the "1+N" reform system for the capital markets, the institutional environment of the capital markets will be more robust, which will drive the capital markets towards achieving high-quality development and better serve the vision of a financially strong country and the modernization of China.

The market is at a turning point from bear to bull, with policies currently taking the lead, followed by improvements in macro and micro fundamental conditions. Looking back at the bottoming processes of the A-share market, the policy bottom often appears first, and there is a process from the effectiveness of policy implementation to the improvement of the macro and micro fundamental conditions.

For example, on September 15, 2008, the central bank lowered interest rates and reserve requirements, and in November, the State Council announced a 4-trillion investment plan, marking the emergence of the policy bottom. Under the impetus of countercyclical policies, the stock market performance bottomed out at the beginning of 2009.

In 2012, in response to the rapid decline in economic growth, a new round of economic stimulus policies was successively introduced, with the central bank twice reducing reserve requirements and interest rates. As policies continued to intensify, the performance bottom appeared in Q3 of 2012.

In 2016, the monetary and real estate policies were successively loosened in January-February, which can be seen as the policy bottom at that time. This round of policy easing is relatively gentle, and corporate profits hit bottom and rebounded in Q2 2016.

The current policy is already exerting force and is expected to gradually drive the restoration of the fundamentals, leading the stock market into a phase driven by fundamentals. At present, the difficulties faced by China's economy are reflected in the damage to the balance sheets of the private sector. To promote the repair of the private sector's balance sheets, it is necessary to increase the support of fiscal policy. For example, stabilizing housing prices and reducing inventory cannot be achieved without fiscal support, and promoting the recovery of residential consumption also requires fiscal efforts.

Recent comprehensive policies focus on core market concerns, including significantly increasing the debt quota to support local resolution of hidden debts; using tools such as local government special bonds, special funds, and tax policies to support stabilizing the real estate market; increasing support and protection for key groups to enhance overall consumption power, and more. Importantly, the Minister of Finance stated that other policy tools are under study, and the central government has ample room for increased debt and deficit.

The 12th meeting of the 14th National People's Congress Standing Committee will be held from November 4th to 8th, with incremental policies likely on the way. General Secretary Xi emphasized at the September Political Bureau meeting the need to work hard to achieve the annual economic and social development goals. On October 25, Premier Li Qiang proposed at the State Council meeting to focus on efforts to achieve the annual goals for economic and social development and continue to ensure the implementation of a comprehensive set of incremental policies. As policies continue to exert force in the future, it will help boost expectations of the fundamentals and drive the economic growth rate closer to the government's work report target of 5%.

Combining with Haitong macroeconomic forecasts, the domestic real GDP growth rate is expected to reach around 5% in 2024. At the micro level, we expect the year-on-year growth rate of full-A net profit to reach 2% in 2024. With policy efforts promoting continuous restoration of fundamentals, the stock market is also expected to enter a phase driven by fundamentals.

Structurally, emphasis is placed on technology and high-end manufacturing. Since 924, the stock market trends are more similar to the 1999 519 market trends, both indicating the first stage of a bottom-up trend, which can be categorized as an asset reassessment market. Looking ahead, if the trends continue to deepen and upgrade, it will still require fundamental support. Historically, during the period from policy efforts to fundamental recovery, the stock market trends are more likely to be volatile. During the turbulent market periods in 1999 and 2019, sectors with better fundamentals such as technology and high-end manufacturing were the main themes. Specific focus could be on technology manufacturing that sees the industrial cycle recovery, as well as high-end manufacturing with supply and demand advantages.

Firstly, technology manufacturing. The industrial cycle moving up combined with policy and technological catalysis, the technology sector is expected to lead the market trends. From a long-term perspective, the current technology industry is in a new upward cycle, with the new generation of information technology represented by artificial intelligence accelerating landing in various fields, potentially profoundly changing people's production and lifestyle in the future. In the medium to short term, technological product innovation and policy support are jointly driving the evolution of the technology market trends.

Regarding self-driving cars, in early October, Tesla released the Robotaxi for self-driving, which might accelerate the deployment of autonomous driving in more scenarios. On October 23, the Ministry of Industry and Information Technology stated that the next step will further implement pilot projects for intelligent connected vehicles and on-road operations, as well as the integration of 'vehicle-road-cloud' to prudently promote industrialization of autonomous driving technology.

In the field of technology and innovation, on October 22, Huawei released the self-developed HarmonyOS operating system, which is China's first fully self-developed operating system. According to the State-owned Assets Supervision and Administration Commission, by 2027, central state-owned enterprises will achieve 100% technology innovation substitution. With the background of future financial efforts, technology innovation is expected to receive greater funding and policy support. We expect that technological breakthroughs combined with policy support will accelerate the development of domestic technology innovation, with great growth potential in areas such as domestic operating systems.

In the field of humanoid robots, under technological breakthroughs, the application of humanoid robots may accelerate. With the rise in labor costs, the manufacturing industry has a significant long-term demand for humanoid robots. According to China Industry Research Institute citing data from Markets and Markets, the CAGR growth rate of the global humanoid robot market from 2024 to 2028 is 50%.

Second, high-end manufacturing: Currently, supported by external demand, the fundamentals of industries related to high-end manufacturing are strong, with broad demand prospects for high-end manufacturing in the future, and the business climate is expected to continue. From the demand side, both domestic and foreign demand support are expected to continue: On the external demand side, China's exports of household appliances and autos have maintained high growth this year, with a year-on-year cumulative growth rate of 15.5% and 22.5% respectively from January to September in renminbi terms, coupled with strong demand from emerging countries and high reliance on China, which may lead to additional exports from China in the future.

On the domestic demand side, China's recent frequent efforts to stimulate consumption, according to the National Development and Reform Commission, indicate an annual replacement demand for autos and household appliances exceeding trillions of yuan, with consumption in sectors such as autos and household appliances expected to be boosted by subsidies. From the supply side, China's high-end manufacturing currently enjoys advantages of industrial clusters, engineering talent, and technological accumulation. Therefore, with the support of supply and demand advantages, China's high-end manufacturing business climate is expected to continue, focusing on industries such as autos and household appliances.

Risk warning: If the implementation progress of stable growth policies falls short of expectations, or if the domestic economic recovery falls short of expectations.

Editor/ping