On December 9, the Political Bureau of the Central Committee of the Communist Party of China held a meeting. The meeting emphasized the importance of economic work for next year and clearly proposed to 'stabilize the real estate and stock markets', 'implement a more proactive fiscal policy and moderately accommodative monetary policy', 'strengthen extraordinary counter-cyclical adjustments', and 'effectively combine policies'.
This is the first time since 2011 that China has mentioned 'moderately accommodative' policy in 14 years. At the same time, the Political Bureau meeting also rarely called for 'increased extraordinary counter-cyclical adjustments'.
Once the news broke, Hong Kong stocks and the FTSE A50 sounded the horn of counterattack, with the Hang Seng Index surpassing the 20,000 point mark for the first time in a month. The market is abuzz with discussions on how to interpret the tone set by this Political Bureau meeting. Will the second round of the bull market in China's Assets arrive?
After 14 years, returning to 'moderately accommodative', will China's stock market explode?
Looking back at China's monetary policy tone over the past 30 years, it has been described in five ways: accommodative, moderately accommodative, prudent, moderately tight, and tight. In nearly thirty years, the phenomenon of both proactive fiscal policy and accommodative monetary policy being present is quite rare, with a similar situation occurring only once from 2009 to 2010, while most of the time has leaned towards prudent.
Between 2009 and 2010, a proactive fiscal policy and moderately loose monetary policy appeared simultaneously, driving the A-share market into a small bull market that year, with the Hang Seng Index reaching a maximum increase of 109% within the range, and it maintained a trend of oscillating upward thereafter. Now, the term "moderately loose" has re-emerged after 14 years, indicating a complete shift in monetary policy and suggesting that the level of policy stimulus has reached its highest level in 14 years.
Institutions widely expect that this tone-setting implies an opening up of monetary policy easing space for next year. The macro team at Industrial Bank stated that emphasizing 'implementing a more proactive macro policy' adds an extra modifier of 'more' on the foundation of 'proactive', indicating that next year's macro policy may continue the proactive orientation seen since September 2024 and will be even more aggressive.
Cinda Securities pointed out that such a change in wording means that there may be greater room for cuts in reserve requirements and interest rates, and the central bank may break the pattern of two cuts in reserve requirements and two interest rate cuts per year seen in recent years, but the specific implementation pace of policies may still need to align with the fundamental economic environment.
Strong policy signals have brought strong confidence to the market. At the same time, expected measures such as reserve requirement ratio cuts and interest rate reductions may increase the market's money supply, benefiting the funding situation of the Capital Markets, with increased capital input from various investors, including large institutional investors and small and medium-sized investors, thereby further enhancing the liquidity of China's Capital Markets.
Seize the opportunity! Which sectors are most likely to benefit?
Overall, the December 2024 Central Politburo meeting's statements regarding macro policy strength and implications for the real estate and stock markets are clearly stronger than in 2023, and the trading sentiment in the Capital Markets may increase accordingly.
Looking ahead to the market, it is generally expected that the meeting has basically set a positive tone for next year's policy, with market risk appetite likely to remain high, and the economic recovery trend is clear. It is anticipated that propelled by both policy expectations and economic trends, China's stock market is likely to maintain an upward trend in fluctuations.
Chen Li, chief economist at Soochow Securities, believes that incremental changes in the funding level will be beneficial for the Hong Kong stock rebound. There are three main reasons: first, the profit-taking funds from earlier have basically ended their impact on short-term market fluctuations; second, the current trading volume of Hong Kong stocks has returned to historically rational levels; third, the December Politburo meeting set a positive tone, and since the Hong Kong market is one of the globally undervalued stock markets, the investment cost-effectiveness obviously increases, leading to a further inflow of foreign capital that was previously interested in the Hong Kong market back to the Hong Kong stock market.
In terms of sectors, Brokerage stocks, Mainland Real Estate stocks, Consumer stocks, and Network Technology stocks have become the focus for subsequent allocation.
Firstly, expectations for policies to 'stabilize the real estate and stock markets' will help stabilize market sentiment, and Brokers and Mainland Real Estate sectors are expected to benefit directly. 'Stabilizing the stock market' creates a favorable development environment for the future of the stock market, and positive policy expectations will attract more capital inflow into the stock market; under 'stabilizing the real estate market', there may be more heavyweight policies supporting the market, coupled with December being the key period for real estate firms' performance sprint, which may further promote the release of demand.
Such substantial bullish news is also reflected in the Hong Kong stock market. As the 'vanguard of the bull market', China-Affiliated Brokerage stocks surged first. From the perspective of the five-day increase,$CMSC (06099.HK)$Rising nearly 8%, Mainland Real Estate also does not dare to lag behind, $SUNAC (01918.HK)$ Rising sharply by 12%.
Secondly, Consumer will become a key focus of policy, vigorously boosting consumption and expanding domestic demand in all aspects will become a priority for economic work, and a series of policy supports are expected in the future. CITIC SEC Research Reports stated that the commitment to "vigorously boost consumption" exceeded market expectations, and with existing policies continuously taking effect and additional support for expanding domestic demand, the improvement of domestic demand may have strong certainty and sustainability.
This week, after the policy made its strongest statement, Dining stocks continued their strong performance from this year, $HELENS (09869.HK)$ soaring more than 34% over five days, $JIUMAOJIU (09922.HK)$ 、 $SUPER HI (09658.HK)$ with increases exceeding 20%.
At the same time, supported by technological advancement and policy expectations, the Internet Plus-Related Sector possesses both offensive and defensive capabilities. Institutions indicate that the strong shareholder returns in this sector provide sufficient safety margins, while the sector's performance is expected to benefit significantly from macro improvements, leading to a dual boost in performance and valuation. Key recommendations include cyclical industries such as e-commerce, local living, travel, freight, online recruitment, and real estate service platforms; long-term attention should be given to emerging segments like AI and autonomous driving, which are likely to contribute incremental growth under the guidance of technological innovation.
From the performance of star Network Technology stocks, this Sector has also been quietly gaining ground recently. $TRIP.COM-S (09961.HK)$ A cumulative increase of 14% over five days leads the way. $BEKE-W (02423.HK)$ A cumulative increase of over 10%. $BABA-W (09988.HK)$ 、 $XIAOMI-W (01810.HK)$ The increase during the same period exceeded 7%.
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